London office developer Derwent London saw valuations stabilise over 2024 in a boon for the real estate sector.
Its portfolio value grew 0.2% over the 12 months to £4,861m, with the final six months of the year seeing a 1.9% increase in values.
This contributed to a 0.6% uplift in its EPRA net tangible assets (NTA) to 3,149p per share, and with dividends reinvested a NAV total return of 3.2% for the year.
Portfolio highlights
The impact of ERV growth of 4.3% (2023: 2.1%) on the portfolio valuation outweighed an 18 basis points yield expansion over the year to 5.73%.
The company signed £18.9m of new leases, with open market lettings 12.3% above ERV. It fully let its 25 Baker Street office development during the year on rents 16.5% ahead of appraisal ERV with 13.5 year WAULT.
Financial highlights
EPRA earnings per share was up 4.4% to 106.5p, with the dividend per share increasing to 80.5p.
Net debt increased to £1,483m, resulting in LTV being slightly higher at 29.9% (from 27.9%), with net debt to EBITDA up to 9.3x (from 8.8x).
Outlook
The company said that it has a positive rental outlook with portfolio ERV guidance for 2025 of 3% to 6%, adding that the total return outlook is the strongest for several years (assuming yields remain stable).
Paul Williams, chief executive of Derwent London, said:
“We have delivered another strong leasing performance, with £18.9m of new rent signed over 12% above ERV. Alongside pre-letting the remaining office space at 25 Baker Street W1, our activity was well distributed across the portfolio. Growth in rental values doubled to 4.3%, the highest level since 2016, and valuations recovered in the second half as yields stabilised, delivering a positive total return of 3.2%
“Over the last few years, we have strategically reshaped our portfolio and we are well positioned for the future. Having secured resolution to grant planning consent for a major scheme at 50 Baker Street W1, in Q4 we acquired our JV partner’s 50% stake for £44.4m (before costs), equivalent to an attractive £370 psf on the consented area. This adds a further c.£100m of capex to our near-term development pipeline.
“London is a leading global city, attracting a broad occupier base. Business leaders across sectors want their teams in the office and London’s workplaces are busy. As specialists, we understand evolving market requirements, and our distinctive brand and the spaces we deliver have strong appeal.
“Our regeneration-led business model has helped us consistently outperform the central London office index by an average 170bp per annum over the last 10 years, and by 280bp in 2024. Investment volumes are forecast to recover over the coming year, and we expect portfolio ERV growth of 3% to 6% in 2025 which will further drive the Group’s reversionary profile. Together with development profits from our c.2m sq ft pipeline, this gives us confidence in our total return outlook.“
