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
- Our strategic framework
- Our year in review
- Chairman's statement
- Chief Executive's statement
- Central London office market
- Investment case
- Right product, right location
- Our portfolio
- Regeneration projects
- Business model & strategy
- Strategic objectives
- Measuring our performance
- Our stakeholders
-
Responsibility
46 Environmental
50 Social
56 Governance
- Property review
- Finance review
- Going concern & viability
- Managing risks
Governance
- Introduction from the Chairman
- Governance at a glance
- Board of Directors
- Executive management team
- Corporate governance statement 130 The Section 172(1) Statement
- Nominations Committee report
- Audit Committee report
- Risk Committee report
- Responsible Business Committee report
- Remuneration Committee report
- Directors' report
- Statement of Directors' responsibilities
Financial statements
- Independent Auditors' report
- Group income statement
- Group statement of comprehensive income
- Balance sheets
- Statements of changes in equity
- Cash flow statements
- Notes to the financial statements
Other information
- Ten-yearsummary
- EPRA summary
- Principal properties
- List of definitions
- Shareholder information
- 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
- Our strategic framework
- Our year in review
- Chairman's statement
- Chief Executive's statement
- Central London office market
- Investment case
- Right product, right location
- Our portfolio
- Regeneration projects
- Business model & strategy
- Strategic objectives
- Measuring our performance
- Our stakeholders
-
Responsibility
46 Environmental
50 Social
56 Governance
- Property review
- Finance review
- Going concern & viability
- 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%) |
- EPRA performance measure - see page 283 for definitions.
- See note 40 on page 264 in the financial statements for reconciliation to IFRS figures.
- 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
- 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.