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Derwent London delivers NAV growth despite Brexit

Derwent London delivers NAV growth despite Brexit – Derwent London has published results for the year ended 31 December 2018. Highlights are:

  • Derwent London delivered a total return of 5.3%
  • EPRA NAV 3,776p per share, up 1.6%
  • EPRA earnings of 113.1p per share, up 20.0% from 94.2p in 2017 (but these include some one-off items, underlying earnings were 99.1p per share, up 5.1% from 94.2p).
  • Net property and other income GBP185.9m, up 12.8% from GBP164.8m in 2017
  • Full year dividend of 65.85p per share from 59.73p, up 10.2% – they say “We expect the 2019 dividend to grow at a similar rate
  • Net debt increased to GBP956.9m from GBP657.9m in December 2017 to give a loan-to-value ratio of 17.2% – Derwent still had cash and undrawn facilities of GBP274m at the year end, before it drew down a GBP250m US private placement drawn in January 2019. Derwent has been sssigned Fitch corporate credit rating of A- in August 2018 with senior unsecured debt rating of A.

Activity and opportunities

  • New lettings totalling GBP26.8m, achieving 4.1% above December 2017 estimated rental value (ERV)
  • Two on-site developments totalling 623,000 sq ft – now 75% pre-let, up from 45% one year ago
    • Brunel Building W2 – 64% pre-let at December 2018 (now 77% with balance under offer)
    • 80 Charlotte Street W1 – 74% pre-let
  • Potential GBP59.6m to contribute to income after additional capex of GBP133m
  • Two new developments could add GBP30m to ERV on completion 2022, with expected capex of GBP359m
    • Soho Place W1 construction contract signed February 2019 [The building that will sit on top of the new Tottenham Court Road station]
    • Demolition started at the site of The Featherstone Building EC1
  • Another 1.6m sq ft of space in the portfolio has regeneration potential, 14% with planning consent

Portfolio update

  • Portfolio valued at GBP5.2bn – an underlying valuation increase of 2.2%
  • Underlying valuation uplift on developments was 18.0%
  • True equivalent yield of 4.73% – unchanged from December 2017
  • Total property return of 6.0%, ahead of benchmark index return of 5.3%
  • EPRA vacancy rate rose to 1.8% from 1.3% in December 2017, down from 4.2% in June 2018
  • ERV growth of 1.1% in 2018 and ERV guidance for 2019 +1% to -2%

Robbie Rayne, chairman, commented: “Derwent London made good progress last year achieving GBP26.8m of new lettings, a 5.1% increase in underlying earnings and a 20.0% increase in EPRA EPS, despite continuing political and economic uncertainty. We propose raising the final dividend 10.3% to 46.75p per share.”

John Burns, chief executive, commented: “Demand for Central London offices remains very active and we have been able to outperform the market through our development activities. Our brand of well-designed office space remains attractive to tenants. With its strong financial position, high quality portfolio and pipeline of exciting opportunities, this positions the Group for continued success.”

DLN : Derwent London delivers NAV growth despite Brexit

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