According to the doom mongers, the London office market is dead and buried, and while the fizz has certainly gone, office landlord Derwent London (DLN) gave some evidence that there is life in the old dog yet. Headline profits were lower because the valuation uplift for the year to December 2018 on the portfolio was less than a year earlier, but net property and other income was up 13 per cent at £228m.
New lettings totalled £26.8m at 4.1 per cent ahead of December 2017 estimated rental value, and total property returns were a more than respectable 6 per cent. The outlook remains far better than the current storm clouds suggest. For while the portfolio showed an underlying valuation gain of 2.2 per cent, the uplift on the development arm was 18 per cent.
The two current on-site developments of 623,000 square feet (sq ft) are now 75 per cent pre-let, up from 45 per cent a year earlier. And the company has committed £359m to its next two developments, which, on completion in 2022, could add a further £30m to estimated rental value. On top of this, there is a further 1.6m sq ft of space with regeneration potential, 14 per cent of which already has planning consent.
Analysts at Peel Hunt are forecasting adjusted net asset value (NAV) at the December 2019 year-end of 3,820p a share, from 3,775p in 2018.
| DERWENT LONDON (DLN) | ||||
| ORD PRICE: | 3,293p | MARKET VALUE: | £3.67bn | |
| TOUCH: | 3,291-3,294p | 12-MONTH HIGH: | 3,344p | LOW: 2,745p |
| DIVIDEND YIELD: | 2.0% | TRADING PROPERTIES: | £36.3m | |
| DISCOUNT TO NAV: | 13% | |||
| INVESTMENT PROP: | £5.03bn | NET DEBT: | 22% | |
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
| 2014 | 2931 | 754 | 719 | 39.7 |
| 2015 | 3528 | 780 | 695 | 43.4 |
| 2016 | 3561 | 55 | 53 | 52.26 |
| 2017 | 3703 | 315 | 282 | 59.73 |
| 2018 | 3767 | 222 | 199 | 65.85 |
| % change | +2 | -30 | -29 | +10 |
| Ex-div: | tba | |||
| Payment: | 07 Jun | |||
| *Not including special dividends of 52p a share in 2016, 75p in 2017 and 75p in 2018 | ||||
