TIDMDLN
RNS Number : 1298F
Derwent London PLC
03 November 2022
Derwent London plc ("Derwent London" / "the Group")
THIRD QUARTER BUSINESS UPDATE
Paul Williams, Chief Executive of Derwent London, said:
"Despite recent political and economic uncertainty, occupier
demand in London remains good for the right product and the flight
to quality continues. We have a strong balance sheet and with
disposal proceeds in the year to date of GBP205m, we are
reinvesting in two distinctive West End developments where supply
remains constrained."
Summary
Portfolio update
-- Lettings in the first nine months of 2022 totalled GBP9.0m at
an average 12.7% above December 2021 ERV with a further GBP1.1m of
rent under offer
o GBP1.9m of lettings in Q3 at an average 27.6% above December
2021 ERV
o Francis House SW1 refurbishment (38,300 sq ft) completed and
handed over to Edelman
-- EPRA vacancy rate 6.9% at 30 September 2022 (30 June 2022: 6.5%)
-- Disposals totalling GBP139.0m after costs in Q3 taking YTD activity to GBP204.9m including:
o Bush House WC2 for GBP83.9m, 41% above December 2021 book
value
o 2 & 4 Soho Place W1 long leasehold interest for
GBP39.7m
West End developments of 435,000 sq ft underway
-- Sub and super structure works progressing well at 25 Baker Street W1 (298,000 sq ft)
-- Works commenced on-site in June 2022 at Network W1 (137,000 sq ft)
Financial position
-- EPRA LTV down to 21.7%(1) (30 June 2022: 23.7%) after receipt of Q3 disposal proceeds
-- Undrawn facilities and cash of GBP626m as at 30 September 2022
o 100% of debt at fixed rates with average maturity of 6.4
years
o First debt maturity (GBP83m at 3.99%) in October 2024
(1) LTV based on 30 June 2022 property values and includes the
Group's share of joint ventures
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 GMT today. To participate in the call, please
register at www.derwentlondon.com
Portfolio update (Appendices 1 & 2)
New leases totalling GBP1.9m on 31,700 sq ft were achieved in Q3
2022, on average 27.6% above December 2021 ERV. This includes two
lettings at 43 Whitfield Street W1 which delivered an attractive
premium to ERV, partly driven by proximity to the DL/78 amenity
space for Derwent London occupiers. Lettings in the first nine
months of 2022 totalled GBP9.0m on 141,000 sq ft, on average 12.7%
above ERV. There is a further GBP1.1m of rent under offer.
We have seen a notable increase in viewings since the summer and
letting interest across our portfolio remains encouraging. The
Group's Q3 EPRA vacancy rate was 6.9% (30 June 2022: 6.5%),
concentrated in recently completed space at The Featherstone
Building EC1, The White Chapel Building E1, One Oxford Street W1
(retail element) and Tea Building E1.
Refurbishment works have completed at Francis House SW1 (38,300
sq ft) and the space has been handed over to the tenant
Edelman.
Rent collection rates at Q3 have improved further compared to
the prior quarter. For the September quarter day, rent collected to
date stands at 98%.
Capital recycling (Appendices 3 & 4)
Disposals in the year to date total GBP204.9m which includes
three disposals in Q3 for GBP139.0m after costs. Bush House WC2 was
sold with vacant possession for GBP83.9m, a 41% premium to December
2021 book value. The sale of 2 & 4 Soho Place W1 completed for
GBP39.7m following delivery of the new theatre to Nimax Theatres.
The price reflects a capital value of c.GBP2,200 psf on the office
element. In addition, a net premium of GBP15.3m was received from
the granting of a geared intermediate leasehold interest at Soho
Place.
Development progress (Appendix 5)
Good progress is being made at our two on-site net zero carbon
developments, which will provide 435,000 sq ft of new space in the
West End, including 350,000 sq ft of offices. Both schemes are
scheduled for delivery in 2025.
At 25 Baker Street W1, demolition works have completed and the
main contractor, Laing O'Rourke, is well underway with sub and
super structure works. 80% of overall construction costs were fixed
at the start of 2022, with the residential fit-out contract to
follow. At Network W1, demolition works commenced in June 2022 and
progress is on programme. Negotiations are advanced with our
preferred contractor regarding the main building contract.
Recognition
80 Charlotte Street W1 was the winner of the BCO's Best National
Commercial Workplace award 2022, recognising both the quality of
the overall design and the building's strong sustainability
credentials.
The Group recently strengthened its GRESB score across all
categories in 2022 and has been awarded an A-rating for public
disclosure and a 5 Star rating for development.
Board changes
After nine years on the Board, Richard Dakin will retire from
his position as a Non-Executive Director of the Company and Chair
of the Risk Committee on 28 February 2023. Helen Gordon, who is
currently a member of the Risk Committee, will become Committee
Chair from 1 March 2023. The Board would like to thank Richard for
his significant contribution to the business and to wish him every
success in the future.
Finance
Capital expenditure of GBP25.9m was incurred in Q3 2022 taking
the total spend for the nine month period to GBP95.1m. In addition,
the Group's share of capital expenditure within joint ventures was
GBP0.5m in Q3. Following the disposal proceeds noted above, net
debt decreased by GBP156.2m over the quarter to GBP1.2bn. This
brought the 30 September 2022 LTV ratio down to 21.7% (30 June
2022: 23.7%) on an EPRA basis, based on 30 June 2022 valuations.
Interest cover for the first nine months of 2022 was 4.2 times (H1
2022: 4.2 times) and cash and undrawn facilities totalled GBP626m
at the quarter end. Neither of the Group's GBP550m revolving credit
facilities were drawn as at 30 September 2022 and, accordingly,
100% of Group debt was at fixed rates.
In September 2022, the second one-year extension option of the
GBP100m revolving credit facility with Wells Fargo was signed. This
moved the facility's maturity date out to November 2027. The
Group's weighted average unexpired debt term at 30 September 2022
was 6.4 years and the first maturity, for an GBP83m fixed rate
secured loan, is in October 2024.
Appendix 1: 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
Factory EC1 Brainlabs 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
The
Featherstone 15, plus 9 if
Building EC1 Marshmallow 16,220 71.50 1.2 10 6 no break
The
Featherstone 11.5, plus 11.5
Building EC1 Dept Agency 11,450 85.25 1.0 10 5 if no break
White Collar 12, plus 10 if
Factory EC1 Adobe 10,180 70.00 0.7 10 6 no break
230 Blackfriars Wandle Housing 7, plus 6 if no
Road SE1 Association 7,290 49.50 0.4 7.5 4 break
----------------- -------- -------- ---------------- ----------- ------------ ----------------
Q3
43 Whitfield
Street W1 Pollination 5,930 85.00 0.5 10 5 5
43 Whitfield 6, plus 5 if no
Street W1 Sine Digital 5,090 86.00 0.4 10 5 break
Gordon House
SW1 VCCP 7,380 52.50 0.4 3 - 7
----------------- -------- -------- ---------------- ----------- ------------ ----------------
Sub-total 103,140 71.75 7.4
-------- -------- ---------------- ----------- ------------ ----------------
Other 37,860 42.25 1.6
-------- -------- ---------------- ----------- ------------ ----------------
Total 141,000 63.70 9.0
-------- -------- ---------------- ----------- ------------ ----------------
Appendix 2: Leasing activity in 2022 YTD
Let Performance against
Dec 21 ERV (%)
Area Income Open market Overall(1)
sq ft GBPm pa
-------- --------- ------------ -----------
Q1 55,900 3.5 6.8 6.8
Q2 53,400 3.6 11.8 11.8
-------- --------- ------------ -----------
H1
2022 109,300 7.1 9.3 9.3
-------- --------- ------------ -----------
Q3 31,700 1.9 27.6 27.6
-------- --------- ------------ -----------
YTD 141,000 9.0 12.7 12.7
-------- --------- ------------ -----------
(1) Includes short-term lettings at properties earmarked for
redevelopment
Appendix 3: Major acquisitions
Property Date Area Total after costs Net Net rental Net rental
sq ft GBPm yield income income
% GBPm pa GBP psf
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 -
------- ------------------ ------- ----------- -----------
Appendix 4: Major disposals
Property Date Area Net proceeds Net Net rental
sq ft GBPm yield income
% GBPm pa
H1 2022
New River Yard EC1 Q2 70,700 65.9(1) 4.5 3.3
------ ---------- ------------- ------- -----------
Total H1 disposals 70,700 65.9 4.5 3.3
---------- ------------- ------- -----------
H2 2022
2 & 4 Soho Place W1 Q3 18,400(2) 39.7 - -
Bush House WC2 Q3 103,700 83.9 - -
Intermediate leasehold interest at Soho Place W1 Q3 - 15.3 - -
------ ---------- ------------- ------- -----------
Total H2 disposals to date 122,100 138.9 - -
---------- ------------- ------- -----------
(1) After deduction of rental top-ups and sale costs
(2) Office space
Appendix 5: Major developments pipeline
Project Total 25 Baker Street W1 Network W1
Completion H1 2025 H2 2025
Office (sq ft) 350,000 218,000 132,000
Residential (sq ft) 52,000 52,000 -
Retail (sq ft) 33,000 28,000 5,000
Total area (sq ft) 435,000 298,000 137,000
Est. future capex(1) (GBPm) 346 241(3) 105
Total cost(2) (GBPm) 697 463 234
ERV (c.GBP psf) - 90 87.5
ERV (GBPm pa) 30.3 18.4(4) 11.9
Pre-let/sold area (sq ft) 31,000 31,000 (5) -
----------------------------- ------------------- -----------
(1) As at 30 June 2022
(2) Comprising book value at commencement, capex, fees and
notional interest on land, voids and other costs. Baker Street
includes a 3.1% profit share
payaway to freeholder The Portman Estate
(3) Includes potential profit share to The Portman Estate
(4) Long leasehold, net of 2.5% ground rent
(5) 19,000 sq ft courtyard retail and 12,000 sq ft Gloucester
Place offices
Notes to editors
Derwent London plc
Derwent London plc owns 75 buildings in a commercial real estate
portfolio predominantly in central London valued at GBP5.9 billion
as at 30 June 2022, 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 1
Soho Place W1, 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 October 2022, 80 Charlotte
Street won the BCO's Best National Commercial Workplace award 2022.
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 2013 the Company launched a voluntary
Community Fund which 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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