Join our community of smart investors

Derwent pins recovery hopes on development

RESULTS: Central London Reit sees no bargains, so will push for development instead
March 17, 2010

Derwent London plans to kick off a clutch of central London development projects, believing that nascent rental recovery offers better returns than buying overpriced investment assets.

IC TIP: Hold at 1322p

The only FTSE 350 Real estate investment trust not to undertake a rights issue in 2009, Derwent's finances provide a firm foundation for securing development finance in due course. With low gearing and banking lines of £425m, it has earmarked £200m for development starts and £37m for refurbishing space. "In the next two to three years we'd like to spend a couple of hundred million on schemes planned for Hampstead and City Road," says chief executive John Burns. The company's redevelopment of Islington's Angel centre, which is 53 per cent pre-let, completes this summer.

The strong recovery in central London property markets was evidenced in the full-year results, with an 18 per cent boost to net asset value (NAV) in the second half of the year, and a £178m revaluation surplus. Demand for good value mid-market office space in central London translated into over 100 lettings in the year, boosting net rental income by 20 per cent to £115m.

Broker Nomura forecasts NAV of 1,295p in 2010.

DERWENT LONDON (DLN)
ORD PRICE:1,322pMARKET VALUE:£1.3bn
TOUCH:1,322-1,323p12-MONTH HIGH:1,418pLOW: 581p
DIVIDEND YIELD:2%TRADING STOCK:£1m
PREMIUM TO NAV:13%
INVESTMENT PROPERTIES:£1.89bnNET DEBT:62%

Year to 31 DecNet asset value (p)*Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20051,33515021913.65
20061,77024334014.75
20071,801-10010122.50
20081,226-607-58224.50
20091,168-35-2727.00
% change-5 - -+10

Ex-div: 19 May

Payment: 17 Jun

*Adjusted NAV

Clickfor a guide to the terms used in IC results tables.