TIDMDLN
RNS Number : 6893G
Derwent London PLC
08 November 2018
Derwent London plc ("Derwent London" / "the Group")
THIRD QUARTER BUSINESS UPDATE
RESILIENT LETTING MARKET SUPPORTS DEVELOPMENT STRATEGY
Highlights
-- Good occupier demand:
o Second half lettings to date of GBP14.6m on a total of 218,500
sq ft, 6.0% above June 2018 ERV
o Total lettings year to date of GBP23.0m, almost double the
GBP11.8m announced on 9 August 2018. These were on 357,700 sq ft at
an average of 7.8% above December 2017 ERV
o EPRA vacancy rate is now 2.3%, down from 4.2% in June 2018
-- 623,000 sq ft under construction with 73% pre-let:
o Brunel Building W2 68% pre-let
o 80 Charlotte Street W1 90% of the office space pre-let
-- Advancing next two major projects totalling 410,000 sq ft:
o Soho Place W1
o The Featherstone Building EC1
-- Finance:
o LTV ratio at 30 September 2018 was 16.3% with undrawn
facilities and cash of GBP334m
o In August 2018 Fitch assigned the Group a long-term issuer
default rating of A-
John Burns, Chief Executive, commented:
"Second half lettings have already substantially exceeded those
in the first half. We have now successfully de-risked both of our
on-site developments and lowered our vacancy rate, placing us in an
excellent position to progress our next two major
developments."
Webcast and conference call
There will be a live webcast together with a conference call for
investors and analysts at 09:00 GMT today. The audio webcast can be
accessed via www.derwentlondon.com.
To participate in the call, please dial the following number:
+44 (0)20 3059 5868.
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 Damian Wisniewski, Finance Director
Quentin Freeman, Head of Investor Relations
Brunswick Group Nina Coad
Tel: +44 (0)20 7404 5959 Emily Trapnell
LETTING ACTIVITY (see Appendix 1)
The good progress reported in the first half has continued. Over
two thirds of Brunel Building has been let this year, principally
to Sony Pictures and with new lettings to Alpha FX, Coach and FA
Premier League. In total we have pre-let 164,100 sq ft achieving
GBP12.0m (GBP11.7m net) of rent for a minimum of 10 years exceeding
last December's ERV by 14.7% and we have good interest in the
remaining space. We have made other lettings across the portfolio
which, on average, recorded 1.2% growth above ERV. These include
lettings at the refurbished space at Johnson Building EC1 and 25
Savile Row W1. This activity has lowered our EPRA vacancy rate from
4.2% in June to 2.3% as at November 2018.
DEVELOPMENT PROGRESS (see Appendix 2)
Our two on-site developments at Brunel Building, Paddington W2
and 80 Charlotte Street W1 remain on plan for delivery in H1 2019
and H1 2020, respectively.
Preliminary work at Soho Place W1 is underway. In addition, we
have exercised our break on the leases at Monmouth House and 19-23
Featherstone Street EC1, which will give us vacant possession at
the end of December 2018 allowing for their redevelopment as The
Featherstone Building. We expect to commit to both these projects
in H1 2019 with anticipated completions in 2022.
FINANCE
Net debt increased to GBP892.4m at 30 September 2018, a rise of
GBP70.9m since 30 June 2018. The main areas of expenditure in the
quarter were GBP41.9m of property acquisitions, mainly at 88-94
Tottenham Court Road W1 which was announced in August but completed
on 24 September, and capital expenditure on projects of GBP50.6m. A
receipt of GBP13.5m was also received from our Porters North N1
joint venture following the sale of the property earlier in the
year.
The loan-to-value ratio increased to 16.3% in September 2018
with NAV gearing at 21.1%. Interest cover for the first nine months
of the year was 5.0 times and undrawn facilities and cash totalled
GBP334m. The weighted average interest rate on our debt at quarter
end was 3.78% on an IFRS basis or 3.51% based on the cash coupon
payable on our 2019 convertible bonds.
In August, Fitch assigned Derwent London plc a long-term issuer
default rating of A- and a senior unsecured debt rating of A. The
London Merchant Securities Ltd. Senior Secured Bonds 2026 were
subsequently given a Fitch rating of A+.
PROPERTY VALUES
Central London office values remain firm bolstered by good
levels of activity. The MSCI IPD Central London Offices Quarterly
Index reported capital values rising 0.5% and rents 0.3% in Q3
2018.
Appendix 1: Principal lettings in 2018 to date
Office Total Rent
Area rent annual Lease Lease free
sq GBP rent term break equivalent
Property Tenant ft psf GBPm Years Year Months
Brunel Building
W2 Various 164,100 73.00 12.0 10-15 10-12 20-30
Metropolitan
Johnson Building Housing
EC1 Trust 22,200 62.50 1.4 10 - 21
1 Stephen Street
W1 Odeon 11,100 75.00 0.8 10 - 18
Holden House
W1 retail Clarks 2,900 - 0.8 10 2 8
12, plus
80 Charlotte Elliott 6 if
St (Asta) W1 Wood 11,000 56.10 0.6 10 5 no break
19-35 Baker
Street W1 Knotel 14,600 41.00 0.6 5 3 9
25 Savile Row Hanover
W1 Investors 5,600 108.00 0.6 10 0 21
45-51 Whitfield
Street W1 Knotel 12,800 48.00 0.6 5.5 3.5 6
11, plus
Charlotte Building First Quantum 9 if
W1 Minerals 6,800 73.20 0.5 10 5 no break
--------------- -------- ------- -------- ------- ------- ------------
251,100 68.90 17.9
------------------------------------ -------- ------- -------- ------- ------- ------------
Appendix 2: Major developments pipeline
Property Delivery Capex Comment
Area to complete
sq ft GBPm(1)
On-site projects
Brunel Building, 2 Canalside
Walk W2 243,000 H1 2019 44 Offices - 68% pre-let
321,000 sq ft offices,
45,000 sq ft residential
and 14,000 sq ft retail
80 Charlotte Street W1 380,000 H1 2020 156 - 76% pre-let overall
----------- --------- ------------- --------------------------
623,000 200
----------- --------- ------------- --------------------------
Other major planning consents
Soho Place W1 285,000 2022 209,000 sq ft offices,
36,000 sq ft retail
and 40,000 sq ft theatre
The Featherstone Building 125,000 2022 Offices, workspaces
EC1 and retail
19-35 Baker Street W1(2) 293,000(3) 206,000 sq ft offices,
52,000 sq ft residential
and 35,000 sq ft retail
Holden House W1(2) 150,000 Retail flagship or
retail and office scheme
----------- --------- ------------- --------------------------
853,000
----------- --------- ------------- --------------------------
Grand total 1,476,000
----------- --------- ------------- --------------------------
(1) As at 30 Jun 2018 (2) Resolution to grant planning
permission obtained (3) Total area - Derwent London has a 55% share
of the joint venture
Notes to editors
Derwent London plc
Derwent London plc owns 87 buildings in a commercial real estate
portfolio predominantly in central London valued at GBP5.0 billion
(including joint ventures) as at 30 Jun 2018, 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 5.5 million sq ft portfolio include
White Collar Factory EC1, Angel Building EC1, The Buckley Building
EC1, 1-2 Stephen Street W1, Horseferry House SW1 and Tea Building
E1.
In 2018 to date the Group has won Property Week Property Company
of the Year and EG Offices Company of the Year, whilst White Collar
Factory scooped RIBA National and London awards, RICS National and
London awards, two BCO awards for Commercial Workplace and
Innovation, an EG Creative Places award and an NLA Wellbeing award.
25 Savile Row also won RIBA National and London awards and SKA Gold
for the fit-out. In 2017 the Group collected the Property Week
Developer of the Year award and EG Offices Company of the Year and
won further awards from RIBA, Civic Trust and BCO. In 2013 Derwent
London launched a voluntary Community Fund and has to date
supported 70 community projects in 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.
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END
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