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Derwent raises dividend as income holds up

The London office landlord said third quarter rent collection was better than anticipated
August 11, 2020

Completing its largest development project ever did not offset the valuation decline stemming from Derwent London’s (DLN) minority retail portfolio during the first half, leading the commercial landlord to report a pre-tax loss. The Charlotte Street scheme is 91 per cent let, which includes all the office space, and the remaining two schemes in development and due for completion in 2022 are 60 per cent let.

IC TIP: Buy at 2968p

Management acknowledged that rising unemployment and business closures would put pressure on the London office market. However, chief executive Paul Williams said he expected “to see the emergence of a two-tier market” and a flight to quality space in the wake of the pandemic. Rent reviews were completed at 4.3 per cent ahead of estimated rental values at the end of December, although re-gearing a short-term lease at Baker Street meant new rent was 2.7 per cent behind that value. 

Rent collection in respect of the third quarter held up better than management had been expecting, receiving 78 per cent of the amount due and expecting to collect a further 6 per cent by September.  

Panmure Gordon forecasts adjusted net assets of 3,918p a share at the end of December, rising to 4,055p in 2021. 

DERWENT LONDON (DLN)   
ORD PRICE:2,968pMARKET VALUE:£ 3.32bn
TOUCH:2,968-2,970p12-MONTH HIGH:4,362pLOW: 2,462p
DIVIDEND YIELD:2.5%TRADING PROP:£36.5m
DISCOUNT TO NAV:24%  
INVESTMENT PROP:£5.2bnNET DEBT:23%
Half-year to 30 JunNet asset value (p)*Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20193,85213011821
29203,901-14-8.522
% change+1--+5
Ex-div: 10 Sep   
Payment: 16 Oct   
*EPRA NAV