TIDMDLN
RNS Number : 9640V
Derwent London PLC
09 November 2017
9 November 2017
Derwent London plc ("Derwent London" / "the Group")
THIRD QUARTER BUSINESS UPDATE
ANOTHER RECORD LETTING YEAR
Highlights
-- In 2017 to date we have let or pre-let 674,800 sq ft achieving GBP41.2m pa of rent:
o This is a 16% increase from the GBP35.5m announced in
September 2017
o Lettings year to date are 1.3% above December 2016 ERV
(Estimated Rental Value)
o Second half lettings to date are 2.3% above June 2017 ERV
o EPRA vacancy rate has fallen from 1.9% in June 2017 to
1.4%
-- 401,000 sq ft of developments completed in 2017 and are now 94% let:
o White Collar Factory EC1 completed in H1 and is now 92%
let
o The Copyright Building W1 was completed and sold for GBP166.2m
in Q4
-- 620,000 sq ft is under construction, with a minimum of 45% pre-let:
o At least 86% of the office space at 80 Charlotte Street W1 is
now pre-let
-- Property disposals in the year to date total GBP496m,10% above December 2016 values
-- At 30 September 2017 cash and undrawn facilities were GBP422m and the LTV was 15.3%
-- The proforma LTV adjusting for disposals since September 2017 is 12.7%
John Burns, Chief Executive Officer, commented:
"Good occupier and investment demand means that 2017 will be a
record year for Derwent London's lettings and investment disposals
even with lower UK economic growth and political uncertainty. The
continuing positive letting momentum reinforces our earlier
decision to move forward with our next major project at Soho Place
W1."
Webcast and conference call
There will be a conference call for investors and analysts at
09:00 GMT today.
To participate in the call, please dial the following number:
+44 (0)20 3059 8125
A recording of the conference call will also be made available
following the conclusion of the call on www.derwentlondon.com
For further information, please contact:
Derwent London John Burns, Chief Executive
Tel: +44 (0)20 7659 3000 Officer
Damian Wisniewski, Finance
Director
Quentin Freeman, Head
of Investor Relations
Brunswick Group Simon Sporborg
Tel: +44 (0)20 7404 5959 Tim Danaher
Active demand for our product leads to another record letting
year (see Appendix 1)
In the year to date we have let or pre-let 674,800 sq ft or
GBP41.2m pa in gross rent (GBP41.0m net of ground rents), 43% of
which has been agreed since 30 June 2017. The overall total is a
GBP5.7m increase from our previous announcement on 11 September
2017. Second half transactions included the major pre-let to The
Boston Consulting Group and Arup committing to further space at 80
Charlotte Street W1. On average our new lettings have been 1.3%
above December 2016 ERV, with second half lettings 2.3% above June
2017 ERV. Our EPRA vacancy rate has fallen from 1.9% to 1.4% since
June 2017 reflecting our product's broad appeal.
Good progress on developments (see Appendix 2)
The completions of White Collar Factory and The Copyright
Building meant that we have now delivered 401,000 sq ft this year,
reducing our development exposure by 39% to 620,000 sq ft. The two
remaining projects, Brunel Building W2 and 80 Charlotte Street W1,
are due for delivery in 2019. We have pre-let a minimum 86% of the
office space at the latter so at least 45% of our on-site programme
is pre-let, and we are seeing some good early interest at Brunel
Building. As noted in our interim results we intend to start a
further 285,000 sq ft at Soho Place W1 in H2 2018. This is one of
the most strategically important sites in central London, located
above the Tottenham Court Road Crossrail station at the eastern end
of Oxford Street. Additionally we are moving ahead with preparatory
works at Monmouth House EC1 next to White Collar Factory where
possession could be obtained from 2019 onwards.
Significant disposals activity (see Appendix 3)
With the sale of The Copyright Building completed, we have now
disposed of GBP496m gross of investment properties this year
representing a 10% premium to December 2016 book values.
Finance
Capital expenditure in the first three quarters totalled
GBP128.4m including GBP7.1m of capitalised interest. This took net
debt to GBP758.1m at 30 September, an increase of GBP24.4m in the
quarter, and the loan-to-value ratio (LTV) to 15.3% based on June
2017 property values. It is expected that approximately GBP50m will
be spent on capital expenditure in Q4. Net proceeds of GBP150.1m
were received on 1 November 2017 from the disposal of The Copyright
Building and a further GBP2.3m has also been received in October
from the sale of an additional small property. After adjusting for
these disposals, the pro-forma LTV at 30 September 2017 was 12.7%.
Undrawn bank facilities and cash at 30 September 2017 totalled
GBP422m before adjusting for the subsequent disposals. The weighted
average interest rate was 3.95% on an IFRS basis or 3.66% based on
the cash coupon payable on our 2019 convertible bonds.
Values
Central London office values remain firm reinforced by
significant letting activity and strong investor demand especially
from foreign capital, despite the continuing political and economic
uncertainties. The IPD Central London Offices Quarterly Index for
Q3 2017 showed capital values rising 0.9% with rents up 0.2% in the
same period.
Appendix 1: Principal lettings in 2017
Min
/ fixed
uplift
at
Total first
Area Rent annual review Lease Lease Rent free
sq GBP rent GBP term break equivalent
Property Tenant ft psf GBPm psf Years Year Months
------------------ -------------- -------- ------ -------- --------- ------- ------- -------------
Q1
80 Charlotte
Street W1 Arup 133,600 72.90 9.7(1) 81.50 20 - 33
White Collar
Factory EC1 Adobe 14,900 67.50 1.0 74.50 11.5 - 22
Angel Building
EC1 Expedia 12,500 62.50 0.8 - 13.3 - 18
Greencoat
& Gordon House
SW1 VCCP 12,800 55.00 0.7 - 8.5 - 13
9, plus
9
20 Farringdon if no
Road EC1 Accenture 11,500 55.00 0.6 - 10 5 break
------------------ -------------- -------- ------ -------- --------- ------- ------- -------------
Q2
The White
Chapel Building
E1 30, plus
Phase 2 - 6
lower ground if no
floors Fotografiska 89,000 27.00 2.4 27.70 15 12 break
18, plus
5
White Collar if no
Factory EC1 Box.com 28,500 75.00 2.1 - 15 10 break
The White
Chapel Building
E1 Wilmington 27,000 52.00 1.4 - 10 - 20
11, plus
The White 8
Chapel Building if no
E1 ComeOn! 12,700 50.00 0.6 - 10 5 break
9.5, plus
5
White Collar Red if no
Factory EC1(2) Badger 7,700 62.50 0.5 65.60 10 5 break
78 Whitfield Made
Street W1 Thought 4,800 63.50 0.3 - 10 4.5 8
78 Whitfield Yoyo
Street W1 Wallet 4,800 63.00 0.3 - 4.5 - 8
78 Chamber
Street E1(3) NetBooster 6,700 40.00 0.3 - 10 5 10
------------------ -------------- -------- ------ -------- --------- ------- ------- -------------
Q3
The
Boston
80 Charlotte Consulting
Street W1 Group 123,500 85.50 10.6 - 15 12 Confidential
80 Charlotte
Street W1 Arup 19,800 75.00 1.5(1) 83.80 20 - 33
90 Whitfield
Street W1 Freightliner 12,100 71.00 0.9 - 10 - 22
Holden House Russell
W1 & Bromley 3,800 - 0.7 - 10 5 3
12-16 Fitzroy
Street W1 Ergonom 8,800 54.00 0.5 57.00 15 10 15
9, plus
White Collar 9 if no
Factory EC1 Egress 6,700 67.50 0.5 - 10 5 break
(1) Annual increases of 2.25% for the first 15 years (2) Low
rise buildings (3) Joint venture - Derwent London share
Appendix 2: Major developments pipeline
Property Area Delivery Capex Comment
sq to
ft complete
GBPm(1)
------------------------- ----------- --------- ---------- -------------------------
Completed projects
White Collar Factory, 293,000 H1 265,000 sq ft
Old Street Yard 2017 offices, 20,000
EC1 sq ft retail,
8,000 sq ft residential
- 92% let
The Copyright Building, 108,000 H2 88,000 sq ft
30 Berners Street 2017 offices and 20,000
W1 sq ft retail
- 100% let. Sold
Q4 2017.
------------------------- ----------- --------- ---------- -------------------------
401,000
On-site projects
Brunel Building,
2 Canalside Walk H1
W2 240,000 2019 85 Offices
332,000 sq ft
offices, 45,000
sq ft residential
and 3,000 sq
80 Charlotte Street H2 ft retail - 73%
W1 380,000 2019 194 pre-let overall
------------------------- ----------- --------- ---------- -------------------------
620,000 279
------------------------- ----------- --------- ---------- -------------------------
Other major planning
consents
Soho Place W1 285,000 209,000 sq ft
offices, 36,000
sq ft retail
and 40,000 sq
ft theatre
Monmouth House EC1 125,000 Offices, workspaces
and retail
------------------------- ----------- --------- ---------- -------------------------
410,000
------------------------- ----------- --------- ---------- -------------------------
Planning applications
19-35 Baker Street 293,000(2) 206,000 sq ft
W1 offices, 52,000
sq ft residential
and 35,000 sq
ft retail
Holden House W1 150,000 Retail flagship
or retail and
office scheme
------------------------- ----------- --------- ---------- -------------------------
Grand total (excluding
completed projects) 1,473,000
------------------------- ----------- --------- ---------- -------------------------
(1) As at 30 June 2017 (2) Total area - Derwent London has a 55% share of the joint venture
Appendix 3: Major disposals in 2017
Gross Gross Net
Property Date Area proceeds proceeds yield Rent
sq GBPm GBP to purchaser GBPm
ft psf % pa
------------------- ------- -------- ---------- ---------- -------------- -------
132-142 Hampstead
Road NW1 Q1 219,700 130.1 590 1.2 1.7
8 Fitzroy Street
W1 Q2 147,900 197.0 1,330 3.4 7.2
The Copyright
Building W1 Q4 108,000 166.2(1) 1,540 4.2 8.5(2)
------------------- ------- -------- ---------- ---------- -------------- -------
(1) GBP150.1m net of rental incentives and guarantees (2) Gross rent
Notes to editors
Derwent London plc
Derwent London plc owns 89 buildings in a commercial real estate
portfolio predominantly in central London valued at GBP4.8 billion
(including joint ventures) as at 30 June 2017, making it the
largest London-focused real estate investment trust (REIT).
Our experienced team has a long track record of creating value
throughout the property cycle by regenerating our buildings via
development or refurbishment, effective asset management and
capital recycling.
We typically acquire central London properties off-market with
low capital values and modest rents in improving locations, most of
which are either in the West End or the Tech Belt. We capitalise on
the unique qualities of each of our properties - taking a fresh
approach to the regeneration of every building with a focus on
anticipating tenant requirements and an emphasis on design.
Reflecting and supporting our long-term success, the business
has a strong balance sheet with modest leverage, a robust income
stream and flexible financing.
Landmark schemes in our 5.6 million sq ft portfolio include
Angel Building EC1, The Buckley Building EC1, White Collar Factory
EC1, 1-2 Stephen Street W1, Horseferry House SW1 and Tea Building
E1.
In 2017 the Group won the Property Week Developer of the Year
award, was listed 12th out of 4,000 in the Corporate Knights Global
100 of the world's most sustainable companies and achieved EPRA
Gold for corporate and sustainability reporting. In 2016 the Group
won Estates Gazette National Company of the Year and London awards
as well as awards from Architects' Journal, British Council for
Offices, Civic Trust and RIBA.
As part of its wider sustainability programme, in 2013 Derwent
London launched a dedicated GBP250,000 voluntary Community Fund
and, in 2016, made a further commitment of GBP300,000 for the next
three years for Fitzrovia and the Tech Belt.
The Company is a public limited company, which is listed on the
London Stock Exchange and incorporated and domiciled in the UK. The
address of its registered office is 25 Savile Row, London, W1S
2ER.
For further information see www.derwentlondon.com or follow us
on Twitter at @derwentlondon
Forward-looking statements
This document contains certain forward-looking statements about
the future outlook of Derwent London. By their nature, any
statements about future outlook involve risk and uncertainty
because they relate to events and depend on circumstances that may
or may not occur in the future. Actual results, performance or
outcomes may differ materially from any results, performance or
outcomes expressed or implied by such forward-looking
statements.
No representation or warranty is given in relation to any
forward-looking statements made by Derwent London, including as to
their completeness or accuracy. Derwent London does not undertake
to update any forward-looking statements whether as a result of new
information, future events or otherwise. Nothing in this
announcement should be construed as a profit forecast.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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