Derwent lifts rents and yields forecasts after record lettings period

By Paul Norman - Thursday, August 10, 2017 9:46

Derwent London said it had secured a record £23.4m of new lettings in the first half prompting it to raise guidance for both rents and yields as it reported on a notably busy first six months of 2017 aided it said by the “appeal” of its product.

The listed London focused property company posted EPRA net asset value per share up 0.9% to 3,582p from 3,551p at 31 December 2016 and a total return of 3.4% including the 2016 final and special dividends totalling 90.5p per share.

Net rental income was up 9.2% to £79.3m from £72.6m in H1 2016 while EPRA earnings rose 22.5% to £50.6m from £41.3m.

EPRA earnings per share increased 22.3% to 45.42p per share from 37.13p while the interim dividend per share has been lited 25% to 17.33p.

The period was notably busy with a record six months of lettings totalling £23.4m, on average 0.5% above December 2016 ERV, and investment property disposals totalling £327m in H1, 6% above December 2016 values.

Derwent said agreed second half disposals took the total to £492m, 10% above December 2016 values and it said there was continuing good interest from potential occupiers.

The portfolio is now valued at £4.8bn; an underlying valuation increase of 1.9% in H1. There has been an underlying valuation uplift on developments of 9.5% in the half year.

The portfolio's EPRA vacancy rate fell from 2.6% to 1.9% in the six months to 30 June 2017. The estimated rental values (ERV) on an EPRA basis increased by 1.1% in H1 2017.

Derwent said its guidance for 2017 ERV had been raised to a range of 2% to -3% from 0% to -5%.

In terms of its pipeline of schemes Derwent said it was advancing the development of Soho Place W1 and was progressing detailed design and engaging with potential contractors for an expected start in H2 2018.

Derwent also highlighted its “robust financial position” with interest cover at 4.3x and the loan-to-value (LTV) ratio at 14.9%.

Net debt is down to £733.7m at 30 June 2017 from £904.8m at 31 December 2016. Cash and undrawn facilities are up to £446m on 30 June 2017.

Robbie Rayne, Chairman, said: "Derwent London's strong recurring earnings growth underpins today's 25% increase in the interim dividend. In addition, with almost £500m of disposals or forward sales above book values already this year, the Group has further strengthened its financial position."

John Burns, Chief Executive Officer, said: "We have achieved a record £23.4m of new lettings in the first half. Following this success, we have marginally raised market guidance for both rents and yields in 2017.

“Despite continuing political uncertainty, we have made strong progress in capturing reversion and de-risking the pipeline which highlights the appeal of our product. This has given us the confidence to advance with our next major development at Soho Place W1, above Tottenham Court Road Elizabeth Line station."

Leasing wise Derwent said there had been major additional commitments from existing occupiers Arup and Expedia, as well as the decision of Fotografiska to launch its first gallery outside Stockholm at The White Chapel Building E1 which was announced this morning.

pnorman@costar.co.uk

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