Derwent London thinks its rental income could rise by 85% over the next five years

Derwent London has published results for the year ended 31 December 2016. Its EPRA net asset value per share increased 0.5% to 3,551p from 3,535p at 31 December 2015, 1.3% lower than 3,598p at 30 June 2016. Net rental income increased 5.2% to GBP145.9m from GBP138.7m in 2015. EPRA earnings rose 8.9% to GBP85.7m from GBP78.7m last year. EPRA earnings per share equivalents increased 7.9% to 76.99p per share from 71.34p in 2015. The proposed final dividend per share has been increased by 25.0% to 38.50p making 52.36p for the full year, an increase of 20.6%. they are also proposing a special dividend of 52p per share.

The true equivalent yield at year end was 4.83%, a 31bp outward movement over the year. This followed 21bp of yield tightening in 2015.

Overall take-up in London offices slowed in 2016; their letting activity captured GBP31.4m pa of rental income on 547,500 sq ft, which surpassed their previous record achieved in 2015 by 16%. Letting developments under construction and vacant space could add another GBP58.4m to rental income, after allowing for GBP363m of future capital expenditure to complete. They also say that reversionary gains in the existing portfolio could raise contractual cash rental income by more than 85% in the next five years.

Derwent incurred GBP213.5m of capital expenditure on development projects during 2016 and at the year-end they were on site at four; Brunel Building W2, 80 Charlotte Street W1, White Collar Factory EC1 and The Copyright Building W1.  Capital expenditure in 2017 is estimated at GBP158m, with no major schemes due to start. White Collar Factory EC1 and The Copyright Building W1, will be completed in 2017, while 80 Charlotte Street W1 and Brunel Building W2, are in the early stages of development.

At the year end they had interest cover of 3.7 times and LTV of 17.7%. Undrawn facilities and cash exceeded their future capital expenditure on committed projects.

DLN : Derwent London thinks its rental income could rise by 85% over the next five years