TIDMDLN
RNS Number : 3334Y
Derwent London PLC
04 May 2023
4 May 2023
Derwent London plc ("Derwent London" / "the Group")
FIRST QUARTER BUSINESS UPDATE
STRONG OPERATIONAL PROGRESS
Paul Williams, Chief Executive of Derwent London, said:
"London, particularly the West End, is busy and people are back
in the office. Occupier demand continues to favour amenity-rich,
well designed and sustainable space, evidenced by a strong Q1 with
GBP17.1m of new lettings across our portfolio on average 6.6% above
ERV. Our EPRA vacancy rate has reduced to 4.9% and we have made
good progress at our on-site developments."
Summary
Portfolio
-- Letting activity in Q1 totalled GBP17.1m at an average 6.6%
above December 2022 ERV. Key transactions in the period were:
o One Oxford Street W1 - 22,200 sq ft flagship retail letting to
Uniqlo
o 25 Baker Street W1 - 106,100 sq ft pre-let to PIMCO two years
ahead of completion
o The Featherstone Building EC1 - 31,100 sq ft letting to Buro
Happold
-- EPRA vacancy rate reduced to 4.9% at 31 March 2023 (31 December 2022: 6.4%)
-- Disposal in January of 19 Charterhouse Street EC1 for
GBP53.6m (after costs), GBP0.6m above December 2022 book value
Developments
-- Following the pre-let to PIMCO, 25 Baker Street W1 is 56%
pre-let or sold and construction works are now above ground
(completion due H1 2025)
-- At Network W1, demolition and piling are now complete and
basement works are underway (completion due H2 2025)
Financial position at 31 March 2023
-- EPRA LTV 23.1%(1) (31 December 2022: 23.9%)
-- Cash and undrawn facilities of GBP610m (31 December 2022: GBP577m)
(1) LTV based on 31 December 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 BST today. To participate in the call, please
register here .
Operational update (Appendices 1 & 2)
New leases totalling GBP17.1m on 190,600 sq ft of space were
achieved in Q1 2023 on average 6.6% above December 2022 ERV (8.3%
above ERV excluding short-term lettings). The weighted average
lease term (to break) of these lettings is 12.0 years. Key
transactions include:
-- One Oxford Street W1 (Soho Place) : 22,200 sq ft flagship
retail unit let to Uniqlo, comprising a base rent (subject to
annual indexation) plus turnover top-up, in line with December 2022
ERV.
-- 25 Baker Street W1 : 106,100 sq ft pre-let to PIMCO at an
annual rent of GBP11.0m, significantly above December 2022 ERV. The
development is scheduled for completion in H1 2025.
-- The Featherstone Building EC1 : 31,100 sq ft to Buro Happold
at an annual rent of GBP2.3m, in line with December 2022 ERV.
These transactions reflect the evolving nature of London's
office market. We believe our buildings are well placed to capture
current and future demand as the way businesses use their office
space changes in this dynamic environment.
Our EPRA vacancy rate reduced from 6.4% at 31 December 2022 to
4.9% at 31 March 2023, with GBP1.8m of rent either signed in Q2 to
date or under offer.
For the March quarter day, office rent collected to date stands
at 98%.
Capital recycling (Appendix 3)
In January, we announced the disposal of 19 Charterhouse Street
EC1 for net proceeds of GBP53.6m to a private investor. The
disposal price represents a 4.6% net initial yield out to lease
expiry in mid-2025 and was GBP0.6m ahead of the December 2022 book
value.
Development progress (Appendix 4)
The 25 Baker Street W1 project remains on budget and programme
with construction works now well above ground. Following the
pre-let to PIMCO in Q1 2023, the commercial element is now 56%
pre-let or pre-sold. We have fixed 97% of construction costs of the
office element (80% of the total) with the residential fit-out
costs still to be finalised.
At Network W1, the on-site works are making good progress with
demolition and piling works complete and basement works
underway.
Sustainability
New Minimum Energy Efficiency Standards (MEES) legislation for
commercial buildings came into effect in April 2023, requiring an
EPC of E or above. Our portfolio was already 100% compliant. In
addition, we are 85.7% compliant with 2027 MEES legislation (EPC C
or above) and 65.3% compliant with expected 2030 legislation (EPC B
or above).
Finance
Net debt decreased to GBP1,225.2m at 31 March 2023 from
GBP1,257.2m at 31 December 2022 with net disposal proceeds of
GBP53.6m offsetting capital expenditure in the period of GBP29.1m.
Payment of the final dividend of 54.5p per share is due on 2 June
2023.
The EPRA LTV ratio reduced through Q1 to 23.1% based on 31
December 2022 valuations, including the Group's share of joint
ventures, from 23.9% at 31 December 2022. Interest cover for Q1
2023 was 4.2 times (FY 2022: 4.2 times) and cash and undrawn
facilities totalled GBP610m at the quarter end. Neither of the
Group's revolving credit facilities, which total GBP550m, were
drawn at 31 March 2023. Accordingly, 100% of Group debt remains at
fixed rates, with a weighted average interest rate of 3.13% on a
cash basis. Our next refinancing is in October 2024, an GBP83m
secured facility with a coupon of 3.99%.
Appendix 1: Leasing activity in Q1 2023
Let Performance against
Dec 22 ERV (%)
Area Income
sq ft GBPm pa Open market Overall(1)
-------- --------- ------------ -----------
Q1 2023 190,600 17.1 8.3 6.6
-------- --------- ------------ -----------
(1) Includes short-term lettings at properties earmarked for
redevelopment
Appendix 2: Principal lettings in Q1 2023
Total annual Rent free
Property Tenant Area Rent rent Lease term Lease break equivalent
sq ft GBP psf GBPm Years Year Months
--------------- -------- ------------- ---------------- ----------- ------------ --------------
25 Baker
Street W1 PIMCO 106,100 103.40 11.0 15 - 37
The
Featherstone 24, plus 12
Building EC1 Buro Happold 31,100 74.40 2.3 15 10(1) if no break
Tea Building Jones Knowles 12, plus 12
E1 Ritchie 8,100 60.00 0.5 10 5 if no break
1 Soho Place
W1 Uniqlo 22,200 Confidential Confidential(2) 10 5 12
--------------- -------- ------------- ---------------- ----------- ------------ --------------
(1) There is an additional break at year 5 on level eight
subject to a 12-month rent penalty payable by the tenant
(2) Rent comprises base rent which is subject to annual
indexation, plus a turnover top-up
Appendix 3: Major disposals in Q1 2023
Property Date Area Net proceeds Net Net rental
sq ft GBPm yield income
% GBPm pa
19 Charterhouse Street EC1 Q1 2023 63,200 53.6 4.6 2.6
--------- ------- ------------- ------- -----------
Appendix 4: Major on-site development 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) 324 217(3) 107
Total cost(2) (GBPm) 708 463 245
ERV (c.GBP psf) - 90 87.5
ERV (GBPm pa) 30.3 18.4(3) 11.9
Pre-let/sold area (sq ft) 137,100 137,100 (4) -
------------------------------------------- ------------------- ----------------
Embodied carbon intensity (kgCO2e/sqm)(5) c.600 c.530
------------------------------------------- ------------------- ----------------
Target BREEAM rating Outstanding Outstanding
------------------------------------------- ------------------- ----------------
Target NABERS rating 4 Star or above 4 Star or above
------------------------------------------- ------------------- ----------------
Green Finance Elected To be elected
------------------------------------------- ------------------- ----------------
(1) As at 31 December 2022. (2) Comprising book value at
commencement, capex, fees and notional interest on land, voids and
other costs. 25 Baker Street W1 includes a profit share to
freeholder, The Portman Estate. (3) Long leasehold, net of 2.5%
ground rent.
(4) Includes PIMCO pre-let, plus 19,000 sq ft courtyard retail
and 12,000 sq ft Gloucester Place offices pre-sale to The Portman
Estate. (5) Embodied carbon intensity estimate as at stage 4 or
5.
Notes to editors
Derwent London plc
Derwent London plc owns 70 buildings in a commercial real estate
portfolio predominantly in central London valued at GBP5.4 billion
as at 31 December 2022, making it the largest London office-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 the property companies
worldwide to have science-based carbon targets validated by the
Science Based Targets initiative (SBTi).
Landmark buildings in our 5.5 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 March 2023 we placed in the top three of the Property Sector in
Management Today's Britain's Most Admired Companies awards 2022. In
2013 the Company launched a voluntary Community Fund which has to
date supported over 150 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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