Derwent London PLC Q1 2018 Business Update (5772N)

TIDMDLN

RNS Number : 5772N

Derwent London PLC

10 May 2018

10 May 2018

Derwent London plc ("Derwent London" / "the Group")

FIRST QUARTER BUSINESS UPDATE

GOOD OCCUPIER DEMAND CONTINUES

Highlights

   --      Occupier interest remains good with 164,500 sq ft of lettings signed or under offer: 

o 51,500 sq ft new lettings achieving GBP2.4m of rents, 4.9% above December 2017 ERV

o 113,000 sq ft under offer for c.GBP7.2m of rents

   --      Two developments under construction totalling 623,000 sq ft, 45% pre-let: 

o 80 Charlotte Street W1, 86% of the office space pre-let

o Brunel Building W2, 32% under offer

   --      Preliminary work started at Soho Place W1, 285,000 sq ft 

-- Two refurbishments completed totalling 77,100 sq ft and taking the EPRA vacancy rate to 4.1%

-- Disposal of Porters North N1 for GBP48.5m (our 50% interest GBP24.3m), above December 2017 value

   --      LTV ratio 13.2% at 31 March 2018, with cash and undrawn facilities of GBP514m 

John Burns, Chief Executive, commented:

"We continue to make good progress with our developments. Occupier interest remains encouraging and we have a significant amount of space under offer."

Webcast and conference call

There will be a live webcast together with a conference call for investors and analysts at 09:00 BST today. The audio webcast can be accessed via www.derwentlondon.com

To participate in the call, please dial the following number: [phone].

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: [phone]     Damian Wisniewski, Finance 
                               Director 
                               Quentin Freeman, Head 
                               of Investor Relations 
 
   Brunswick Group              Simon Sporborg 
   Tel: [phone]     Nina Coad 
                                Emily Trapnell 
 

Letting activity

Having de-risked a substantial part of our development programme last year we have achieved a further GBP2.4m of new lettings year to date which, on average, have been 4.9% above December 2017 ERV.

We have also completed the refurbishments at Johnson Building EC1 and 25 Savile Row W1 which were the major contributors to the increase in the EPRA vacancy rate to 4.1%. Together they represent more than half the vacant space.

We are seeing good occupier interest and currently have 113,000 sq ft under offer including our first potential letting at Brunel Building W2. If all these transactions complete, they will produce a further c.GBP7.2m of new rents.

Development progress (see Appendix)

We have two on-site developments. As already announced 80 Charlotte Street W1 is 73% pre-let, or 86% based on the offices alone. There is strong interest in the Brunel Building where 32% is under offer. In January Crossrail handed over the site of Soho Place W1 enabling us to begin preliminary work.

Disposal

In March Porters North N1 was sold for GBP48.5m, or GBP43.0m net of rental top-ups, disposal costs and a capital contribution to the tenant. The 44,100 sq ft building was held in a 50:50 joint venture and was sold at a 5% premium to December 2017 book value.

Finance

Capital expenditure and properties acquired in the first three months of 2018 totalled GBP53.1m including GBP2.4m of capitalised interest. There were no significant property acquisitions and the only disposal in the period was Porters North; at the sale date, the associated GBP13.5m of bank debt (Group share: GBP6.8m) was repaid.

Group net debt rose marginally during the quarter ended 31 March 2018 to GBP667.5m giving an unchanged loan-to-value ratio of 13.2% based on December 2017 property valuations, and interest cover rose again to 519%. The weighted average interest rate was 3.77% on a cash basis and 4.08% on an IFRS basis. Undrawn facilities and cash were largely unchanged at GBP514m and the weighted average debt maturity was 7.3 years.

Subject to shareholder approval, the 2017 final dividend of 42.4p per share and the special dividend of 75.0p per share will be paid to shareholders on 8 June 2018, the shares having become ex-dividend on 3 May. These dividends have given rise to an adjustment to the conversion price of the Group's GBP150m 1.125% convertible bonds due July 2019 from GBP32.7342 per share to GBP31.7764.

Property values

Central London office values remain firm. MSCI IPD is reporting capital growth of 0.4% in the first quarter of 2018 with rents falling marginally by 0.2%.

Appendix: Major developments pipeline

 
 Property                      Area          Capex   Comment 
                                 sq    to complete 
                                 ft        GBPm(1) 
----------------------  -----------  -------------  ---------------------- 
 On-site projects 
 Brunel Building, 
  2 Canalside Walk                                   Offices - 32% 
  W2                        243,000             70    under offer 
                                                     321,000 sq ft 
                                                      offices, 45,000 
                                                      sq ft residential 
                                                      and 14,000 sq 
 80 Charlotte Street                                  ft retail - 73% 
  W1                        380,000            182    pre-let overall 
----------------------  -----------  -------------  ---------------------- 
                            623,000            252 
----------------------  -----------  -------------  ---------------------- 
 Other major planning 
  consents 
 Soho Place W1              285,000                  209,000 sq ft 
                                                      offices, 36,000 
                                                      sq ft retail and 
                                                      40,000 sq ft theatre 
 Monmouth House EC1         125,000                  Offices, workspaces 
                                                      and retail 
 19-35 Baker Street      293,000(3)                  206,000 sq ft 
  W1(2)                                               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 31 Dec 2017 (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 GBP4.9 billion (including joint ventures) as at 31 December 2017, 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 the Property Week Property Company of the Year award whilst White Collar Factory scooped two BCO awards for Commercial Workplace and Innovation. 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 56 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.

This information is provided by RNS

The company news service from the London Stock Exchange

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May 10, 2018 02:00 ET (06:00 GMT)