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Ladies and gentlemen, welcome to the Derwent London 2023 Q1 Business Update. My name is Nicola and I will be the operator for your call this morning. [Operator Instructions] I will now hand you over to Paul Williams, Chief Executive.
Good morning, everybody, and welcome to the Derwent London Q1 2023 business update. Office occupancy levels are rising, people are returning to the office and [indiscernible] are close to pre-COVID levels, London and particularly the West End, is really busy. I'm delighted to announce that we've had a record leasing quarter in Q1 with more than GBP 17 million of new leases signed on average e 6.6% above ERV. The weighted average lease length of these lettings is 12 years to break. 3 deals stand out in particular. The first is the letting of the 22,000 square feet flagship retail unit of Soho Place to Uniqlo as rented in line with ERV or potential upside. This consists of a base rent, subject to annual indexation, and a turnover top-up. This highlights the positive impact of the opening of the [indiscernible], which has led to a substantial increase in [indiscernible]. We're encouraged by the level of interest the remaining 4 small retail units, which together totaled just over 10,000 square feet.
Second is the GBP 11 million pre-let for 15 years on 106,000 square feet to PIMCO at 25 Baker Street, one of our on-site developments and who rented more than 12% above ERV. As well as endorsing the quality of the building and the area, it is also a story of long-term growth, increasing their occupational footprint. The commercial element of the scheme is now 56% pre-let or sold, 2 years ahead of completion.
Third is the GBP 2.3 million letting for 31,000 square feet to Buro Happold at the Featherstone Building. Our commitment to open the next [indiscernible] land in our Old Street [indiscernible], our long-cycle building's site sustainability specifications played an important part in their decision.
Across Central London vacancy remains elevated at 8.3%, but the West End, our largest core area is significantly below the 10-year average at 3.6%. This compares to the city at 11.7% and Docklands at 14.6%. A large part of the supply is secondary assets. Our own EPRA vacancy rate has fallen from 6.4% to 4.9%.
Sustainability is taking an increasingly central position in occupational decisions. Our developments have strong green credentials. Our portfolio is 100% compliant with 2023 EPC legislation, 86% for 2027 and 65% for 2030. This is substantially ahead of the wider market. We have a fully costly program of work to ensure we meet the evolving legislation, but believe the investment represents an opportunity to create value through broader repositioning of buildings. Alongside our development, David has long been recognized for its distinctive approach to refurbishment, and we expect to do more of these over the coming years. As we're delivering an [indiscernible] rents, these projects will benefit from a lower embodied targeted footprint.
We expect to invest some GBP 30 million to GBP 50 million per annum in refurbishments over the next few years. Investment activity across London recovered somewhat in Q1 2023 with a number of larger transactions. However, the uncertain macro backdrop means activity remains subdued compared to its tract levels, a trend expected to continue in Q2.
Demand is mainly from cash buyers in the sub GBP 100 million range, and the West End is faring better than the city. At the start of the quarter, we sold 19 Charterhouse Street of GBP 54 million, reflecting a yield of 4.6% to lease expiry in mid-2025. This is a small asset for us with limited space game potential, so we chose to recycle the capital, providing further firepower to fund future betterment CapEx whilst keeping our leverage loan. Net debt reduced through the quarter to GBP 1.2 billion, resulting in an EPRA loan-to-value ratio of 23.1% and GBP 610 million of cash and undrawn debt.
We have substantial capacity to finance the GBP 307 million of committed CapEx and take advantage of the potential acquisition opportunities that may emerge. Turning to development. Our on-site projects, which together totaled 435,000 square feet continue to make good progress. At 25 Baker Street construction works are now well out of the ground.
Combined with the pre-let of PIMCO and our low exposure to build cost inflation, this scheme has been meaningfully derisked. At Network, demolition and piling works have completed and basement works are getting underway. We're also close signing the main contract on a tax price basis.
The development pipeline, especially the West End is barely constrained from 2024 onwards, boosting our confidence in the leasing prospects for these projects, which both completed in 2025. So in summary, again, a challenging macro backdrop, Derwent London remains well positioned as the nature of occupational demand continues to evolve. The way businesses work is evolving and hybrid is here to stay. [indiscernible] is strong for our distinctively [indiscernible] brand amenity rich sustainable offices, and we see rental growth for the right space.
We have a strong balance sheet, a portfolio that meets occupiers increasingly requirements and a deep pipeline of regeneration projects that we expect will deliver attractive returns. Thank you. And I'll hand back to the operator for any questions.
[Operator Instructions] Your first telephone question today is from Pieter Runneboom from Kempen.
One question from my side on the signing of PIMCO. Actually, it was done above ERV, but it's clear assume that this does not take into account the 37 months, eventually.
Yes. I mean the rent fee of 37 months a 15-year lease on 100,000 square but very much in line what we'd expect very much in line is what the market would expect. So...
YYes. So then if you exclude the PIMCO lease from the leasing, the EUR 17 million of leases that were done in the first quarter at [ 37 months [indiscernible]. If you exclude that one, the whole lease [indiscernible] leftover leases done compared to your fees?
If you exclude the PIMCO lease from the EUR 17 million in total, you're at plus [ 1% ] of the overall ERV.
That was my question.
The next question is coming from [indiscernible]
Just 2 questions from me. It was noted in your full year the year ERV guidance in the 0 to 3% range. Just wanted to get where you think that may sit now? Is it closer to the lower end or the upper end of that range?
I think Obviously, it's an average across the portfolio. I mean obviously, the new lettings better buildings are doing better than that. We expect to continue to outperform. It's too early to change any guidance at this stage. All we can tell you is we've got good interest across the portfolio. We're delighted with the record first Q1 lettings. So I think we'll probably have a look at where we are on guidance at your [ interest ]. At the moment we remain confident of that guidance and hope that we would beat expectations.
Okay. And second question, just given the polarization in the office market between the best and the rest, with obviously valuations and leasing tuning up well, where do you see opportunities there? And is there a case for you maybe to sell more of your prime buildings at a sharper yield and use that to add to your development pipeline going forward?
Well, there is obviously a case. So as we looked at the strategy and if you look at how they performed at year-end, they very much outperformed the market. I think they were down just over 3%. In fact, the new developments were up. So I think the view is that we've been setting some of the smaller assets and keeping the green and bigger buildings for longer.
We see good demand in those buildings. If you look at our Brunel building, which is one of our ready performing assets, I think 7 out of the 8 occupiers are looking to expand their space. So it's good to [indiscernible] for that. But it's not forever. I think at some stage, we will sell one of the bigger assets and recycle and we'll look at how we can address that money. So for the time being, we're very happy with the strategy of keeping the better buildings for longer, certainly they're all very green on there's good demand. But we will look at selling one of the bigger assets at some stage.
The next question is coming from James Crawford from Peel Hunt.
I'm -- just a quick question for me. So I mean, you touched on the strong balance sheet, and I appreciate you obviously got a pretty exciting development pipeline. But I'm just wondering what you're seeing in the investment market and given the repricing has happened. Are you starting to see any interesting acquisition opportunities?
Well, we haven't seen many motivated centers yet. Yes. [indiscernible] do you want you to see I mean there's been a bit more activity in Q1, I think about $2 billion, whereas Q4 last year was very quiet in about $700. And those sort of spread across long income, I think big vacant building in the city. But we're not really seeing much come through.
We are hearing from the sort of banking side that there are discussions going on, on covenants and stuff on a few buildings, especially the sort of the ones that were required by the Korean investors over the last 4 or 5 years. Also, we've got the balance sheet to go by.
We'd like to see a bit more value in the secondary market to see where I think they've been expected for too long. So I think -- we think this polarization will continue. And we're ready to acquire if we see something where we can add some value. But I think it needs to be a reasonable size because I think that's where you can turn the needle. So I think, again, we've got plenty of best within the portfolio. We've got a great pipeline to refurbishments. But if we see some good value, we certainly look to acquire.
This concludes our question-and-answer session. I would like to turn the conference back over to Paul Williams for any closing comments.
Thank you very much. Thank you, everyone, for listening in today. We're all around, if we want to make a call, maybe give Robert a call for any further questions you have. Any one to come and see the wonderful portfolio, please get in contact, but thank you all for your support, and have a good day, and enjoy the correlation. Thank you very much.
Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect. Goodbye.