Report and Accounts 2023

Derwent London plc

The largest London office- focused REIT with a distinctive 5.4 million sq ft portfolio

Brunel Building W2

01

Strategic report

  1. Our strategic framework
  2. Our year in review
  1. Chairman's statement
  1. Chief Executive's statement
  1. Central London office market
  1. Investment case
  1. Right product, right location
  1. Our portfolio
  1. Regeneration projects
  1. Business model & strategy
  1. Strategic objectives
  1. Measuring our performance
  1. Our stakeholders
  1. Responsibility
    46 Environmental
    50 Social
    56 Governance
  1. Property review
  1. Finance review
  1. Going concern & viability
  1. Managing risks

Governance

  1. Introduction from the Chairman
  2. Governance at a glance
  3. Board of Directors
  1. Executive management team
  1. Corporate governance statement 130 The Section 172(1) Statement
  1. Nominations Committee report
  1. Audit Committee report
  1. Risk Committee report
  1. Responsible Business Committee report
  1. Remuneration Committee report
  1. Directors' report
  1. Statement of Directors' responsibilities

Financial statements

  1. Independent Auditors' report
  1. Group income statement
  2. Group statement of comprehensive income
  3. Balance sheets
  4. Statements of changes in equity
  5. Cash flow statements
  6. Notes to the financial statements

Other information

  1. Ten-yearsummary
  2. EPRA summary
  1. Principal properties
  1. List of definitions
  1. Shareholder information
  2. Awards & recognition

Derwent London plc  Report and Accounts 2023

02

Strategic report

25 Baker Street W1

Strategic report

The inspiration for 25 Baker Street came from the rare opportunity to regenerate an entire urban block with a major new public space at its centre.

Mike Taylor

Hopkins Architects

  1. Our strategic framework
  2. Our year in review
  1. Chairman's statement
  1. Chief Executive's statement
  1. Central London office market
  1. Investment case
  1. Right product, right location
  1. Our portfolio
  1. Regeneration projects
  1. Business model & strategy
  1. Strategic objectives
  1. Measuring our performance
  1. Our stakeholders
  1. Responsibility
    46 Environmental
    50 Social
    56 Governance
  1. Property review
  1. Finance review
  1. Going concern & viability
  1. Managing risks

03

Derwent London plc  Report and Accounts 2023

04

White Collar Factory EC1

OUR STRATEGIC FRAMEWORK

Strategic report 05

We are driven by our...

Vision

Purpose

Values

We craft inspiring and distinctive

We design and curate long-life,

We build long-term relationships

space where people thrive

low carbon, intelligent offices

that contribute to London's

We lead by design

position as a leading global city,

while aiming to deliver above

We act with integrity

average long-term returns for all

our stakeholders

Achieved by our...

Core activities

See pages 28 and 29

Asset management

Refurbishment & development

Investment activity

Strategic objectives

See pages 32 to 36

1

2

3

4

5

To optimise returns

To grow recurring

To attract, retain

To design, deliver

To maintain

and create value

earnings and

and develop

and operate

strong and

from a balanced

cash flow

talented employees

our buildings

flexible financing

portfolio

responsibly

Derwent London plc Report and Accounts 2023

Occupiers

Strong governance, risk management & culture

See page 126

To create value for...

Our stakeholders

See pages 42 and 43

Employees

Local

Suppliers

Central & local

Shareholders &

communities

government

debt providers

& others

06 OUR YEAR IN REVIEW

Occupier demand for the right product was strong through 2023. We had another successful year of letting and asset management activity across our portfolio and good progress was made on site at our major developments. However, the macro environment remained challenging, impacting both property yields and the cost and availability of new debt.

Operational highlightsESG highlights

£28.4m

149 kWh/sqmR

Lettings, 8.0% above December 2022 ERV

Energy intensity (2022: 142 kWh/sqm)

4.0%

R

14,370 tCO2e

EPRA vacancy rate (December 2022: 6.4%)

Operational carbon footprint (2022: 11,314 tCO2e)

46%

68.4%

Major on-site projects pre-let

EPC rating A or B (by ERV) including projects (2022: 65.3%)

100%

18.4 MW

Construction costs fixed for on-site projects

Planning consent for Scottish solar park

DL/28

£464k

Launch of second Member lounge

Community fund & sponsorship donations committed

Portfolio performance

-10.6% -7.3% R

5.55%

2.1%

Capital return

Total property return

Equivalent yield

ERV growth

Strategic report

Financial highlights

3,129p

102.0p

£480m

EPRA NTA per share1, 2

EPRA earnings per share1, 2

Cash and undrawn facilities

(2022: 3,632p)

(2022: 106.6p)

(2022: £577m)

£212.8m

£186.2m

4.1x 3

Gross rental income

Net rental income

Interest cover ratio

(2022: £207.0m)

(2022: £188.5m)

(2022: 4.2x)

-11.7R %

79.5p

27.9%

1, 3

Total return

Dividend per share

EPRA loan-to-value ratio

(2022: -6.3%)

(2022: 78.5p)

(2022: 23.9%)

  1. EPRA performance measure - see page 283 for definitions.
  2. See note 40 on page 264 in the financial statements for reconciliation to IFRS figures.
  3. See note 42 on page 270 in the financial statements for calculation.

R Links to remuneration - see page 37.

07

Derwent London plc  Report and Accounts 2023

DL/Service at White Collar Factory EC1

08 CHAIRMAN'S STATEMENT

Mark Breuer - Chairman

Our long-term strategic approach has ensured that the Group remains well-positioned against an uncertain and challenging backdrop.

Highlights

  • A year of operational progress against a challenging market backdrop
  • Strong balance sheet and long-term strategy means we are well positioned as opportunities emerge
  • Annual dividend 79.5p, up 1.3%; uninterrupted annual growth since 2007

While our total property return was negative in 2023, we outperformed the MSCI IPD Central London Office benchmark. Our total return was -11.7%, taking the NTA to 3,129p. The Group's balance sheet remains robust with EPRA LTV of 27.9% and interest cover of 4.1 times, giving us capacity to continue investing in our pipeline.

The occupational market continues to polarise with good rental growth prospects for high quality, sustainable buildings where there is deep demand and constrained supply, particularly in the West End where 72% of our portfolio is located. In 2023, we agreed £28.4m of new leases, on average 8% ahead of December 2022 ERV, which includes pre-letting 75% of the offices at

25 Baker Street W1 ahead of completion in H1 2025. This gives us confidence in the letting prospects for our Network W1 project as well as the next phase of our development pipeline.

The London office investment market has been adversely impacted by higher inflation and the subsequent upward movement in interest rates. We expect to see a rise in the number of motivated sellers, and we have the balance sheet capacity to explore these opportunities as they emerge.

Our experienced management team has a strong track record of value creation across the economic cycle. We recognise the importance of investing in our people and planning ahead. Over the last three years, there have been eight promotions to the Executive Committee with representation from across the business. This diversity of skills and expertise helps position us well as the macroeconomic environment starts to recover.

The Group has been impacted by global inflationary pressures and we have also invested more in the amenity we offer our occupiers. As a result, EPRA EPS is down slightly year- on-year to 102.0p. However, we have substantial reversionary potential from

  1. combination of on-site projects (requiring £223m of capex to complete), underlying rental uplifts and vacant space. In addition, we expect only a modest impact on our cost of debt from near-term refinancing.

I am therefore pleased to confirm a

1.3% increase in the full year dividend to

79.5p in line with our progressive and well covered dividend policy, with the final dividend raised by 0.5p to 55.0p.

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Derwent London plc published this content on 08 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 April 2024 09:05:03 UTC.