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Derwent improves rental growth guidance

The London office landlord and developer has cited increased business confidence
February 25, 2020

Following three years of stagnant rents across the London office market, Derwent London (DLN) feels it can be more “aggressive” in putting up rates due to increased demand and greater political certainty, said chief executive Paul Williams. The group has improved guidance for estimated rental value (ERV) growth this year to between 1 and 4 per cent, compared with the 1.4 per cent rise in ERV in 2019.

IC TIP: Buy at 4312p

The West End office landlord and development group completed new lettings on just under 500,000m sq ft of space, contributing £34m in annual rental income and 7.6 per cent ahead of ERV at the end of December 2018. The vacancy rate also fell to just 0.8 per cent. 

Management is now accelerating its development activity, buoyed by a conservative loan-to-value ratio of just 16.9 per cent. Three projects are on site and 72 per cent pre-let, while planning consent has been secured on a further two sites, including 19-35 Baker Street.   

Analysts at Panmure Gordon forecast adjusted NAV of 4,079p at the December 2020, rising to 4,254p in 2021. 

 DERWENT LONDON (DLN)   
 ORD PRICE:4,312pMARKET VALUE:£4.82bn
 TOUCH:4,308-4,314p12-MONTH HIGH:4,362pLOW: 2,858p
 DIVIDEND YIELD:1.7%TRADING PROP:£40.7m
 PREMIUM TO NAV:9%  
 INVESTMENT PROP:£5.2bnNET DEBT:22%
Year to 31 DecNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20153,52878069543.4
20163,561555352.26
20173,70331528259.73
20183,77622219965.85
20193,95828125472.45
% change+5+27+28+10
Ex-div: 30 Apr   
Payment: 05 Jun