TIDMDLN
RNS Number : 5451S
Derwent London PLC
07 November 2019
Derwent London plc ("Derwent London" / "the Group")
THIRD QUARTER BUSINESS UPDATE
FURTHER STRONG LETTING PROGRESS AND REFINANCING
Highlights
-- Lettings year to date total GBP33.5m on 486,600 sq ft, on
average 7.0% above December 2018 ERV
o Includes 83,100 sq ft pre-let to Apollo Management
International at 1 Soho Place W1
o EPRA vacancy rate down to 0.6% from 1.8% in December 2018
-- 790,000 sq ft under construction with 70% of commercial space pre-let, of which:
o 80 Charlotte Street W1 - 92% pre-let, completion H1 2020
o Soho Place W1 - 76% pre-let, completion H1 2022
o The Featherstone Building EC1 - completion H1 2022
-- Capital expenditure on projects of GBP155.7m in the nine months to 30 September 2019
-- Property disposals of GBP181.7m (Group's share) in the year
to date, 6.2% above December 2018 values
-- LTV ratio at 30 September 2019 was 16.4%(1) with GBP560m of undrawn facilities and cash
-- Signed a new five-year GBP450m revolving credit facility
including a GBP300m 'green' tranche
-- The Group joined the Better Buildings Partnership and signed
their Climate Change Commitment
Paul Williams, Chief Executive of Derwent London, said:
"Our strong pre-letting activity continues, demonstrating the
consistent demand for our product and for London office space. In
addition we have extended our main revolving credit facility, which
includes an innovative green tranche linking the financing of our
developments to their environmental impact."
(1) LTV based on June 2019 property values
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 register at
www.derwentlondon.com
For further information, please contact:
Derwent London Paul Williams, Chief Executive
Tel: +44 (0)20 7659 3000 Damian Wisniewski, Chief Financial
Officer
Quentin Freeman, Head of Investor
Relations
Brunswick Group Nina Coad
Tel: +44 (0)20 7404 5959 Emily Trapnell
LETTING ACTIVITY (see Appendix 1)
In the second half to date Derwent London has achieved GBP15.4m
of new lettings, 6.5% ahead of December 2018 ERV and 7.3% ahead of
June 2019 ERV. This takes our lettings in the year to date to
GBP33.5m, 7.0% above December 2018 ERV, which compares to GBP26.8m
achieved for the whole of 2018. The Group's largest single letting
was the 83,100 sq ft pre-let to Apollo at 1 Soho Place announced
earlier this week which was above December 2018 ERV. We reported on
the second half lettings at 80 Charlotte Street W1 and Johnson
Building EC1 in August. Since then we have achieved a GBP65 per sq
ft rental level at Tea Building E1 and let the lower ground floor
space at White Collar Factory EC1. The rest of the portfolio
continues to perform well. This is demonstrated by our EPRA vacancy
rate, which is now only 0.6%, down from 1.6% in June 2019 and 1.8%
in December 2018.
DEVELOPMENT PROGRESS (see Appendix 2)
Following the completion of Brunel Building W2 in the first half
of 2019, 80 Charlotte Street W1 is on schedule for delivery in the
first half of 2020. Construction work is progressing well at Soho
Place W1 and The Featherstone Building EC1 with completion expected
in 2022. We have started design, pre-construction and procurement
work on our 19-35 Baker Street W1 project which is likely to start
in 2021.
DISPOSALS (see Appendix 3)
So far this year we have disposed of GBP181.7m of investment
properties (Group's share) at an average premium of 6.2% above
December 2018 book values. These were properties where we thought
we could add limited further value with the proceeds being recycled
into the development programme.
FINANCE
Net debt fell from GBP1,003.5m in June 2019 to GBP937.0m at 30
September 2019, the decrease due mainly to the sale proceeds from
The Buckley Building EC1. Capital expenditure spent on projects
during Q3 was GBP54.4m taking capex for the year to date to
GBP155.7m plus a further GBP21.0m incurred on property
acquisitions.
The loan-to-value ratio has fallen slightly to 16.4% at 30
September 2019 with NAV gearing at 21.4%. Interest cover for the
first nine months of the year was 4.6 times and undrawn facilities
and cash increased to GBP560m at the quarter end. The weighted
average interest rate on our debt at 30 September 2019 was 3.71% on
an IFRS basis or 3.56% based on the cash coupon payable on the 2025
convertible bonds issued in June 2019.
On 31 October 2019 we announced the extension of our main
GBP450m revolving bank facility to October 2024, increasing the
weighted average maturity of facilities by 11 months. The facility
incorporates a 'green' tranche of GBP300m to be drawn in accordance
with our newly published Green Finance Framework. The latter is
available on our website and has been independently verified as
being in accordance with the Loan Market Association ("LMA") Green
Loan Principles drawn up in December 2018, making this the first
revolving credit facility arranged by a UK REIT that meets these
principles.
BETTER BUILDINGS PARTNERSHIP
In October 2019 the Group joined the Better Buildings
Partnership and signed their Climate Change Commitment. One of the
key principles of the latter is that the Group will publish its net
zero carbon pathway by the end of 2020.
PROPERTY VALUES
MSCI IPD's central London office Quarterly Index in Q3 showed a
small improvement with capital values up 0.1% and rents up 0.3%.
For the nine months to 30 September 2019, the equivalent figures
were 0.2% and 0.9%, respectively.
Appendix 1: Principal lettings in 2019 to date
Total
Area Office annual Lease Lease Rent free
sq rent rent term break equivalent
Property Tenant ft GBP psf GBPm Years Year Months
H1
1 Soho Place
W1 G-Research 102,600 94.70 9.7 15 - 32
Brunel Building
W2 Splunk 49,600 75.00 3.7 12 - 20
Brunel Building 20, plus
W2 Paymentsense 33,000 77.50 2.6 15 10 6 if no break
--------------- -------- ------------- ------------- ------- ------- ---------------
H2
1 Soho Place
W1 Apollo 83,100 Confidential Confidential 15 - Confidential
80 Charlotte
Street W1 BCG 40,650 82.50 3.4 15 12 Confidential
Johnson Building 10, plus
EC1 Oktra 18,300 47.50 0.9 10 5 8 if no break
15, plus
Johnson Building Access 12 if no
EC1 Intelligence 17,800 45.00 0.8 10 5 break
10.5, plus
Tea Building 10.5 if no
E1 LoopUp 6,925 65.00 0.5 10 5 break
White Collar 14, plus
Factory EC1 AHMM 10,600 40.00(1) 0.4 8.5 4.5 6 if no break
362,575 78.70(2) 22.0(2)
(1) Lower ground floor space (2) Excludes Apollo letting
Appendix 2: Major developments pipeline
Property Area Capex to complete Comment
sq ft GBPm(1)
Completed projects in H1 2019
Brunel Building, 2 Canalside Walk W2 243,200 - Offices and retail - 100% let
On-site projects
80 Charlotte Street W1 380,000 69 321,000 sq ft offices, 45,000 sq ft
residential and 14,000 sq ft retail - 85%
pre-let / pre-sold
overall
Soho Place W1 285,000 262(3) 209,000 sq ft offices, 36,000 sq ft retail
and 40,000 sq ft theatre - 76% commercial
space
pre-let(4)
The Featherstone Building EC1 125,000 70 110,000 sq ft offices, 13,000 sq ft
workspaces and 2,000 sq ft retail
----------- ------------------ ---------------------------------------------
790,000 401
----------- ------------------ ---------------------------------------------
Major planning consents
19-35 Baker Street W1 293,000(2) 206,000 sq ft offices, 52,000 sq ft
residential and 35,000 sq ft retail
Holden House W1 150,000 Retail flagship or retail and office scheme
----------- ------------------ ---------------------------------------------
443,000
----------- ------------------ ---------------------------------------------
Total (excluding completions) 1,233,000
----------- ------------------ ---------------------------------------------
(1) As at 30 Jun 2019 (2) Total area - Derwent London currently
has a 55% share of the joint venture
(3) Includes remaining site acquisition cost and profit share to
Crossrail (4) In addition the 40,000 sq ft theatre is pre-let
Appendix 3: Major disposals in 2019 to date
Gross Gross Net yield
Property Date Area proceeds proceeds to purchaser Rent
sq ft(1) GBPm(1) GBP psf % GBPm(1)
Premier House SW1 Q1 60,700 50.0 820 - -
9 Prescot Street E1
(50% interest) Q2 48,500 26.9 560 4.5 1.3
16 Prescot Street
E1 (50% interest) Q3 4,400 1.8 400 2.6 0.05
The Buckley Building
EC1 Q3 85,100 103.0 1,210 4.4 4.9
------- ---------- ---------- ---------- -------------- ---------
Total 198,700 181.7 910 - 6.25
---------- ---------- ---------- -------------- ---------
(1) Derwent London share
Notes to editors
Derwent London plc
Derwent London plc owns 84 buildings in a commercial real estate
portfolio predominantly in central London valued at GBP5.4 billion
(including joint ventures) as at 30 June 2019, 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, in October 2019, Derwent London became the first UK
REIT to sign a Green Revolving Credit Facility. 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 schemes in our 5.7 million sq ft portfolio include
Brunel Building W2, White Collar Factory EC1, Angel Building EC1,
1-2 Stephen Street W1, Horseferry House SW1 and Tea Building
E1.
In 2019 to date, the Group has 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 89 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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END
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