TIDMDLN
RNS Number : 3576K
Derwent London PLC
05 May 2022
5 May 2022
Derwent London plc ("Derwent London" / "the Group")
FIRST QUARTER BUSINESS UPDATE
Well positioned in continuing flight to quality
Summary
Portfolio update - letting space above ERV
-- GBP3.9m of new leases achieved YTD, 8.2% above December 2021 ERV
-- In addition, GBP3.3m of space is under offer, at rents above
ERV, including 28,000 sq ft at The Featherstone Building EC1
(125,000 sq ft) which reached practical completion in April
-- 3.1% EPRA vacancy rate at Q1 2022 (FY2021: 1.6%), with
current vacancy at 6.4%, in line with our expectations and
principally reflecting Featherstone completion
Investment activity - adding c.1.0m sq ft to the development
pipeline
-- Conditional exchange of contracts for the GBP239m acquisition
of City Road Island EC1 (the site of the Moorfields Eye Hospital)
in the Tech Belt adding a potential 750,000+ sq ft regeneration
super-site - see separate announcement for further details
-- Completed the purchase of 230 Blackfriars Road SE1, a future
super-site, for GBP58.3m currently yielding GBP2.1m pa
Major developments on track - delivering net zero carbon
schemes
-- 1 Soho Place W1 achieved practical completion in February.
Occupier fit-out of the fully pre-let offices has commenced. The
adjacent 2 & 4 Soho Place W1 is expected to complete in Q2
2022
-- Commitment to Network Building W1 (137,000 sq ft of offices). Start on site June 2022
Financial position - strong balance sheet
-- LTV 23.2%(1) at Q1 2022
-- Cash and undrawn facilities of GBP441m at Q1 2022
(1) LTV based on 31 December 2021 property values and includes
the Group's share of joint ventures
Paul Williams, Chief Executive of Derwent London, said:
"London is busy again and maintains its global appeal in an
uncertain macro environment. The flight to quality continues, our
portfolio is well positioned and we are seeing a high level of
enquiries and viewings. As a result, we have committed to our next
major office development at Network Building."
For further information, please contact:
Derwent London Paul Williams, Chief Executive
Tel: +44 (0)20 7659 3000 Damian Wisniewski, Chief Financial
Officer
Robert Duncan, Head of Investor
Relations
Brunswick Group Nina Coad
Tel: +44 (0)20 7404 5959 Emily Trapnell
Webcast and conference call
There will be a webcast and conference call for investors and
analysts at 09.00 BST today. To participate in the call, please
register at www.derwentlondon.com
Portfolio update (Appendices 1 & 2)
New leases totalling GBP3.9m of rent on 64,700 sq ft have been
achieved in the year to date at an average 8.2% above December 2021
Estimated Rental Values (ERV). A further GBP3.3m is under offer.
With the shortage of Grade A space becoming more apparent, many
occupiers are prepared to pay premium rents for space that meets
their requirements.
Our EPRA vacancy rate at 31 March 2022 was 3.1%, up from 1.6% at
31 December 2021. One-third of the year-end vacancy has already
been let or is under offer. Following completion of The
Featherstone Building EC1 in April, the current EPRA vacancy rate
is 6.4%, in line with our expectations, and we have 45,000 sq ft
under offer. This includes 28,000 sq ft at Featherstone at rents
ahead of ERV with further negotiations underway.
Overall rent collection so far for the March 2022 quarter has
reached 98%, in line with pre-pandemic levels, with 99% of office
rents collected.
Capital recycling (Appendix 3)
We have exchanged conditional contracts for the acquisition of
City Road Island EC1 for a base price of GBP239m before costs. This
2.5 acre freehold site is located in the heart of the Tech Belt, an
area where we have substantial holdings and have undertaken several
regeneration schemes over many years. Our early appraisals show the
site has potential to deliver a major 750,000+ sq ft campus with
generous public realm and strong environmental credentials. The
existing buildings total c.400,000 sq ft. See separate announcement
for further details.
In January, we completed the acquisition of 230 Blackfriars Road
SE1 for GBP58.3m including costs. This 60,300 sq ft building, with
an income of GBP2.1m pa, has potential for a 200,000+ sq ft scheme.
This super-site adds to our long-term development pipeline.
Completion of the disposal of New River Yard EC1 for GBP65.9m
(after rental top-ups) is scheduled for this month. The sale of 2
& 4 Soho Place W1 is due to complete later in Q2 for GBP40.5m
before costs.
Development progress (Appendix 4)
Good progress has been made this year on our near-term
developments, including The Featherstone Building as noted above.
In February, 1 Soho Place W1 reached practical completion and a new
headlease from TfL was subsequently granted for GBP71.9m. Leases on
the offices, which were 100% pre-let to Apollo and G-Research, have
now completed and the 36,000 sq ft of retail was launched last
week. We are confident in the prospects for this space which we
expect to benefit from the forthcoming opening of the Elizabeth
line. 2 & 4 Soho Place W1 is due to reach practical completion
imminently.
At Network Building W1, our latest net zero carbon development,
we have committed to develop the office-led scheme (137,000 sq ft,
96% uplift on existing area). Work is due to commence in June
2022.
19-35 Baker Street W1 (298,000 sq ft, an uplift of 108%)
commenced in October 2021 with demolition works due to complete
shortly. As previously reported, we have signed the building
contract and 97% of capex on the office element (80% of the overall
scheme) is fixed and in line with budget, thereby reducing our
exposure to further build cost inflation. Completion is scheduled
for H1 2025.
Finance
After capex of GBP38.6m and acquisitions of the Soho Place
headlease and 230 Blackfriars Road, net debt increased to
GBP1,368.5m at 31 March 2022 from GBP1,251.5m at 31 December
2021.
As at 31 March 2022, the LTV ratio was 23.2% based on 31
December 2021 valuations, including the Group's share of joint
ventures, up from 20.8% at 31 December 2021. Interest cover for the
first three months of 2022 was 4.1 times (FY 2021: 4.6 times) and
cash and undrawn facilities totalled GBP441m at the quarter
end.
Appendix 1: Leasing activity 2022 YTD
Let Performance against
Dec 21 ERV (%)
Area Income Open market Overall
sq ft GBPm pa
------- --------- ------------ --------
Q1 55,500 3.5 6.8 6.8
Q2 (to date) 9,200 0.4 20.0 20.0
------- --------- ------------ --------
H1 2022
(to date) 64,700 3.9 8.2 8.2
------- --------- ------------ --------
Appendix 2: Principal lettings in 2022 YTD
Total annual Rent free
Property Tenant Area Rent rent Lease term Lease break equivalent
sq ft GBP psf GBPm Years Year Months
----------------- ------- -------- ---------------- ----------- ------------ ----------------
Q1
90 Whitfield
Street W1 Michael Kors 18,850 72.50 1.4 10 - 24
White Collar Brain Labs
Factory EC1 Digital 11,540 71.70 0.8 6 - 10.4
80 Charlotte
Street W1 NewRiver REIT 4,090 70.00 0.3 5 - 11
Holden House W1 Talon Outdoor 5,120 49.50 0.3 5 3.5 6
Q2 (to date)
230 Blackfriars Wandle Housing 7, plus 6 if
Road SE1 Association 7,290 49.50 0.4 7.5 4 no break
----------------- ------- -------- ---------------- ----------- ------------ ----------------
Sub-total 46,890 68.30 3.2 - - -
------- -------- ---------------- ----------- ------------ ----------------
Other 17,810 39.30 0.7 - - -
Total 64,700 60.30 3.9 - - -
Appendix 3: Major acquisitions and disposals in 2022 YTD
Net Net
Net rental rental
Area Total after costs yield income income
Property Date sq ft GBPm % GBPm pa GBP psf
Acquisition
230 Blackfriars Road SE1 Q1 60,300 58.3 3.5 2.1 41.00
Soho Place W1 headlease Q1 - 71.9 - - -
------ ------- ------------------ ------- --------- ---------
Total acquisitions 60,300 130.2 - 2.1 -
------- ------------------ ------- --------- ---------
Disposals
New River Yard EC1 (exchanged) Q1 70,700 65.9(1) 4.5 3.3
------ ------- ------------------ ------- ---------
(1) After deduction of rental top-ups
Appendix 4: Major developments pipeline
Proposed Capex
Property area to complete Comment
sq ft GBPm(1)
---------- ------------- ----------------------------------------
H1 2022 completion
110,000 sq ft offices, 13,000
The Featherstone sq ft workspaces, 2,000 sq ft
Building EC1 125,000 10 retail - 22% under offer.
On-site projects
209,000 sq ft offices, 36,000
sq ft retail and 40,000 sq ft
theatre - 87% pre-let / pre-sold.
Soho Place W1 285,000 79(2) Completes H1 2022.
38,000 sq ft offices - 100% pre-let.
Francis House SW1 38,000 10 Completes H1 2022.
218,000 sq ft offices, 28,000
sq ft retail, 45,000 sq ft private
residential and 7,000 sq ft affordable
residential. Demolition about
19-35 Baker Street to complete, piling underway.
W1 298,000 266(3) Completes H1 2025.
621,000 355
---------- ------------- ----------------------------------------
2022 project starts
Network Building 137,000 c.100 Committed to 137,000 sq ft office-led
W1 scheme. 96% uplift on existing
floor area.
Bush House WC2 130,000 c.100 Refurbishment and extension project,
totalling c.130,000 sq ft. Potential
25% uplift to existing floor area.
267,000 c.200
---------- ------------- ----------------------------------------
Total 1,013,000 565
---------- ------------- ----------------------------------------
(1) As at 31 December 2021
(2) Includes remaining site acquisition cost and potential
profit share to Crossrail
(3) Includes potential profit share to The Portman Estate
Notes to editors
Derwent London plc
Derwent London plc owns 77 buildings in a commercial real estate
portfolio predominantly in central London valued at GBP5.7 billion
as at 31 December 2021, 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.
As part of our commitment to lead the industry in mitigating
climate change, Derwent London has committed to becoming a net zero
carbon business by 2030, publishing its pathway to achieving this
goal in July 2020. In 2019 the Group became the first UK REIT to
sign a Revolving Credit Facility with a 'green' tranche. At the
same time, we also launched our Green Finance Framework and signed
the Better Buildings Partnership's climate change commitment. The
Group is a member of the 'RE100' which recognises Derwent London as
an influential company, committed to 100% renewable power by
purchasing renewable energy, a key step in becoming a net zero
carbon business. Derwent London is one of only a few property
companies worldwide to have science-based carbon targets validated
by the Science Based Targets initiative (SBTi).
Landmark buildings in our 5.6 million sq ft portfolio include 80
Charlotte Street W1, Brunel Building W2, White Collar Factory EC1,
Angel Building EC1, 1-2 Stephen Street W1, Horseferry House SW1 and
Tea Building E1.
In January 2022 we were proud to announce that we had achieved
the National Equality Standard - the UK's highest benchmark for
equality, diversity and inclusion. In April 2022, Derwent London
won the BCO Best Commercial Workplace award for 80 Charlotte
Street. In October 2021, the Group won EG's UK Company of the Year
award and in January 2022 came top of the Property Sector and 38th
position overall in Management Today's Britain's Most Admired
Companies awards 2021. In 2020 the Group won several awards for
Brunel Building with the most prominent being the BCO Best
Commercial Workplace award. In 2019 the Group won EG Offices
Company of the Year, the CoStar West End Deal of the Year for
Brunel Building and Westminster Business Council's Best Achievement
in Sustainability award. In 2013 the Company launched a voluntary
Community Fund and has to date supported well over 100 community
projects in the West End 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.
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