Derwent London (DLN) Q3 2024 TU earnings summary

Executive summary

• Year-to-date leasing totals £13.3 million, 8.5%–9% above ERV, with £4.5 million signed in H2 at up to 10% above ERV and £5.7 million under offer.

• Vacancy rate reduced to 3% at Q3, with strong occupier demand for high-quality, design-led space in supply-constrained London sub-markets.

• Major on-site projects progressing well, with 53% pre-let or pre-sold and next phase of West End schemes to commence from mid-2025.

• Positive rent reviews, including an 18% uplift at Savile Row and office rents at 25 Baker Street 15% above appraisal ERV.

• Over £40 million of leasing since 2023, with further reductions in vacancy expected.

Financial highlights

• Net debt marginally higher in Q3 at £1.39–£1.4 billion, mainly due to £145 million project expenditure.

• Loan-to-value (LTV) remains modest at 28.9%, with interest cover at 4.0x.

• 95% of drawn debt fixed or hedged; weighted average interest rate at 3.23% at Q3 end.

• Drew down a new £100 million unsecured debt facility and repaid an £83 million secured facility, releasing c.£240 million of charged properties.

• Interim dividend of 25.0p per share paid in October.

Outlook and guidance

• Upgraded 2024 ERV growth guidance to 3%-6% in August, with confidence in achieving the top end, supported by ongoing rental growth and strong demand.

• Expect continued leasing momentum and strong occupier demand for best-in-class, well-connected buildings.

• Investment market activity expected to pick up in 2025, with more assets coming to market and longer-term pipeline extending to 1.1 million sq ft from 2027.