Derwent London plc Results 2011 Contents Presenters: Contents: - PowerPoint PPT Presentation

Derwent London plc Results 2011

Contents Presenters: Contents: Page John Burns Overview 3 Market summary 5 Damian Wisniewski Portfolio activity 10 Results and fjnancial review 15 Simon Silver Valuation and portfolio analysis 27 Projects 36 Nigel George Outlook 64 Appendices 66 David Silverman Disclaimer 92 Paul Williams Presentation date: 1 March 2012 | 2

Overview John Burns | | 3 3

Overview X Continue to see an encouraging level of tenant enquiries X Crossrail reshaping areas of London - signifjcant benefjt for Derwent X Over 50% of portfolio earmarked for refurbishment/development X London continues to outperform the rest of the UK | 4

Market summary | 5

West End offjce supply 2011 Outlook West End development pipeline 2.5 12.5 Vacancy rate Completed Under construction or proposed Vacancy rate X Limited West End choice 2.0 10.0 f Vacancy rate declined from 5.2% to 4.3% in 2011 Floor area (m sq f) Vacancy rate (%) f Development completions were only 0.3m sq fu 1.5 7.5 f 10-year average of 1.0m sq fu X Key note for Derwent..... 1.0 5.0 f Favourable supply-demand imbalance f Exciting pipeline of schemes 0.5 2.5 0.0 0.0 2003 2005 2007 2009 2011 2013 2015 Source: CBRE f Appendices 1 and 2 | 6

West End offjce demand 2011 Outlook 2011 Outlook West End take-up Rental 6 Take-up values 5 X Take-up of 4.4m sq fu in 2011 f 6% above long-term average Average 4 Take-up (m sq f) f Continued West End resilience f Active TMT sector 3 X Key note for Derwent..... f Occupiers attracted to our brand of space 2 f Good demand in our key villages e.g. North of Oxford Street and Victoria 1 f Increasing infmuence of Crossrail f West End - Tottenham Court Rd & Paddington 0 f City Borders - Farringdon 2003 2005 2007 2009 2011 f Current activity points to positive rental Source: CBRE growth in 2012 f Appendices 2 and 3 | 7

Technology, Media and Telecoms (TMT) sector X Rapid growth in the TMT sector across central London TMT West End take-up f Particularly active in the West End f 1.0m sq fu of TMT take-up in 2011 1.2 24 TMT take-up (m sq f) f 24% of total West End take-up TMT (% of West End take-up) f 19% higher than 2010 1.0 20 TMT (% of West End take-up) TMT take-up (m sq f) X Key recent TMT transactions: 0.8 16 f Derwent London f 44% of 2011 lettings to TMT sector 0.6 12 f Expedia - Angel Building EC1 f Lastminute.com - Johnson Building EC1 0.4 8 f Other f Apple - Hanover Street W1 f Google - Central Saint Giles WC2 0.2 4 f Nokia - Paddington Central W2 f Telefónica (O2) - Air W1 0 0 2003 2005 2007 2009 2011 Source: CBRE | 8

Central London offjce investment market 2011 Outlook Central London offjce investment Yields 18 Value of investment transactions (£bn) X Firm investor demand but limited supply 16 f Transactions of £8.4bn in 2011 14 f 17% below the 10-year average 12 f Stock shrinkage as acquired assets are Average ‘locked away’ 10 f Demand likely to underpin yields 8 6 X Key note for Derwent..... f A strong balance sheet to fund future 4 acquisitions 2 f Ability to recycle capital if pricing attractive 0 2003 2005 2007 2009 2011 Source: CBRE | 9

Portfolio activity | 10

Lettings X 100 lettings, totalling 495,700 sq fu at £16.7m pa f Previous income of £5.3m pa at December 2010 f £14.6m pa (88%) were open-market lettings f £2.1m pa (12%) were short-term lettings at our future development properties f 80% of lettings in 2011 were to occupiers seeking expansion space (H1 2011: 76%) X Open-market lettings in 2011 f 11.2% above December 2010 ERV f H2 2011: 5.9% above June 2011 ERV X 52 rent reviews/lease renewals totalling 256,700 sq fu at £7.4m pa f 14.1% above previous rents X Activity post year end f 153,100 sq fu let at £6.0m pa f Burberry at Page Street - 127,000 sq fu at £5.3m pa rising to minimum of £5.7m pa at 5th year review | 11

Activity 201 1 Tea Building E1 Nine offjce lettings Angel Building EC1 Rent: £1.2m pa - £32.50 psf on best Area: 41,000 sq fu Seven offjce & restaurant lettings Rent: £5.5m pa Johnson Building EC1 Morelands Buildings EC1 Offjce rent: £40 to £42 psf Tenant: Lastminute.com Roof scheme pre-let Area: 136,500 sq fu Rent: £0.9m pa - £42.50 psf Tenant: AHMM Area: 22,300 sq fu Rent: £0.6m pa - £37.50 psf on best Area: 17,800 sq fu | 12

Acquisitions & disposals 2011 2012 transactions X Acquisitions - £87.5m 1 - income £2.4m pa 2 X 1-5 Grosvenor Place SW1 - headlease regear and joint venture agreement signed f 1 Page Street SW1 - £45.0m f Disposal of 50% raising £60m 1 f Network Building W1 - £31.0m f Morelands Buildings EC1 - headlease X Riverwalk House SW1 - conditional sale regear £5.8m f £77.3m including Vauxhall Bridge Road SW1 f 423 Caledonian Road N7 - £5.6m X Disposals - £132.5m 1 X 40 Chancery Lane WC2 - headlease regear f Ownership extended f Attractive prices achieved f 38% above December 2010 valuation f New development to start in H2 2012 f Profjt £36.1m f Rental income £3.2m - net initial yield 2.3% f Appendix 5 for details f Appendices 4 and 5 1 Before costs 2 Income at the time of acquisition. Excludes Morelands Buildings which was a headlease regear. | 13

Highlights 201 1 X Strong NAV growth X Record year for lettings X Signifjcant refjnancing undertaken X Planning consents X Substantial project pipeline | 14

Results and fjnancial review Damian Wisniewski | 15

Headline numbers Dec 2011 Dec 2010 % change Total portfolio at fair value £2,646.5m £2,426.1m 9.1 EPRA net asset value per share 1 1,701p 1,474p 15.4 Gross property income £125.5m £119.4m 5.1 EPRA profjt before tax 2,3 £52.3m £55.2m (5.3) EPRA earnings per share 3 51.59p 52.89p (2.5) Profjt for the year 3 £234.3m £352.8m (33.6) Total interim / fjnal dividend per share 31.35p 29.00p 8.1 Recommended fjnal dividend per share 21.90p 20.25p 8.1 Net debt £864.5m £887.8m (2.6) Loan to value (LTV) ratio 32.0% 35.7% n/a Balance sheet gearing 50.4% 59.4% n/a Interest cover ratio 307% 328% n/a 1 On a diluted basis 2 See Appendix 7 for reconciliation to IFRS profjt before tax f Appendices 6, 7 and 11 3 December 2010 fjgures have been restated for the accounting policy change for owner-occupied property (part Savile Row W1) | 16

Group balance sheet Dec 2011 Dec 2010 £m £m Investment property 1 2,444.9 2,373.3 Owner-occupied property 1 17.1 15.2 Other non-current assets 67.4 56.4 2,529.4 2,444.9 Non-current assets held for sale - 137.5 Other current assets and liabilities (27.5) (27.1) Cash and cash equivalents 3.5 7.2 Bank overdrafu - (5.6) Financial liabilities - current (32.5) - Corporation tax liability (1.3) (3.3) (57.8) (28.8) Financial liabilities - non-current (835.5) (889.4) Other non-current liabilities (59.1) (32.0) (894.6) (921.4) Total net assets 1,714.5 1,494.7 Minority interests (51.8) (45.9) Attributable to equity holders 1,662.7 1,448.8 f Appendix 6 1 December 2010 fjgures have been restated for the accounting policy change for owner-occupied property (part Savile Row W1) | 17

Group balance sheet X Shareholders’ funds up by 15% f To £1,663m from £1,449m Debt, net assets and gearing X Net debt decreased 1,800 100 Net debt Net assets Balance sheet gearing LTV ratio f To £864.5m from £887.8m 1,600 1,663 1,611 1,400 75 1,449 X LTV and balance sheet gearing ratios 1,319 f Reduced again as a result of property 1,200 valuation surplus and disposals 1,127 £m % 1,000 50 905 888 800 865 749 721 600 25 400 200 0 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 | 18

Group income statement Year ended Year ended Dec 2011 Dec 2010 £m £m Gross property income 125.5 119.4 Other income 2.0 1.7 Property outgoings (1 1.4) (9.8) Property outgoings (9.8) (8.1) Rates credits 1.6 1.7 Net property income 117.7 113.0 Total administrative expenses (22.7) (20.9) H1 104.9 H1 197.5 Revaluation surplus 1 170.1 298.1 H2 65.2 H2 100.6 Profjt on disposals 36.1 0.9 Net fjnance costs (43.2) (37.7) Foreign exchange gain/(loss) - (0.2) JV revaluation 0.9 0.9 Joint venture (JV) results 1.5 2.0 Other JV profjt 0.6 1.1 Derivatives fair value adjustment (26.5) (2.4) IFRS profjt before tax 233.0 352.8 f Appendix 7 1 The December 2010 revaluation surplus has been restated for the accounting policy change for owner-occupied property (part Savile Row W1) | 19

Group income statement - property income 2011 2010 Increase £m £m £m Rental income 115.3 113.4 1.9 Surrender premiums received 1 1.4 0.6 0.8 SIC15 lease incentives 8.8 5.4 3.4 Gross property income 125.5 119.4 6.1 2011 £m Includes Central Cross £5.6m and Network Building £1.5m Property acquisitions 7.2 Includes Covent Garden Estate £1.3m Property disposals (1.6) Includes Angel Building £4.1m, Strathkelvin Retail Park £0.8m Lettings and reviews 10.3 and Charlotte Building £0.7m Voids, breaks and expiries (11.4) Includes Angel Building £1.0m, Premiums/other 1.6 88 Rosebery Avenue £1.3m and Riverwalk House £1.8m 6.1 1 Net of write-ofg of lease incentive balances | 20