1、REPORT&ACCOUNTS 2015DERWENT LONDON PLCCover image and this page:White Collar Factory EC1Derwent London plc,the largest central London-focused REIT,owns and manages a5.0 billion predominantly office portfolio located in 15 villages in Londons West End andTech Belt.Our experienced team creates long-te
2、rm value through disciplined acquisitions at low capital values,asset recycling,active asset management,development and refurbishment with an emphasis on design,anticipating tenant andcommunity requirements and delivering good value for money.Our reversionary portfolio balances income growth and reg
3、eneration activity supported bya strong balance sheet,low leverage and flexiblefinancing.1.STRATEGIC REPORTAt a glance 4At a glance financial highlights 6Year in review 8Chairman s statement 10London s appeal 12Our portfolio 14Our business model and strategy 18Delivery of our strategy 20Measuring ou
4、r performance 32Chief Executive s statement 38Our market 40Property review 43 Valuation 43 Portfolio management 46 Projects 50 Investment activity 55Finance review 58Sustainability 66Our people 68Risk management 722.GOVERNANCEBoard of Directors 80Senior management 82Statement of Directors responsibi
5、lities 83Chairman s letter on corporate governance 85Directors report 86Letter from the Chairman of the Remuneration Committee 95Report of the Remuneration Committee 96Letter from the Chairman of the Nominations Committee 113Report of the Nominations Committee 113Letter from the Chairman of the Risk
6、 Committee 114Report of the Risk Committee 114Letter from the Chairman of the Audit Committee 115Report of the Audit Committee 116Independent Auditor s report 1183.FINANCIAL STATEMENTSGroup income statement 126Group statement of comprehensive income 126Balance sheets 127Statements of changes in equi
7、ty 128Cash flow statements 129Notes to the financial statements 130OTHER INFORMATIONEight-year summary 172EPRA summary 173Principal properties 174List of definitions 1761Derwent London plc Report&Accounts 2015 STRATEGIC REPORTAT A GLANCE 4AT A GLANCE FINANCIAL HIGHLIGHTS 6YEAR IN REVIEW 8CHAIRMANS S
8、TATEMENT 10LONDONS APPEAL 12OUR PORTFOLIO 14OUR BUSINESS MODEL AND STRATEGY 18DELIVERY OF OUR STRATEGY 20MEASURING OUR PERFORMANCE 32CHIEF EXECUTIVES STATEMENT 38OUR MARKET 40PROPERTY REVIEW 43FINANCE REVIEW 58SUSTAINABILITY 66OUR PEOPLE 68RISK MANAGEMENT 721Derwent London is one of Londons most inn
9、ovative office focused property regenerators and investors and is well known for its design-led philosophy and active asset management.25.0%EPRA earnings per share growth21.6%EPRA NAV per share growth240 Chancery Lane WC2AT A GLANCEDerwent London is the largest real estate investment trust(REIT)spec
10、ialising in central London.OUR PORTFOLIO SIZE39%Located in Tech Belt36%Located in Fitzrovia25%OtherDerwent London has a total return model generating value through asset management and regeneration with income at its core.The current income upside is reflected in our potential reversion(below).Low e
11、xisting rental levels Our average topped-up central London office rent is 41.04 per sq ft.Asset management Opportunities for growth through reviews,lease restructuring and new lettings.Regeneration We were regenerating 23%of the portfolio at 31 December 2015.Potential reversion CBRE estimated our re
12、version as 141.0m at 31 December 2015 after total additional costs of 569m.6.2m sq ft1Total area5.0bnMarket value Lease reversionsOn-site projects and refurbishmentsVacant spacePassing rentContracted uplifts20152014131.7137.135.574.029.1278.132.021.37.12.423.5215.6ERV m72%22%800 metres 400 metresPag
13、e 43Page 43Income producing 77%Under development 17%Under refurbishment 6%137.1mContracted rent at December 2015AN INCOME FOCUSED REGENERATION BUSINESSDISTANCE FROM A CROSSRAIL STATION4Strategic reportWHERE WE INVEST In central London offices and their ancillary spaces.Currently invested in 15 villa
14、ges chosen for their medium term growth outlook Fitzrovia,our largest village,benefits from the major improvements to the eastern end of Oxford Street W1.Crossrail is expected to have a major impact on opening in 2018.We have a significant concentration of properties close to Farringdon and Tottenha
15、m Court Road stations.The Tech Belt has benefited from being attractive to the creative industries.PORTFOLIO WEIGHTINGS1 Includes space under development.DISTINCTIVELY DERWENTPage 18YIELD AND VACANCY RATEOUR TEAM Experienced management has created aculture of diligence,creativity and teamwork Specia
16、list teams work collaboratively to deliver our strategies3.1%EPRA net initial yield2014:3.4%4.5%True equivalent yield2014:4.7%3.8%EPRA topped-up net initial yield2014:4.0%1.3%EPRA vacancy rate2014:4.1%Page 68197236 414 30BOARD OFDIRECTORS 13Acquisitions/investment recycling AssetmanagementLeasingOth
17、erFinanceDevelopmentExecutiveCommitteePage 66Derwent London plc Report&Accounts 20155DESIGNINCOMECOMMUNITYREGENERATIONREITLONGTERMBALANCEOFFICESINNOVATIONRELATIONSHIPSDYNAMIC VALUE FOR MONEYLOW RENTS CENTRAL FINANCING INCOME EXPERIENCEARCHITECTURE EMERGING LOCATIONSRENTAL INCOMEPIPELINEPROJECTS SUST
18、AINABILITY PEOPLELONDONFLEXIBLETENANTSSTAFFPLANNINGFLAIRREFURBISHMENTADDING VALUEOUR SUSTAINABLE APPROACH Design and deliver buildings responsibly Manage our assets responsibly Create value in the community Engage with and develop our employeesOUR STRATEGIC OBJECTIVES Acquire properties and unlock t
19、heir value Create well-designed space Optimise income Recycle capital Maintain strong and flexible financingTOTAL RETURNWEST ENDTECH BELTASSET MANAGEMENTDELIVERINGCONSISTENTCAREFULRETURNSPORTFOLIOORIGINALLOW LEVERAGERECYCLINGOCCUPIERSAT A GLANCE FINANCIAL HIGHLIGHTSIn 2015 the Group generated a stro
20、ng combination of NAV and earnings growth and further strengthened itsfinancial position.NAV per shareThe revaluation surplus generated by an increase in property values and a strong operating performance were the main contributors to the increase in net asset value per share.STRONG FINANCIAL PERFOR
21、MANCE21.6%Increase in EPRA NAV per share650mRevaluation surplusReturnsThe Group s strong performance meant that the benchmarks on its total return(TR)and total property return(TPR)KPIs and total shareholder return(TSR)key metric were exceeded.The increase in earnings and a 16%increase in net cash fr
22、om operating activities have enabled us to continue with our progressive dividend policy.TR%TPR%TSR%Derwent London 23.021.224.5Benchmark118.713.811.41 Measuring our performance(page 32)explains the benchmarks for the annual TR,three-year rolling TPR and annual TSR shown here.EarningsA 9%increase in
23、net property income and an 18%fall in finance costs have driven the increase in EPRA profit before tax(PBT)and EPRA earnings per share(EPS).31%Increase in EPRA PBT25%Increase in EPRA EPS1,7011,8862,2642,9083,535EPRA NAV per share(p)2015201120122013201401,0002,0003,0004,000p0255075100m201520112012201
24、32014p020406080EPRA profit before tax(m)EPRA earnings per share(p)57.862.381.652.552.331.3533.7036.5039.6543.40201520110255075100p201220132014m0255075100Dividend per share(p)Net cash from operating activities(m)6Strategic reportFINANCIAL POSITION STRENGTHENEDLTV ratioThe combination of financing act
25、ivity,including the early conversion of the 2016 convertible bonds,and the increase in property values have further reduced the NAV gearing and LTV ratio.NAV gearingInterest cover ratioNet debtWeighted average interest rate cashUndrawn facilities and cashThe increase in income and fall in interest c
26、osts have caused net ICR to increase.Refinancing with more unsecured debt has increased unencumbered properties and extended our average debt tenor.Weighted average interest rate IFRSUnencumbered assetsAverage tenor of debt24.0%32.9%286%1,013.3m3.78%336m4.22%2,718m6.6 years17.8%22.8%362%911.7m3.68%2
27、69m3.93%3,709m7.3 yearsDebt,net assets and gearing1,0002,00003,0004,000204006080Net debt(m)Net assets attributable to equity shareholders(m)NAV gearing(%)Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-158657211,1801,1278881,4498651,6638751,8609492,3041,0133,0129123,923m%2015Page 582014Derwent London
28、plc Report&Accounts 201572015 was a significant year for Derwent London:it was a record year for lettings,weacquired two substantial opportunities in the Tech Belt,we progressed our developments,we supported local communities,we strengthened our financesand our business and developments won a number
29、 of awards.Some of the years highlights are shownbelow.YEAR IN REVIEWProperty swap for 20Farringdon Road EC1 In February we acquired this prominent and substantial building in Clerkenwell opposite the future Farringdon Crossrail station.In return we sold two assets and formed a joint venture on a th
30、ird.Total transaction size 207m.Started our next majorscheme In February we started site clearance for The Copyright Building,30 Berners Street W1.The development comprises 87,150 sq ft offices and 20,000 sq ft retail,and is due for completion in H2 2017.Q1Completed Turnmill EC1 In January we handed
31、 over 58,200 sq ft offices to Publicis Groupe at Turnmill,63 Clerkenwell Road EC1.We have since let the 12,300 sq ft ground floor to two restaurants:Albion and Jason Atherton.Since completion the property has won a number of awards.Conversion of 175m 2.75%convertible 2016 After we called for early r
32、edemption in January 2015,convertible bond holders opted to convert the 2016 convertible bonds leading to the issue of 7.9m new shares,thereby significantly reducing our LTV ratio.Q2Letting success at Angel Square EC1 In March the leases on the majority of the building acquired in November 2014 expi
33、red.We quickly re-let 57,600 sq ft to Expedia,who already occupy our Angel Building opposite,and 40,700 sq ft to The Office Group.Supporting our communities This is the third year of Derwent Londons Fitzrovia Community Fund where we have increased our commitment to 400,000 and extended its time span
34、 to 2018.Completion of Tottenham Court Walk W1 We completed redeveloping the Tottenham Court Road retail frontage with the introduction of a broad range of retail and restaurant users.400,000Committed to our Fitzrovia community fund523,800 SQ FTSignificant letting success in 2015Turnmill EC1The Copy
35、right Building W1Angel Square EC18Strategic report277mSales in 2015246mAcquisitions in 2015Q4Selling assets to re-invest in better opportunities We sold the Davidson Building,Covent Garden WC2 and Portobello Dock W10 for 100m at a 30.9%premium to December 2014 book values.Receiving recognition In De
36、cember 2015 we were voted third best company overall in the Management Today Awards and,for the sixth successive year,first in our sector.Crystallising value In December Wedge House SE1 was sold for 33.0m.This follows the receipt of planning for 110,000 sq ft hotel and offices earlier in the year.Ac
37、quisition of major Whitechapel opportunity We acquired a substantial property in December for 139.3m.We were able to commence a nine month refurbishment immediately.Q3Progressing the pipeline In July we completed the development of 40 Chancery Lane WC2,pre-let to Publicis.In the same month we agreed
38、 terms whereby we can re-acquire the site of 1 Oxford Street W1 for a 275,000 sq ft office,retail and theatre development over the entrance to Tottenham Court Road Crossrail station.Successful refinancing In July we replaced a 90m secured facility with a 75m unsecured facility.Unsecured debt now rep
39、resents over two thirds of total debt,which has increased our financial flexibility.First lettings at White Collar Factory In July the Group announced its first lettings at White Collar Factory EC1.The property is now 38%let to occupiers Adobe,AKT II(structural engineers),BGL Group (financial servic
40、es)and The Office Group.Maintaining high reporting standards In September we were awarded EPRA gold for both our 2014 Annual Report and Sustainability Report for the third consecutive year.MAJOR ADDITIONS20 Farringdon Road EC1The White Chapel Building E1DEVELOPMENT COMPLETIONS Turnmill EC1Tottenham
41、Court Walk W140 Chancery Lane WC273 Charlotte Street W1DEVELOPMENTS ON-SITE White Collar Factory EC1The Copyright Building W1 80 Charlotte Street W11 Oxford Street W1White Collar Factory EC1Davidson Building WC2Link to business model Acquire properties and unlock their valueCreate well-designed spac
42、eOptimise incomeRecycle capitalMaintain strong and flexible financingDerwent London plc Report&Accounts 20159CHAIRMANS STATEMENTOverviewDerwent London made excellent progress in 2015.A highlight of the Group s performance was the 21.6%increase in our EPRA diluted NAV to 3,535p per share driven by th
43、e combination of rental value growth,development surpluses,asset management activity and yield tightening.There was alsoa particularly strong rise in EPRA recurring earnings whichincreased by 25.0%to 71.34p per share,the product of our substantial letting progress in recent years and lower interest
44、costs.As a result of this growing income stream,the Board has recommended raising the final dividend by 10.0%to 30.80p per share to make the full year s dividend 43.40p,an increase of 9.5%for the year.At this level the total dividend for 2015 is 1.6 times covered by recurring earnings.Our average di
45、vidend growth in the eight years since we converted to a REIT has been 8.6%pa.During the year the London office market saw strong demand both from occupiers and investors.In what proved a record year for the Group,we let 523,800 sq ft in 79 transactions capturing 27.1m pa of rental income.On average
46、 these lettings were 10.8%above December 2014 Estimated Rental Values(ERV)and,by income,44%were pre-lets.Buoyant investment demand enabled us to make 247.8m of investment property disposals at an average surplus of 18.4%to our December 2014 book values.Despite the competitive market conditions the G
47、roup was also able to acquire two major properties in the Tech Belt for 232.0m,and we invested 116.4m of capital expenditure in our projects.After a year of significant refinancing activity,including the early conversion toequity of the first of our two convertible bonds,we have strengthened our fin
48、ancial position with enhanced interest cover of 3.62x and the LTV ratio being reduced to 17.8%.ROBERT RAYNE CHAIRMANDuring the year the London office market saw strong demand both from occupiers and investors.Derwent London made excellent progress highlighted by our growth in NAV and recurring earni
49、ngs.“Operationally 2016 has started well for us.We have achieved 9.2m of new lettings and raised additional long-term finance.”10Strategic reportAs long-term investors in central London,it is important that our activities benefit the neighbourhoods and local environments in which we invest.Last year
50、 we extended our commitment to the Group s Community Investment Fund,which will now cover theTech Belt as well as Fitzrovia.Our Sustainability Report,published simultaneously with the Annual Report,gives more detail of the Group s activities.Brief highlights include improved resource efficiency with
51、 reductions in carbon generation and energy use.We continue to record high ratings from GRESB,CDP and EPRA,and are a member of FTSE4good.Looking forward,to enhance the transparency of our sustainability and corporate responsibility,we will be following Global Reporting Initiative guidelines from 201
52、6 onwards.This year s results provide further testimony to the success ofour strategy and culture.The Group has again been recognised in the Management Today awards for Britain s Most Admired Companies.In this annual survey we were ranked third across all UK companies,and first in the property secto
53、r for the sixth successive year.It is also gratifying to know that in a recent non-attributable staff survey,of the 96%who responded,all stated that they were proud to work for the Group.Once again I would like to thank them as well as our other stakeholders and advisers.The BoardLast year we contin
54、ued to refresh the Board s composition.June de Moller and Robert Farnes retired and we would like to thank them for their insight and sound judgement over a long period.In their place we are delighted to welcome Claudia Arney and Cilla Snowball,who bring with them extensive business,advertising,mark
55、eting,media and technology experience.OutlookThe current year has started with major falls in global stock markets mainly based on concerns regarding global economic growth.In addition,the UK is facing an EU referendum in June,the result of which will either confirm the existing situation or extend
56、the period of uncertainty as the ramifications of leaving the EU are worked out.It is too early to tell what impact this may have on the London property market,but a protracted period of uncertainty is likely to reduce business confidence.UK economic growth appears to be moderating and,as a global c
57、ity,London is not insulated from external risks,but the central London office market starts the year in a strong position with good demand and low vacancy rates.If current market conditions persist we estimate rental value growth across our portfolio of 5-8%and yields to remain firm in 2016.We expec
58、t the strongest rental growth will be at the lower end of our 45-80 per sq ft mid-market range and,with an average ERV on our central London office portfolio of only 51 per sq ft,the Group is well placed to benefit.Operationally 2016 has started well for us.In particular we have achieved 9.2m net of
59、 new lettings thereby considerably de-risking our immediate development pipeline,and raised additional long-term finance.Together with the strong occupier interest being shown in our schemes,this enables the Group to continue its development programme confident in its resilience to potential market
60、turbulence and well positioned to take advantage of opportunities that may arise.ROBERT RAYNE CHAIRMAN25 FEBRUARY 2016Derwent London plc Report&Accounts 201511LONDONS APPEALLondons success as a global city has ledto population and employment growth and a broad based economy.This has produced increas
61、ed demand for office space from a wide range of established and new occupiers.8 Fitzroy Street W1Tea Building E1Angel Building EC1Total populationTotal workforceSource:Experian 20202000200520102015Forecast0246810Number of peoplemLondons population and workforceLondon s population totals around 8.6m
62、people and is ethnically diverse.It is expected to grow to 10m by 2030.The workforce totalled 5.7m in 2015 which is 0.7m more jobs than at the previous 2008 peak.It is a leading global centre for talent and high skills employment.1.5m Londoners work in knowledge-based sectors,47%of the combined tota
63、l of the five top European cities.1 20202000200520102015075150225300375450Source:ExperianForecastGVAbnLondons economyLondon s gross value added(GVA)increased 19.4%in the five years to 2014,and is expected to continue to grow over the following three years.It is the pre-eminent business capital in Eu
64、rope benefiting from the wide understanding of the English language and its legal system.It also benefits from its time zone and is home to 40%of the European headquarters of the world s top companies.1 Oxford Economics estimates 200,000 people are employed in London s tech sector and expect this to
65、 grow 22%by 2025.DERWENT LONDON BENEFITS AS A MAJOR PROVIDER OF DESIGN-LED VALUE FOR MONEY OFFICE SPACE,EITHER FROM MANAGING ITS EXISTING PORTFOLIO,THE REGENERATION OF TIRED SPACES,OR THE DEVELOPMENT OFEMERGING BUSINESSLOCATIONS.12Horseferry House SW1Qube W1Education and cultural attractionsLondon h
66、as some of the best higher education facilities with 18 universities ranked among the best in the world.Imperial College and University College London rank joint second and fifth respectively.2London boasts numerous attractions:four UNESCO world heritage sites,museums,theatres,opera houses and world
67、-class retail.It was ranked the world s most popular tourist destination in 2015.3 18.8m visitors are expected to have visited and 700,000 people are employed in London s tourism industry.1 Deloitte London crowned business capital of Europe 2014.2 QS World University Rankings 2015.3 Mastercard 2015.
68、Major office marketLondon s office market totals 224m sq ft.The West End and the City represent 72%of the total.Around 75%of the West End office stock lies in conservation areas which limits development opportunities.This compares to c.33%in the City.The City and Docklands markets hold the highest c
69、oncentration of office towers and financial occupiers.Our market share is 2.2%.City 33%West End 39%Midtown 11%Southbank 8%Docklands 9%224m sq ftSource:CBRECentral London office stock“London is one of the worlds leading international financial centres and home to a large pool of highly skilled intern
70、ational talent.”HSBC 15 FEBRUARY 2016Sources of office take-upProfessional and business services have long represented a high proportion of take-up.More recently creative industries take-up has matched that of financial services.The table below shows the sources of take-up in the last five years.%Cr
71、eative Industries24Banking and Finance20Business Services18Professional12Consumer Services and Leisure9Public Sector/Regulatory Bodies7Insurance5Manufacturing Industrial and Energy5Source:CBRE 2000 2005 2010 20151980 1985 1990 1995050100150200250300350Capital GrowthRental Value GrowthSource:MSCI IPD
72、 Index(1980=100)Central London office cyclicality The London office market has proven to be cyclical over time,and is influenced by a number of external and internal factors.2015 was the sixth year of consecutive growth.More details of our views can be found under Our Market.Page 4013PADDINGTONPaddi
73、ngtonOUR PORTFOLIOOur portfolio comprises 6.2 million sq ft ofproperties valued at 5.0billion.98%of our properties are located in central London,grouped in 15villages,each with itsown individual identity.66%can be found in the WestEnd and 32%inthe City Borders.Thebalance relates toproperties and lan
74、d held inScotland on the northern outskirts ofGlasgow.100Buildingsc.725Tenants39%Portfolio weighting inTech Belt5.0bnValuation of theportfolio137.1mContracted net rental income278.1mEstimated rental value11 After total additional costs of 569m.14Strategic reportBAKER STREET/MARYLEBONEMAYFAIRVICTORIA
75、ST JAMESSSOHO/COVENT GARDENNORTH OFOXFORDSTREETFITZROVIAEUSTONISLINGTONCLERKENWELLHOLBORNOLD STREETTHE CITYBLOOMSBURY LFarringdonTottenham Court RoadBond Street Kings CrossVictoriaDerwent London plc Report&Accounts 201515SHOREDITCHWHITECHAPELLiverpool Street WhitechapelPORTFOLIO WEIGHTING West End66
76、%City Borders32%Provincial2%OUR VILLAGESFitzrovia1 36%Victoria12%Baker Street/Marylebone4%Soho/Covent Garden2%Mayfair2%Paddington1%Islington/Camden9%Clerkenwell11%Old Street8%Shoreditch/Whitechapel7%Holborn4%Holborn(non Tech Belt)2%Provincial2%1 Includes North of Oxford Street and Euston.TEN PRINCIP
77、AL TENANTS%OF RENTAL INCOME1Burberry6.3Arup5.0Government4.5Expedia4.3Cancer Research UK4.2Publicis Groupe3.5FremantleMedia Group2.6MWB Business Exchange2.4Thomson Reuters2.1EDF Energy1.9 VILLAGES TECH BELT DERWENT LONDON PROPERTIES CROSSRAIL1 Based upon contracted net rental income of 137.1m.Tech Be
78、ltPage 43Page 17416OPEN HERE TO SEE LONDON PORTFOLIO 30.64.92.416.729.180400ContractualgrowthPre-letprojectsVacant(Available)Vacant(Under refurb)141.0m uplifton Dec 15income120160Build-up of reversion rental upliftOn-siteprojectsLeasereversions57.3m1 Expressed as a percentage of annualised rental in
79、come of the whole portfolio.Profile of tenants business sectors1Media,TV,29marketing and advertising Professional and 22business servicesRetail head offices,18showrooms Retail sales 12Government 5and public admin.Charities 4Financial 2Other 8%Central London office rent banding0-30 per sq ft 930-40 p
80、er sq ft 1840-50 per sq ft 2950-60 per sq ft 3260+per sq ft 12Topped-up income%Underappraisal 0.66m sq ft 0.68msq ft 0.96msq ft Consented 0.14m sq ft On site 1.02m sq ftCore income 3.25m sq ftFutureappraisal 1.10m sq ft Portfolio compositionBy areaProposed area6.2msq ft11 Comprises 5.2m sq ft of exi
81、sting buildings plus 1.0m sq ft of on-site developments.32.1041.0451.22200Average current rentAverageERVAverage topped-up rent504060Central London office rent profile3010 per sq ftDerwent London plc Report&Accounts 201517OUR PRINCIPAL OBJECTIVEOUR STRATEGIC OBJECTIVESCREATING VALUE THROUGH OUR BUSIN
82、ESS MODEL AND STRATEGYTO DELIVER ABOVE AVERAGE LONG-TERM RETURNS FOR OUR SHAREHOLDERS AND LONG-TERM VALUE FOR OTHER STAKEHOLDERSOur business model employs five strategic objectives in order to deliver the Groups principal objective.OUR DISTINCTIVE APPROACHExperienced managementThe management team se
83、ts the culture of the business and,by using its experience of the property cycle,identifies the strategic priorities that will best deliver long-term value to stakeholders.Dedicated teamsWe have teams that specialise in our core activities of acquisitions/disposals,leasing,development,asset manageme
84、nt and finance that work flexibly and collaboratively.CultureWe have an open and collegiate culture that engenders creativity and innovation.On central LondonWe concentrate on the markets we know best,and our knowledge helps us to find relative value and to identify up-and-coming areas.We have creat
85、ed a number of property clusters and substantial parts of our portfolio will benefit from the opening of Crossrail in 2018,or are located in the Tech Belt.We have avoided the core City office market which is dominated by financial services as we consider it to be more cyclical.On good designWe look
86、at each building individually and in the context of its location.We believe that good architecture helps create demand,and that it is important to be innovative and continually improve quality.These attributes have helped develop the Derwent brand.On sustainabilityWe expect to have a positive impact
87、 on the areas surrounding our buildings and ensure that schemes are efficient,sustainable and not over specified.With third party professionalsOver many years we have built up good relationships with third party professionals,who share our passion and help us achieve our objectives.With occupiersAn
88、active relationship with our occupiers helps inform our views and can create new letting opportunities.We offer a wide range of office accommodation,rental levels and lease structures.With communitiesWe work closely with local communities to ensure that our actions respond to their needs and expecta
89、tions,and benefit the local environment.With investorsWe work hard to maintain good communications with our shareholders andfunders.PEOPLE AND CULTUREFOCUSRELATIONSHIPSPages 22 31 ACQUIREPROPERTIES ANDUNLOCK THEIRVALUECREATEWELL-DESIGNED SPACERECYCLECAPITALOPTIMISEINCOMEMAINTAINSTRONG AND FLEXIBLEFI
90、NANCING18Strategic reportPERFORMANCE MEASURED BY OUR KPIsOUR DISTINCTIVE APPROACHTHE OUTCOMESMEASUREMENTWe create long-term value for our stakeholders:CAREFUL GOVERNANCE AND RISK MANAGEMENTSHAREHOLDERSAbove average long-term returns for shareholdersEMPLOYEESBenefit from a rewarding environment in wh
91、ich they are valued and developed to fulfil their potentialLOCAL COMMUNITIESBenefit from the regenerative effects of redevelopment and investmentOCCUPIERSBenefit from high quality and sustainable space that meets their needsProperty cycleFor REITs,market conditions naturally change as a result of th
92、e property cycle.We aim to increase our development risk and activity while reducing financial leverage into a rising property market.Ideally,our lowest leverage is near the peak and our maximum leverage near the floor.History shows that this is hard to getabsolutely right and so we continually moni
93、tor the market,particularly after a longperiod of growth,to ensure that ourstrategy is consistent with our view ofthe cycle.Group perspectiveAlthough all properties are treated individually,decisions are taken in the context of the Group as a whole.This is to ensure that there is the relevant balanc
94、e between income and development,that the scale and pace of development activity is appropriate to the larger Group,that the longer-term growth potential remains intact and that the Group has the financial resources to adapt to different market conditions.Long-term perspectiveFrom its very origins D
95、erwent London has had a vision to become a significantand active London landlord.This reinforces our commitment to quality,allows us to look beyond initial returns forlong-term gains,and to build good relationships with occupiers,communities and local authorities.GovernanceThe Group s attitude to go
96、od governance reflects its culture which is shaped by the Board.Its approach to risk management revolves around its risk register,which reflects the Group s risk appetite statement.PEOPLE AND CULTUREFOCUSRELATIONSHIPSCAREFUL GOVERNANCE AND RISK MANAGEMENTPage 32MEASURING OUR PRINCIPAL OBJECTIVEOur s
97、uccess in achieving this is measured by total shareholder return(TSR)and total return(TR).Page 32Derwent LondonBenchmarkOutperformanceTSR24.5%11.4%13.1%TR23.0%18.7%4.3%Page 20 for more on delivery of our strategyDerwent London plc Report&Accounts 201519DELIVERY OF OUR STRATEGYWe consider our achieve
98、ments,measure our performance and identify risks in the light of our strategic objectives.OUR STRATEGIC OBJECTIVES PRIORITIES AND ACHIEVEMENTS FOR 2015 ACQUIRE PROPERTIES AND UNLOCK THEIR VALUE Buy at low capital values in improving London villages,capitalising on our detailed understanding of Londo
99、nAdd to our pipeline of future opportunities and maintain that proportion of our portfolio at around50%Focus on acquisitions that meet our strategic criteria Acquired two major properties in the TechBelt for 232m,atanaverage costof 545 per sq ft CREATE WELL-DESIGNEDSPACEUse top design teams to creat
100、e attractive,adaptable and modern offices whilst avoiding over-specificationIncorporate features in our developments toreduce the environmental impact and increase theirappeal to tenantsInvest in public realm to provide desirable spaces foroccupiers and local communities Complete Turnmill EC1,40 Cha
101、ncery Lane WC2,Tottenham Court Walk W1 and 73 Charlotte Street W1 Commence The Copyright Building W1 and 80 Charlotte Street W1 Submit planning application for Wedge House SE1 All priorities were achieved and 97%of the completed space has been let or sold Wedge House was sold once planning permissio
102、n was received OPTIMISE INCOMEUnderstand occupiers needs by building strong relationships through regular dialogueRespond to occupiers needs by varying terms of leases or by relocating them within the portfolioEnsure income growth by incorporating minimum rental uplifts in leases when appropriate Le
103、t the recently completed office space at 1-2 Stephen Street W1 and the retail space at Tottenham Court Walk W1 Monitor the portfolio for asset management opportunities Stephen Street offices fully let Eight of the nine retail units at Tottenham Court Walk let 2015 was a record letting year 27.1m of
104、new lettings RECYCLE CAPITALRegularly review the status and options for each propertyin the portfolioWhen market conditions are favourable dispose ofassets where:future growth is limited they are non-core Monitor portfolio for opportunities to recycle capital Sell remaining residential units at Quee
105、ns W2 and commence marketing units at The Corner House W1 Six major investment properties were sold for 247.8m 18.4%above December 2014 book values Eight of the nine remaining units at Queens and seven of the nine at The Corner House were sold for 23.7m MAINTAIN STRONG AND FLEXIBLE FINANCINGEnsure s
106、ustainable interest coverEnsure appropriate level of gearing for market conditions and our development activityProvide protection from increases in interest ratesMaintain good relationships with a broad spread offunding sourcesExtend loan durations when rates are attractive Convert 175m 2.75%convert
107、ible bonds into equity Monitor interest cover Maintain balance between income generation and development activity All priorities were achieved At the year end the Group s interest cover was 362%;its LTV ratio was 17.8%and it had 262m of undrawn,available facilities Credit rating upgraded to BBB+Page
108、 22Page 24Page 26Page 28Page 3020Strategic reportKPIs AND BUSINESS METRICS THAT MEASURE OUR PERFORMANCEPRIORITIES FOR 2016PRINCIPAL RISKS TO OUR STRATEGIC OBJECTIVES Total property return Capital return Gearing and available resources Reversionary percentage Development potential Continue to seek ac
109、quisitions that meet our strategic criteria Achieve planning on Monmouth House EC1 Complete The White Chapel Building E1 refurbishment Inconsistent strategy Inconsistent development programme Increase in property yields Reduced development returns Business interruption Contractor/sub-contractor defa
110、ult Shortage of key staff Capital return Tenant receipts Tenant retention Development potential Void management BREEAM ratings Energy performance certificates Complete White Collar Factory EC1 Continue construction at The Copyright Building W1 and 80 Charlotte Street W1 Commence Brunel BuildingW2 Re
111、duced development returns Inconsistent development programme Business interruption Regulatory non-compliance Contractor/sub-contractor default Shortage of key staff Reputational damage Total property return Capital return Interest cover ratio Void management Tenant receipts Tenant retention Let avai
112、lable space at White Collar Factory EC1,The White Chapel Building E1 and 20 Farringdon Road EC1 Continuously monitor portfolio for further asset management initiatives Inconsistent strategy Reputational damage Business interruption Regulatory non-compliance Shortage of key staff Interest cover ratio
113、 Development potential Gearing and available resources Monitor portfolio for further opportunities torecycle capital Inconsistent strategy Business interruption Increase in property yields Shortage of key staff Interest cover ratio Gearing and available resources Maintain balance between income gene
114、ration and development activity Put in place additional long-term fixed rate debt Maintain good interest cover Inconsistent strategy Business interruption Increase in property yields Regulatory non-compliance Reputational damage Reduced development returns Shortage of key staffPage 32Page 72Total re
115、turn and total shareholder return measure our performance across all our strategic objectives.Derwent London plc Report&Accounts 20152120 FARRINGDON ROAD EC1 170,600 SQ FTTHE WHITE CHAPEL BUILDING E1 270,000 SQ FTWe specialise in buying income-producing properties let off low rents with low capital
116、values in improving locations.Typically these acquisitions both increase our income base and supplement the supply of future opportunities.This ensures the portfolio retains above average growth potential from opportunities for active management.Unlocking value may come from growing rental income,re
117、furbishment or asset management,adding area or increasing the value per sq ft.Eachbuilding is considered individually and,because the pipeline is income producing,we have time to find the optimum solution in each case.Some examples are given on the next page.ACQUIRE PROPERTIES AND UNLOCK THEIR VALUE
118、22Strategic reportRisksPage 72KPIsPage 32RAISING INCOME ON ANGELSQUARE EC1We acquired this 126,900 sq ft property in November 2014 for 78.6m with an income of 2.4m pa(average rents 19per sq ft).The majority of the space fell vacant in March 2015,which gave us the opportunity to raise the income by s
119、wiftly re-letting 98,300 sq ft to Expedia,who also occupy our Angel Building opposite,and The Office Group.We retained an occupier in 3,300 sq ft andhave refurbished the remainder.Thelatter space is either pre-let or under offer and we have recently achieved a rent of 55 per sq ft.On full letting th
120、e income should double to 4.8m pa.REGENERATING 1-2 STEPHEN STREET W1Since acquisition five years ago we have refurbished over half the office space and completely remodelled and reclad the ground floor.This has improved the entrances and provided a new retail frontage on Tottenham Court Road and a m
121、ore vibrant tenant mix.During 2015 we achieved office rents ranging from 65 to 82.50 per sq ft.We acquired the property in 2010 for an average price of 582 per sq ft.We have since spent c.175 per sq ft on refurbishment and the property was valued in December 2015 at 1,280 per sq ft.Thisbuilding is e
122、xpected to be a major beneficiary from the opening of the nearby Crossrail station in 2018,andthere remains 102,000 sq ft still torefurbish.MAJOR ACQUISITIONS OFFER IMMEDIATE AND LONG TERM POTENTIALWe acquired two substantial properties in 2015.The first was the long lease of 20 Farringdon Road,Cler
123、kenwell EC1,comprising a 170,600 sq ft building,for 545 per sq ft,and let at an average rent of 27 per sq ft.We are currently refurbishing 88,000 sq ft,and have pre-let 33,500 sq ft at 45 per sq ft.At the same time we are working up plans for a more significant remodelling of the building after 2020
124、,by which time the new Farringdon Crossrail station opposite will be open.At the end of the year we acquired Aldgate Union,Whitechapel E1 for 139m,also around 545 per sq ft.Thefact that it was vacant enabled us to immediately commence an 18m light touch refurbishment.The property has been rebranded
125、The White Chapel Building and will be repositioned from back office space to Tech Belt space.The 200,000 sq ft Phase 1 of the refurbishment is scheduled for completion in the second half of 2016.We are currently seeing strong demand for this kind of space in the Tech Belt area.ANGEL SQUARE EC1 126,9
126、00 SQ FT1-2 STEPHEN STREET W1 267,400 SQ FTDerwent London plc Report&Accounts 20152339-42 psf Existing occupiers,future refurbishment 102,000 sq ft83 psf AnaCap 8,075 sq ft81 psf AnaCap 8,075 sq ft65 psf Freud Communications 28,350 sq ftUnder refurbishment 10,900 sq ftTottenham Court Road 120 metres
127、65 psf FremantleMedia 6,500 sq ft65 psf The Office Group 34,150 sq ftDerwent London creates attractive andadaptable offices avoiding over-specification.Wework with leadingarchitects to design fresh andmodern spaces,building features intoour buildings to reduce their environmental impact and increase
128、 theirappeal.We invest in public realmto provide desirable spaces foroccupiers and communities alike.ANGEL BUILDING EC1 STILL WINNING AWARDS IN 2015RisksPage 72KPIsPage 32CREATE WELL-DESIGNED SPACE“We believe that creating the right space can help improve neighbourhoods,as well as attracting new bus
129、inesses to thelocation.”24Strategic reportOUR OFFICE DESIGNSThe White Collar Factory EC1 development that features on this Annual Report s cover is a classic example of our approach.The office space design is the fruition of five years research conducted by ourselves,AHMM(architects)and Arup(enginee
130、rs).It was concluded that occupiers value flexibility and cost efficiency.One solution was to build space with above average 3.5 metre floor to ceiling heights.This provides occupiers with more volume and natural light,energy efficient temperature control incorporating the interaction of the larger
131、areas,concrete core cooling in the ceilings and opening windows.None of these design features involve new technologies,but it is rare to see them combined in a modern London office scheme.To check our designs we tested them for ten months in a full scale 3,000 sq ft mock-up.Our developments incorpor
132、ate a variety of materials.In 2015 we used bespoke Danish made bricks for Turnmill EC1,and travertine sourced directly from a quarry in Italy for 40 Chancery Lane WC2.In both cases we sought the right finish for each building s context.White Collar Factory s main material is concrete using a shutter
133、ed effect on its external surfaces.This will provide a plain clean image,which complements its simple flexibility.OUR APPROACHGood design lies at the centre of our regeneration activities,along with knowingour markets and our occupiers requirements.We believe one way to attract a tenant to an improv
134、ing area is toprovide an exceptional building at a reasonable price.Often that price sets new levels for the area.We tailor our approach to each building and collaborate with leading architects and other external professional teams.These are frequently longstanding relationships but we take on new c
135、onsultants where we are looking for a fresh approach.It is important that we learn from what our occupiers are telling us about our existing buildings,and that we remain innovative.The process is supported by the income from the existing property.BUILDING LONGEVITYOur loose-fit flexible spaces ensur
136、e that buildings remain in demand and are sustainable.Five years ago we completed Angel Building,Islington EC1 which provided occupiers with fresh office space,a revised entrance,ground floor catering and business lounge,and accessible roof terraces.In addition we added three retail units at street
137、level,which have been let to food operators.Its success was recognised with the BCO Test of Time award in 2015.ADDING VIBRANCYThe White Collar Factory has other trademark characteristics where its space is shared with other occupiers and visitors.The 16-storey tower will have a striking double-heigh
138、t entrance with a communal caf,a lower ground floor multi-use space(capable of being a conference centre),a roof top terrace and entertainment space and even a roof top running track.Behind the tower is Old Street Yard,a new public realm,which in turn will be surrounded by restaurants,low rise offic
139、es and nine apartments.POSITIVE IMPACT ONOURSURROUNDINGSWe completed the refurbishment of The Buckley Building EC1 in 2013,exploiting its industrial frame and corner position to create well-lit flexible office space.We also created a more imposing entrance,repositioning it to face Clerkenwell Green,
140、and added a restaurant.This year,as part of our Community Strategy,we commissioned a survey to evaluate its impact on the neighbourhood.Amongst the report s findings is that the new occupiers had increased the revenues of local businesses by 6%.WHITE COLLAR FACTORY EC1 LOWER GROUND FLOOR(CGI)Derwent
141、 London plc Report&Accounts 201525In December 2015 77%of our portfolio wasincome producing,made up of a combination of mature buildings on longer leases and properties with future potential let off shorter leases or ground rents.Lowcompetitive rents and flexible terms onthe latter encourage tenants
142、to remain inoccupation until we start on site.The Group builds strong relationships with all its occupiers through regular dialogue so as tobest understand their needs.Where appropriate we can offer flexibility either byaltering lease terms or by relocation.In a significant number of recent leases w
143、e have also incorporated minimum rental uplifts thereby ensuring guaranteed future cash flow growth.HOLDEN HOUSE W1 EXTENDING INCOMEOPTIMISE INCOME“Strong levels of occupier demand have helped raiserental levels on our available space,and we are seeing goodearly interest inschemes not due for comple
144、tion until 2019.”26Strategic report01 Before development02 After developmentOUR OCCUPIERS ARE IMPORTANT STAKEHOLDERSAll our major multi-let properties have on-site building managers responsible for day-to-day contact with our occupiers.In addition our asset managers meet with occupiers regularly.Exa
145、mples of other methods of contact include our recently updated Tenant Handbook and our regular Sustainability Newsletters.MANAGEMENT CONTINUITYWe acquired Greencoat and Gordon House SW1 in 1995.These adjoining properties total 145,100 sq ft and are a demonstration of how we refresh and evolve our lo
146、ng-standing ownerships.Since acquisition we have substantially modernised the interior of this building raising rents from c.10 per sq ft to c.59 per sq ft.In 2014 we bought back the long lease on the basement space and have since been reconfiguring it to create 31,000 sq ft of lettable space.MAINTA
147、INING INCOMETwo recent examples of retaining high occupancy prior to development are at 55-65 North Wharf Road W2 and Holden House W1.The former was income producing until a few weeks before demolition was started in January 2016 to make way for the Brunel Building.A number of leases expired in Hold
148、en House in 2014 representing approximately 25%of the lettable area.We have longer term regeneration plans for this property,so we conducted a modest refurbishment and re-let the space on five year terms which synchronises their expiry with the majority of leases on the property.ENHANCING INCOMETwo
149、of our three leases signed with The Office Group(TOG)in 2015 included a share of profits above a threshold level.The success of TOG s 2 Stephen Street W1 business is now expected to provide us with additional income of c.240,000 in 2016,equivalent to 7 per sq ft of extrarent.GIVING PROPERTIES A MAKE
150、OVERThe reduced demand for car spaces has given us an opportunity to create higher value commercial space.The new retail units at Tottenham Court Walk W1 benefited from the conversion of car spaces into lower ground floor storage.In Middlesex House W1 international architects Make converted the car
151、park into offices and occupied them in 2015.GREENCOAT AND GORDON HOUSE SW1 CONTINUING IMPROVEMENTRisksPage 72KPIsPage 32MIDDLESEX HOUSE W1 PREVIOUS CAR PARK SPACE0102279 PRESCOT STREET E1 FORMATION OF JOINT VENTUREWe regularly review the status and options for each property in the portfolio.When mar
152、ket conditions are favourable we dispose of assets where either future growth is limited or where we perceive that better use of our capital can be made elsewhere.The funds released are reinvested in new acquisitions or in capital projects to grow portfolio value.“It is important that we actively lo
153、ok to dispose some of our mature assets to ensure that we maintain thebalance between the income and redevelopment elements in our portfolio as projects are completed and let.”RECYCLE CAPITALPORTOBELLO DOCK W10 SAW STRONG INVESTOR DEMANDRisksPage 72KPIsPage 3228Strategic reportSELLING TO REDEPLOY CA
154、PITAL ELSEWHEREIn February 2015 we sold two buildings and a half interest in a third as part of the property swap to acquire 20 Farringdon Road EC1.The properties sold:22 Kingsway WC2 and Mark Square House EC2,offered less value-adding potential.Weretained a 50%interest in 9 and 16Prescot Street E1,
155、where leases have been extended on half the building and half is being refurbished.In November we sold the Davidson Building,Covent Garden WC2 where we had recently refurbished and re-let 56%ofthe space achieving new rental levels.In December we also sold Portobello Dock W10 which represented a rela
156、tively small asset in ourportfolio.Together these sales achieved 14%above June 2015 book values.REPOSITIONING WEDGEHOUSE SE1At this tired 39,000 sq ft office building south of the River Thames,we had achieved consent for an 80,000 sq ft office development.During 2015 we teamed up with The Hoxton and
157、 submitted plans for a 110,000 sq ft mixed hotel and office scheme.The application was successful and we have since sold the site to the hotel operator.This transformation saw the Group secure a substantial capital profit of 15.3m in 2015 or 86%over the December 2014 value.RESIDENTIAL DEVELOPMENTIn
158、the last two years we have developed two small standalone residential schemes for sale.These projects at Queens W2 and The Corner House W1 have been implemented where residential values exceeded commercial ones,and,in the latter s case,allowed us to meet our residential obligations on larger develop
159、ments.In 2015 we raised 24m from residential sales.AcquisitionsDisposals 201320142015130.1149.792.4114.4246.2277.2mWEDGE HOUSE SE1 MIXED-USE REDEVELOPMENT01 Existing building02 CGI of development010229WE WORK HARD TO MAINTAIN EXCELLENT RELATIONSHIPS WITH ALL OUR LENDERSTHE GROUPS CREDIT RATING WAS R
160、AISED BY STANDARD&POORS TO BBB+IN APRIL 2015 HELPING US TO SOURCE FUNDING FROM THE CAPITAL MARKETS AT REDUCED COSTGROUP LTV RATIO REDUCED TO 17.8%IN DECEMBER 2015 FROM 24.0%IN DECEMBER 2014MAIN FINANCING ACTIVITIES IN THE LAST YEARIn January 2015,we called for early redemption of the 175m 2.75%conve
161、rtible bonds 2016 which led to their conversion.This reduced debt and led to the issue of 7.88m new ordinary shares.Gearing was lowered and interest cover was substantially improved.In July 2015,a new 75m revolving unsecured bank facility was arranged with Wells Fargo.Simultaneously,the 70m drawn fr
162、om a secured 90m facility with the same lender was repaid and the old facility was cancelled thereby removing charges over 390m of property.In December 2015,the Group s main 550m revolving bank facility was extended by 12 months to January 2021.Several interest rate swaps were cancelled or re-coupon
163、ed in 2015 at a cost of 4m.A forward start swap was also deferred by 12 months for 2.4m.These steps reduced our interest cost.105m of US private placement notes were agreed and signed with three new lenders in February 2016 for drawing in May 2016.MAINTAIN STRONG AND FLEXIBLE FINANCINGOur financial
164、strategy has low leverage at its heart with a focus on sustainable income growth and interest cover to balance the riskier value-adding aspects of our business model.We have diversified our sources of finance in recent years and moved to predominantly unsecured borrowings to preserve flexibility.Com
165、bination of unsecured revolving bank facilities and long-term fixed rate debt revolving bank facilities provide flexibility fixed rate debt ensures a relatively long average unexpired loan term 85%of borrowings were fixed rate or swapped at December 2015 to give protection against rising rates“Our r
166、ecent success in raising long-term fixed rate finance in uncertain global financial markets from a range of blue-chip institutions is a demonstration of the Groups creditworthiness.”30Strategic reportGREENCOAT HOUSE SW1 RECEPTIONUnsecured debt and unencumbered properties2015201420132012Proportion of
167、 debt unsecured(%)68656320Unencumbered properties(m)3,7092,7182,144624IMPROVED INTEREST COVER AND LOW LTV RATIO Our annual budgeting process is supported by a five year plan to ensure we find the right balance between growing recurring earnings and investing in higher value-added capital projects.We
168、 aim to de-risk projects as we go by letting space prior to scheme completion or by fixing costs with contractors where this is economically viable,supported by low leverage and with a particular focus on interest cover.MAINLY UNSECURED BORROWINGSSince 2011,we have gradually increased the proportion
169、 of Group borrowings that are unsecured(i.e.we have no assets pledged as security to the lender).This has also substantially increased the level of our unencumbered properties.LOWERING THE AVERAGE COST AND LENGTHENING THE UNEXPIRED TERM OF OUR DEBTWe try to ensure that the cost of our debt is compet
170、itive while also ensuring the duration of our unexpired facilities provides headroom in relation to business planning,going concern and viability assessments for the business as a whole.Generally,longer term fixed rate debt is more expensive than short-term floating rate debt so we look to balance b
171、oth elements.Interest cover ratio(ICR)%362286 20152014Hedging profile%Fixed 57Swapped 28Floating 15ADDED FINANCIAL FLEXIBILITYWe made our financing more flexible in 2015 by:Increasing our revolving bank facilities by 55m to 625m.Increasing total unencumbered properties to 3.7bn in December.LTV ratio
172、%17.824.0201520143.68%Average interest rate of debt(cash basis)Dec 2014:3.78%3.93%Average interest rate of debt(IFRS basis)Dec 2014:4.22%7.3 yearsWeighted average unexpired term of borrowings Dec 2014:6.6 yearsRisksPage 72KPIsPage 32Derwent London plc Report&Accounts 201531MEASURING OUR PERFORMANCEW
173、e have established a set of Key Performance Indicators(KPIs)which are measured against relevant external and internal benchmarks.In addition to these KPIs,we also use additional metrics and various EPRA performance measures to monitor the performance of the business.For definitions please see pages
174、176 to 178.Link to remunerationThere is a clear link from our performance measures to theremuneration structure of senior management.These performance measures are reflected in the remuneration structure of senior management as follows:Bonus schemeThe Group s bonus scheme takes into account the tota
175、l return and the total property return together with a number of other key metrics referred to above.Page 106Long-term incentive planThe vesting level of half an annual award depends on the Group s total shareholder return compared to that of a group ofcomparator companies.The vesting level of the o
176、ther half reflects the Group s total property return compared to the IPDCentral London offices index.Page 107Our objective is to provide above average long-term returns to shareholders through the execution of our strategy.In order to assess the effectiveness of the different strands of this strateg
177、y,we measure our performance in a number of different ways.ABOVE AVERAGE LONG-TERM RETURNS TO SHAREHOLDERSKEY PERFORMANCE INDICATORSTotal returnTotal property return(TPR)Void managementTenant receiptsInterest cover ratioBREEAM ratingsEPRA MEASURESEarnings per shareNet asset value per shareTriple net
178、 asset value per shareNet initial yield(NIY)Topped-up net initial yieldVacancy rateLike-for-like rental income growthCost ratioKEY METRICSDevelopment potentialReversionary percentageTenant retentionGearing and available resourcesEnergy Performance Certificates(EPC)Capital returnTotal shareholder ret
179、urn(TSR)32Strategic reportKEY PERFORMANCE INDICATORSTotal returnOur total return,which reflects the combined effectiveness of all the strands of our strategy,equates to the combination of NAV growth plus dividends paid during the year.We aim to exceed our benchmark which is the average of other majo
180、r real estate companies.Page 58Our performanceIn 2015 our total return of 23.0%again comfortably exceeded our benchmark.Our cumulative performance over the past five years was 158%compared to the benchmark of 97%.Total property return(TPR)Our total property return givesan indication of the effective
181、ness of all the property related strands of our strategy.We aim to exceed the IPD Central London Offices Index on an annual basis and the IPD UK All Property Index on a three-year rolling basis.Page 43Our performanceWe exceeded both of our IPD benchmarks again in 2015.Over the past five years we hav
182、e exceeded the IPD Central London Offices Index and the IPD UK All Property Index by 15%and 62%,respectively.Derwent LondonWeighted average of real estate companies17.4%10.912.76.621.915.120112012201330.121.923.018.720142015 Derwent LondonIPD Central London Offices Index13.4%12.511.68.818.515.820112
183、012201325.123.519.919.720142015Annual 12.1%Three-year rolling8.815.48.614.57.020112012201318.410.421.213.820142015Derwent LondonIPD UK All Property IndexStrategic objective measured Acquire properties and unlock their valueCreate well-designed spaceOptimise incomeRecycle capitalMaintain strong and f
184、lexible financingDerwent London plc Report&Accounts 201533MEASURING OUR PERFORMANCECONTINUEDKEY PERFORMANCE INDICATORS CONTINUEDVoid managementTo optimise our rental income weplan to minimise the space immediately available for letting.Weaim that this should not exceed 10%of the portfolio s estimate
185、d rental value.Page 46Our performanceDue to our letting success over the past few years,the EPRAvacancy rate has remained consistently low and well below ourmaximum guideline of 10%.%1.31.61.04.11.3 20112012201320142015Tenant receiptsTo maximise our cash flow and minimise any potential bad debts we
186、aim to collect more than 95%of rent invoiced within 14 days of the due date.Page 46Our performanceDue to the quality of our tenants and the performance of our credit control,rent collection has remained high over the past five years and consequently the level of defaults has been de minimis.%9897989
187、998 20112012201320142015BenchmarkInterest cover ratioWe aim for our interest payable to be covered at least 1.5 times by net rents.The basis of calculation is similar to the covenant included inthe loan documentation for our unsecured bank facilities.Please see note 39 for the calculation of this me
188、asure.Page 58Our performanceThe net interest cover ratio comfortably exceeded our benchmark of 150%in each ofthepast five years.%261263279286362 20112012201320142015BREEAM ratingsSustainability has always been atthe heart of Derwent London s business model.It is important thatour buildings are attra
189、ctive totenants and that they are also environmentally sound and efficient.BREEAM is an environmental impact assessment method fornon-domestic buildings.Performance is measured across a series of ratings;Pass,Good,Very good,Excellent and Outstanding.We target that all of our major new developments i
190、n excess of5,000m should obtain aminimum BREEAM rating ofExcellent and all major refurbishments a minimum rating of Very good.Page 66Our performanceWe are pleased that our completions in 2015 met our benchmark.We expect all our 2016 projects to maintain this highperformance.CompletionRatingTurnmill
191、EC1Q1 2015ExcellentTottenham Court Walk W1Q2 2015Very good40 Chancery Lane WC2Q3 2015ExcellentWhite Collar Factory EC1(Building 1)Q4 20161Outstanding1 Expected.34Strategic reportKEY METRICSDevelopment potentialWe monitor the proportion of ourportfolio with the potential forrefurbishment or redevelop
192、ment to ensure that there are sufficient opportunities for future value creation in the portfolio.Page 50Our performanceThe percentage of our portfolio which is available for redevelopment,regeneration or refurbishment was 47%at the endof 2015.%201120122013201420155153555247Reversionary percentageTh
193、is is the percentage by which the cash flow from rental income would grow were the passing rent to be increased tothe estimated rental value and assuming the on-site schemes are completed and let.It is used to monitor the potential future income growth ofthe Group.Page 43Our performanceThe 103%rever
194、sion in the portfolio demonstrates the growth potential in our income stream.%20112012201320142015Reversion42465664103Tenant retentionMaximising tenant retention following tenant lease breaks orexpiries minimises void periods and contributes towards rentalincome.Page 46Our performanceIn order to pro
195、tect our income stream where we do not have redevelopment plans,it is desirable for us to retain tenants at lease expiry or break.Our retention and re-let rate was 89%in2015 and averaged 86%over the past five years.20112012201320142015Exposure(m pa)16.214.720.017.317.0Retention(%)7281746345Re-let(%)
196、215141044Total(%)9386887389Strategic objective measured Acquire properties and unlock their valueCreate well-designed spaceOptimise incomeRecycle capitalMaintain strong and flexible financingDerwent London plc Report&Accounts 201535MEASURING OUR PERFORMANCECONTINUEDKEY METRICS CONTINUEDGearing and a
197、vailable resourcesConsistent with others in its industry,the Group monitors capitalon the basis of NAV gearingand the LTV ratio.Our approach to financing has remained robust and our gearing levels reflect our ability to finance our pipeline,cope with fluctuations in the market and to react quickly t
198、oanypotential acquisition opportunities.We carefully monitor our headroom(i.e.the difference between our total facilities and the amounts drawn under those facilities)and the levelof uncharged properties toensurethat we have sufficient flexibility to take advantage ofacquisition and development oppo
199、rtunities.Page 58Our performanceOur gearing levels reduced again in2015 and we maintained our headroom at over 250m.The level of unsecured properties increased again after the refinancing during the year.Headroom(m)NAV gearing(%)Uncharged properties(m)LTV(%)4765893336242,1443212,7182623,709806040200
200、2012201320152014m%400030002000100002832011Energy Performance Certificates(EPC)EPCs indicate how energy efficient a building is by assigning arating from A(very efficient)to G(inefficient).We design projects to achieve a minimum of B certificate for all new-build projects over 5,000m and a minimum of
201、 C for all refurbishments over5,000m.Page 66Our performanceAll our 2015 and 2016 completions have matched or are expected to match our benchmark.CompletionRatingTurnmill EC1Q1 2015BTottenham Court Walk W1Q2 2015B40 Chancery Lane WC2Q3 2015BWhite Collar Factory EC1(Building 1)Q4 20161B1 Expected.36St
202、rategic reportCapital returnIn order to evaluate the performance of our portfolio we compare our performance against the IPD Central London Offices Index for capital growth.Page 43Our performanceIn 2015 we again exceeded our IPD benchmark,outperforming by 0.8%and over the past five years by a total
203、of 11.3%.7.6%7.37.34.112.611.220112012201320.419.016.515.720142015Derwent LondonIPD Central London Offices IndexTotal shareholder return(TSR)To measure the Group s achievement of providing above average long-term returns to its shareholders we compare ourperformance against the FTSE All-Share Real E
204、state Investment Trust Index,using a 30-day average of the returns inaccordance with industry best practice.Page 111Our performance2015 saw the Group outperform itsbenchmark index and our strong performance over the past five years has resulted in a total outperformance of 61%.2.9%(7.9)39.030.816.41
205、7.220112012201324.826.024.511.420142015Derwent LondonFTSE All-Share REIT IndexStrategic objective measured Acquire properties and unlock their valueCreate well-designed spaceOptimise incomeRecycle capitalMaintain strong and flexible financingDerwent London plc Report&Accounts 201537CHIEF EXECUTIVES
206、STATEMENTLast year s achievements reinforced the Group s strong position as we consistently look to improve our long-term income prospects.This approach has seen us assemble aportfolio that has significant opportunities to benefit from improving locations,hands-on asset management and regeneration.W
207、e start 2016 with 141.0m of estimated reversion.Just over half of this potential growth derives from developments and refurbishments with a total cost to complete of 569m(equivalent to 11%of the December 2015 property portfolio)which will be phased over the next four years.Thecompletion of this prog
208、ramme will add net lettable area and will signify a major upgrade to our portfolio ensuring it meets the latest occupational demands and environmental standards.In the medium term our strategy is to deliver these growth prospects while ensuring the business does not incur undue risks.Portfolio posit
209、ioned for future earnings growthOur strategy ensures that whilst our portfolio contains a wealth of future value enhancing opportunities the vast majority remains income producing(at the year end this was 77%by area).Approximately 53%consisted of property which we have already regenerated,but which
210、have opportunities for growth through asset management,and another 24%was occupied buildings that form our stock of future redevelopment and refurbishment schemes,where we retain control over a project s timing.The remaining 23%of the portfolio is subject to development or refurbishment projects whi
211、ch we continue to de-risk as they progress.During the year the EPRA vacancy rate,which is based on the space available to let,was reduced from 4.1%to 1.3%.Dependent on future pre-letting activity,this could rise in the second half of 2016 as projects are completed.Although we achieved new rental lev
212、els at a number of properties in 2015,we believe our buildings continue to offer occupiers good value with the average ERV of our central London office portfolio still only 51 per sq ft,and with 56%of our portfolio by area let below 50 per sq ft on a topped-up basis.These lie comfortably at the lowe
213、r end of our middle-market range of 45-80 per sq ft.The current development and refurbishment programme will benefit from the opening of Crossrail.The additional estimated 569m capital expenditure to complete these projects,which includes 48m of capitalised interest,will be spread over the next four
214、 years.Construction cost inflation remains high,andcapacity constraints on many contractors have seen delays across the industry including at some of our schemes.The cumulative ERV of these projects(including pre-lets)is 78.9m of which half will not be completed until 2019.Our strategy is to deliver
215、 the growth prospects from our development and asset management opportunities,while ensuring the business does not incur undue risks.“Although we achieved new rental levels at a number of properties in 2015,we believe our buildings continue to offer occupiers good value with the average ERV of our c
216、entral London office portfolio still only 51 per sq ft.”JOHN BURNS CHIEF EXECUTIVE38Strategic reportWe phase the timing of the capital expenditure on our developments to ensure that it is appropriate to the Group s risk appetite.During last year we completed 226,000 sq ft of projects which are now 9
217、7%let or sold.In the next two years we expect to deliver 728,000 sq ft,which is currently 32%let by area.This includes pre-lets in the current year of all the office space(87,150 sq ft)at The Copyright Building W1 to Capita,and 28,600 sq ft at White Collar Factory EC1 to Adobe.The remaining part of
218、our development programme totalling 620,000 sq ft relates to two West End developments:80 Charlotte Street W1 and Brunel Building W2.Neither building completes until 2019,but we are already having preliminary discussions with potential occupiers for part of this space.We have taken steps to unlock p
219、otential major schemes that we could start from 2018 onwards.We are particularly pleased to have agreed terms with Crossrail,which enable us to gain access to redevelop above the Crossrail site at 1 Oxford Street W1,one of London s most prominent locations.Disciplined approach to acquisitions and di
220、sposalsWe have an opportunistic approach to acquisitions within our strategic plan and were pleased to acquire two substantial Tech Belt properties last year at attractive prices of around 545 per sq ft.Both present short-term refurbishment opportunities and together will contribute 40%of our 2016-1
221、7 projects.In the longer term,both buildings offer the opportunity for regeneration and the creation of additional space in the next decade.Overall the proceeds from property sales of 277m exceeded the cost of new acquisitions.Typically we sell investment assets when we have identified better relati
222、ve growth elsewhere.In 2015,our disposals included a number of properties as part of a property swap,and a sale to an owner-occupier after we had obtained planning consent for amajor hotel development.In addition we have completed andsold most of our available residential units.Following our decisio
223、n to refurbish 25 Savile Row W1 as offices,our residential exposure remains modest and primarily consists of ancillary space connected with our larger commercial projects.In accordance with our usual approach,we expect to continue to recycle capital with over 100m of investment property sales planne
224、d in the current year.FinanceUnderpinning our business is a flexible financial structure and last year we took steps to strengthen this further.In January 2015 our 175m convertible bonds 2016 were converted early thereby raising new equity and reducing debt.Later in the year,we increased the level o
225、f our unsecured revolving debt by refinancing a secured loan and extended the maturity of our principal bank facility.The Group s year end financial ratios arestrong with interest cover of 3.62 times and an LTV ratio of17.8%.Since the year end we have also arranged 105m ofnew long-term debt which wi
226、ll increase the level of undrawnfacilities.The year aheadOccupier and investment demand remains strong in Derwent London s markets and we have started the year well increasing contracted income with a significant number of new lettings atgood levels.We have also enhanced our financial structure.The
227、general economic environment has shown signs of nervousness and volatility in 2016 and,if conditions were todeteriorate,our balance sheet strength would give us considerable resilience.However,providing occupier demand remains solid,we expect to see further good letting activity as the year unfolds
228、thereby locking in significant income growth.JOHN BURNS CHIEF EXECUTIVE25 FEBRUARY 2016Derwent London plc Report&Accounts 201539OUR MARKETLast year the Group continued to enjoy very favourable market conditions with strong occupier demand underpinned by a growing UK economy.The recent falls in publi
229、c equity prices and the value of oil and other commodities demonstrate that,despite some recovery in the USA and European economies,overall economic growth remains fragile and faces a number ofrisks.The latest estimates see the UK economy growing at about 2%pa over the next two years,one of the fast
230、er growth rates amongst the G8 economies,and London s growth rate is expected to remain in excess of the UK average.This level of economic activity remains conducive to employment growth and continuing low interest and inflation rates in the UK.CBRE forecasts Inner London office employment growth at
231、 1.7%pa in the next five years.Last year 14.5m sq ft of central London office space was taken up,of which 4.4m sq ft was in the West End.Total take-up was 3%below the previous year s level,but remains well above trend.In 2015 demand from the financial sector recovered so take up was more evenly spre
232、ad across sectors with business and professional services at 35.8%,banking and finance at 24.4%and TMT at 20.2%.The overall vacancy rate reduced to 2.5%in central London(one of the lowest levels recorded),and to 2.2%in the West End.Prime rental levels are now estimated at 120 per sq ft in Mayfair an
233、d St.James s,82.50 per sq ft in Fitzrovia and 68.50 per sq ft in the City.The decline in the vacancy rate has led to a supply response with estimated above average central London completions in each of the next five years.In total this adds up to a potential 35 million sq ft of space,or 16%of the cu
234、rrent market.The net impact is likely to be lower than this as only 33%,or 11.6m sq ft,is under construction and,of this amount,40%is pre-let or under offer.The outcome is 6.9m sq ft of speculative space currently available which represents less than half of last year s take-up.The full impact of th
235、e 23.4m sq ft yet to start may be deferred due to planning delays and the availability of finance.CBREs views support our own estimates of 5-8%average ERV growth across our portfolio and for investment yields to remain firm in 2016.Central London office development pipelineFloor area million sq ft20
236、20201820162014201220102008200620042002200020202018201620142012201020082006200420022000Vacancy rate%3006912Source:CBRE36912CompletedUnder constructionProposedVacancy rateCompleted average West End office development pipeline20202018201620142012201020082006200420022000202020182016201420122010200820062
237、00420022000Vacancy rate%1234812CompletedSource:CBREUnder constructionProposedVacancy rateFloor area million sq ftCompleted average0040Strategic reportAnother feature of the potential supply is that only 24%,or 8.2msq ft,is in the West End and the amount of new supply tobe delivered in the West End i
238、s expected to fall between 2016 and 2019.Of this potential supply 2.5m sq ft is under construction of which 30%is pre-let.This leaves 1.7m sq ft under speculative construction representing 40%of last year s take-up.After the completion of White Collar Factory and the refurbishment of The White Chape
239、l Building E1 later this year,our subsequent committed major projects are all located in theWest End.Last year saw 16.2bn of central London investment transactions(8.2bn in H1),which was 2.3bn below 2014 levels with a smaller volume of deals above 100m.Overseasinvestors continued to dominate,but the
240、 UK buyers share of the total increased to 42%from 31%.CBRE reports that demand weakened in Q3 before picking up again in Q4,and there was 4.5bn of office stock under offer at year end.However,it expects to see more stock on the market as someinvestors seek to take profits.CBRE expects yields to beu
241、nchanged in 2016 given the background of continuing lowinterest rates and central London s growth prospects.Itestimates rental growth in the City and West End markets for 2016 to be over 6%.Our own portfolio has a more significant West End and Tech Belt weighting than the central London average,but
242、CBRE s views support our own estimates of 5-8%average ERV growth across our portfolio and investment yields to remain firm in 2016.In the near term the London property market continues to face a number of specific opportunities and challenges.Crossrail is on track to open in 2018.This will improve L
243、ondon s east-west connectivity and,in central London,the new service is expected to particularly benefit Tottenham Court Road and Farringdon.Approximately half our portfolio is located near these two stations.With London s population growth expected to continue,attention has begun to focus on centra
244、l London s next major rail project,Crossrail 2,but this is still uncommitted and the project is unlikely to complete before 2030 at the earliest.If it goes ahead it will improve north-south connectivity,again running through Tottenham Court Road and with new stations in our Islington and Victoria vi
245、llages.Central London office take-up2015201320112009200720052003200101051520Central LondonSource:CBRECentral London averageFloor area million sq ft West End office take-up201520132011200920072005200320010426West EndSource:CBREWest End averageFloor area million sq ftDerwent London plc Report&Accounts
246、 201541OUR MARKETCONTINUEDIt is expected that business rates(local taxes)will increase in 2017,and this is likely to raise occupation costs in London.Thenew rates will be set on April 2015 rental levels,whereas the current rates are set on April 2008 levels.As most London commercial property has exp
247、erienced good rental growth in that period,business rates are likely to rise,although a transitional period,if adopted,could defer the full impact.Although these costs are borne by our tenants,the rise in overall occupation costs may affect future rental growth while these additional expenses are ab
248、sorbed.CBRE has recently estimated the impact across 19 central London locations.Onan unweighted basis the average increase in rates on prime offices is 40%,which translates into an average increase of occupational costs(rates and rents)of 11%.Given that we have seen strong rental growth on our prop
249、erties we would expect to be affected and CBRE estimates that occupational costs in our largest village,Fitzrovia,will increase by 4%.Based on their numbers,the successful Shoreditch and Farringdon locations could experience some of the higher increases of our villages,with increases of 13%and 9%res
250、pectively.These numbers remain a matter of conjecture at this stage,but they suggest Tech Belt total occupancy costs will still remain substantially below most of the traditional core office locations.As well as these two specific catalysts there are two uncertainties based on upcoming votes.On 5 Ma
251、y Londoners will choose a new Mayor,and,whatever the outcome,there are likely to be some policy changes.In addition,a national referendum on whether the UK should remain in the European Union is to be held on 23 June.We have previously discussed the additional property market uncertainty that we wou
252、ld expect to see if the result was for the UK to leave the EU.CBRE warns that the central London office market would be the most affected given the sensitivity of the financial services industry.Our own portfolio would not be immune to any potential fall out,but it has no exposure to the City core m
253、arketand financial tenants accounted for just 2%of our rentalincome in December 2015.Central London office investment transactions2015201320112009200720052003200101051520Source:CBREAveragebn Estimated business ratesMayfair andSt James sNorth of OxfordStreet WestSohoFitzroviaCovent GardenVictoriaMidt
254、own(Holborn)FarringdonShoreditchCity corePaddington2015 Q4 Prime Rent2015 Q4 Prime Business Rate2015-2018 increase010050150200Source:CBRE psf42Strategic reportThe Group s investment portfolio was valued at 5.0bn as at 31 December 2015,having benefited from buoyant occupational demand,development sur
255、pluses and a further tightening of valuation yields.The valuation surplus for the year was 672.2m,before accounting adjustments of 20.8m(seenote 16)giving a total reported movement of 651.4m.Theunderlying valuation increase was 16.5%which followed 20.4%in 2014,another strong year.We have outperforme
256、d ourbenchmarks again in 2015.The IPD Central London Offices Index increased by 15.7%and the wider IPD UK All Property Index rose by 7.8%.By location,our central London properties,which constitute 98%of the portfolio,saw an underlying valuation increase of 16.8%.The West End was up 14.6%and the City
257、 Borders rose 22.5%.The Scottish properties represent the balance of the portfolio and increased by 1.3%.The portfolio s total property return was 19.9%in 2015 compared to 25.1%in 2014.The IPD total return index was 19.7%for Central London Offices and 13.1%for All UK Property.Within the investment p
258、ortfolio,we were on site at five developments during the year.Four of these,Turnmill EC1,40Chancery Lane WC2,White Collar Factory EC1 and TheCopyright Building W1 were commercial developments whilst the fifth was a small residential scheme at 73 Charlotte Street W1.In total these projects were value
259、d at 457.5m and delivered a 31.5%uplift in the year.Turnmill and 40 Chancery Lane were completed in the year and handed over to PublicisGroupe,and at 73 Charlotte Street the majority of the apartments have been sold.At year end we were still on-site atWhite Collar Factory and The Copyright Building.
260、These two projects were valued at 259.3m and are progressing well.VALUATIONAs valuation yields appear to have levelled out,future property valuation growth is most likely to come from rental returns,development surpluses and asset management.NIGEL GEORGE EXECUTIVE DIRECTOR651.4mvaluation surplus16.5
261、%underlying valuation uplift Valuation performanceDerwent London1 Quarterly Index.IPD Central London Offices1IPD UK All Property Index120152014201320122011-107.67.37.312.611.24.320.419.011.916.515.77.84.11.7(3.1)50-5151020%Derwent London plc Report&Accounts 201543At the end of the year we added two
262、new developments,bothproperties where we had achieved planning permissions for substantial floor area increases.These were 80 Charlotte Street W1 and Brunel Building W2 which were valued at 251.4m.Both will be completed in 2019.At 1-2 Stephen Street W1,our major refurbishment project during the year
263、,we completed the latest phase of works.Thisfocused on improving and extending the retail units on Tottenham Court Road and followed a phased upgrade of nearly half the office space.The letting of the majority of the retail units and the office refurbishment at above anticipated rental values contri
264、buted to a strong valuation rise of 19.0%onthe property to 340.6m.Looking at our rental growth,it was another strong year.Rentalvalues,on an EPRA basis,rose by 11.8%following 9.0%in 2014.During 2015 the City Borders saw rental growth of 15.2%and the West End 10.8%.On an EPRA basis the portfolio s in
265、itial yield was 3.1%which increases to 3.8%on a topped-up basis,following expiry of rent free periods and contractual rental uplifts.For the previous year,these figures were 3.4%and 4.0%respectively.The true equivalent yield at year end was 4.52%,a 21bp reduction overthe year and follows 55bp of yie
266、ld tightening in 2014.Thistempering of yield compression was further illustrated withthe second half of 2015 s movement being 4bp compared to 17bp in the first half.As valuation yields appear to have levelled out so future property valuation growth is most likely tocome from rental returns,developme
267、nt surpluses and assetmanagement.The December 2015 valuation recorded a good increase in ourportfolio s contracted income and a very significant increase in our potential income.Overall,our contracted income has risen 4.1%to 137.1m pa and our ERV has risen 29.0%to 278.1m pa.The portfolio s reversion
268、 stands at 141.0m.Of this growth 35.5m is contractual and due to come from fixed uplifts or the expiry of rent free periods within the leases.Adding this to our contracted income takes topped-up rent to 172.6m,5.4%higher than last year.The bulk of the reversion comes from the potential income from l
269、etting either vacant space under construction,under refurbishment or currently available.It primarily reflects the recent start of the two new developments at 80 Charlotte Street W1 and Brunel Building W2,and the acquisition of The White Chapel Building E1(previously known as Aldgate Union),which is
270、 currently undergoing refurbishment.The total ERV of vacant space at the year end was 76.4m pa.Whilst this has more than doubled since June 2015,much of this space will not be delivered for four years.These projects require 569m of further expenditure,and offer a degree of flexibility on the timing
271、of delivery.Of this vacant space 75%derives from developments,22%from refurbishments and only 3%represents existing vacancy.We have let or pre-let 12%of this space since the year end for 9.2m pa net,at levels in excess of December 2015 ERV.The final component of our growth could come from lease revi
272、ews and renewals and this is estimated to add 29.1m to our income,which is 24%higher than last year.VALUATIONCONTINUED Derwent London True Equivalent Yield(TEY)Derwent London Initial Yield 07865432110-year GiltAverage gap(251 bp)Gap between DL TEY and 10-year Gilt20002002200420062008201020122014Valu
273、ation yields%Contractual rental upliftsVacant space and lease reversionsReversionContractual rent7501502253003006090120Portfolio income potential20152014201320122011Reversion%Rental income m44Strategic reportPortfolio statistics valuation ValuationmWeighting%Valuation1performance%Valuationperformanc
274、emOccupiedfloor area000 sq ftAvailablefloor area000 sq ftMinorrefurbishmentfloor area000 sq ftVacantproject floor area000 sq ftTotalfloor area000 sq ftWest EndCentral 2,818.05713.8343.22,34554697253,193Borders471.0919.877.753813335843,289.06614.6420.92,883671027253,777CityBorders1,599.43222.5254.81,
275、52613162092,052Central London 4,888.49816.8675.74,409684189345,829Provincial100.121.31.333613340Total portfolio 20154,988.510016.5677.024,745694219346,169 20144,168.110020.4683.85,1441291083635,7441 Underlying properties held throughout the year.2 672.2m after deducting capitalised interest.Rental i
276、ncome profile RentalupliftmRentalper annummAnnualised contracted rental income,net of ground rents137.1Contractual rental increases across the portfolio35.5Letting 69,000 sq ft available floor area2.4Completion and letting 421,000 sq ft of minor refurbishments16.7Completion and letting 934,000 sq ft
277、 of major projects57.3Anticipated rent review and lease renewal reversions29.1Portfolio reversion141.0Potential portfolio rental value278.1Portfolio statistics rental income Netcontractedrental incomeper annummAveragerental income per sq ftVacantspacerental valueper annummRent reviewand leasereversi
278、ons per annummPortfolioestimatedrental valueper annummAverageunexpiredlease length1YearsWest EndCentral 75.932.7851.430.3157.67.4Borders17.732.930.85.624.17.193.632.8152.235.9181.77.3CityBorders38.525.8124.228.491.16.5Central London 132.130.3876.464.3272.87.1Provincial5.014.800.35.34.5Total portfoli
279、o 2015137.129.2876.464.6278.17.0 2014131.725.7728.455.5215.66.61 Lease length weighted by rental income at year end and assuming tenants break at first opportunity.Derwent London plc Report&Accounts 201545PORTFOLIO MANAGEMENT2015 was a record year for Group letting activity.In total we secured 27.1m
280、 of rental income on 523,800 sq ft at an average level 10.8%above December 2014 ERVs.Of this,44%by income were pre-lets as we let development space during its course of construction.Open market lettings were 14.3%above December 2014 ERVs.Second half lettings totalled 10.7m pa on 201,200 sq ft,and we
281、re on average 22.3%above December 2014 ERVs or 12.9%above June 2015 ERVs.Notable new rental levels were achieved at 1 Stephen Street W1,Davidson Building WC2(since sold)and Charlotte Building W1 all at 80 per sq ft or above for the upper floors,and at White Collar Factory EC1,Tea Building E1 and Ang
282、el Square EC1 where rents of 62.50 per sq ft,57.50 per sq ft and 55.00 per sq ft respectively,were obtained.Significant transactions included the letting of the majority of the commercial space on our recently completed projects including the office space at 1-2 Stephen Street W1 and eight of the ni
283、ne retail units at Tottenham Court Walk W1.Together these added 5.8m to rents.We also made our first pre-lets at White Collar Factory securing 4.9m pa.2015 was a record year for Group letting activity.In total we secured 27.1m of rental income at an average level 10.8%above December 2014 ERVs.PAUL W
284、ILLIAMS EXECUTIVE DIRECTOR27.1mof new lettings in 201510.1mof new lettings in 2016 year to date Pre-letsNon pre-lets20152014201320122011201020098.28.014.16.07.311.36.8 2.410.52.615.211.91.1105020251530Letting activity by rental incomem pa46Strategic reportPrincipal lettings in 2015Tenant Areasq ftRe
285、nt psfTotalannualrentmMin/fixeduplift atfirst review psfLeasetermYearsLeasebreakYearRent freeequivalentMonthsQ12 Stephen Street W11The Office Group34,15065.0012.271.752015Angel Square EC1Expedia57,60036.802.141.6063&52.5,plus 3 if no break in year 31 Stephen Street W1AnaCap16,15081.751.384.251015Tea
286、 Building E1Feed7,99047.500.455Davidson Building WC2Astus UK4,37080.000.382.501057,plus 5 if no breakQ2White Collar Factory EC1The Office Group41,30057.502.463.502024Angel Square EC11The Office Group40,70035.0011.438.651029Davidson Building WC2First Utility6,23072.500.575.001057,plus 7 if no breakMo
287、relands EC1Spark445,37055.000.360.00959,plus 3 if no breakQ3White Collar Factory EC1AKT II28,40057.501.663.502012&152420 Farringdon Road EC1Improbable Worlds25,70042.501.143.5067Charlotte Building W1Kingston Smith5,96082.500.485.001014Angel Square EC1DrEd4,74055.000.34.533,plus 2 if no breakDavidson
288、 Building WC2Elastic search6,30072.500.576.001057,plus 5 if no break20 Farringdon Road EC1Moo Print33,50045.001.549.501068Tea Building E1Transferwise23,95057.501.456White Collar Factory EC1BGL14,30062.500.969.001018Davidson Building WC2Alibaba6,31072.500.574.701057,plus 7 if no breakQ4Tottenham Cour
289、t Walk W1Marie Claire7,9000.41057.51 The Group will get a share of The Office Group s profits on this space above a minimum level.2 Landlord s break in year five.The purchases of Angel Square EC1 in November 2014 and 20 Farringdon Road EC1 in February 2015 brought almost immediate letting opportunit
290、ies.The former 126,900 sq ft property was acquired with an income of 2.4m pa,equivalent to an average rent of 19 per sq ft.The majority of the leases expired in March 2015,but we swiftly re-let 98,300 sq ft to Expedia and The Office Group,and the property is now virtually fully let at a rent of 4.8m
291、 pa.The second purchase was a 170,600 sq ft building producing 3.2m pa net.In the second half we re-let the 25,700 sq ft ground floor,and embarked on the refurbishment of 88,000 sq ft,of which 38%has been pre-let.Assuming we let the remaining available space at ERV we will have increased the income
292、on the property to 6.5m pa net.H1 10H2 10H1 11H2 11H1 12H2 12H1 13H2 13H1 14H2 14H1 15H2 152.62.84.12.12.63.83.05.24.84.22.86.620648Rental value growthHalf-yearly rental value growth(%)Derwent London plc Report&Accounts 201547Our letting progress saw the EPRA vacancy rate on our portfolio fall from
293、4.1%to 1.3%in the year.The major components of this residual have either since been let or are currently under offer.However in addition to the immediately available space we have a number of refurbishments under way which will provide letting opportunities during the course of the year.The most sig
294、nificant is at The White Chapel Building E1,which we acquired vacant in December 2015 and is now undergoing a light refurbishment at a cost of around 18m.We expect 200,000 sq ft of refurbished offices to be available here in the latter part of 2016 with an ERV of c.9.0m.Other notable projects includ
295、e rejuvenating space at 20 Farringdon Road EC1,Network Building W1 and the eighth floor of 1 Stephen Street W1.Assuming we are unable to secure any further lettings at White Collar Factory or these other projects,our proforma vacancy would rise to c.12%.PORTFOLIO MANAGEMENTCONTINUEDFor some time we
296、have been monitoring the expansion of the new breed of flexible office space providers.We could see they were responding to significant demand for small amounts of space,lease flexibility and co-working facilities that would be too management intensive for our business.One operator which caught our
297、attention was The Office Group(TOG),who share with us an interest in workspace design.Last year we made three lettings to them totalling 116,150 sq ft,or 6.0m pa of rent(3.5%of contractual rent).All these transactions are at properties with multi-let strategies,and were agreed at market rents with t
298、wo incorporating an additional profit share once TOG has achieved a threshold return.The most significant of these is at 2 Stephen Street W1 where,based on current profitability,we are expecting overage income of about 7 per sq ft in 2016 on 34,150 sq ft.We expect the TOG space to complement our off
299、er and extend our buildings appeal to a wider range of potential occupiers to whom we are unable to offer the same level of services and lease flexibility.TOG s services are available both to occupiers within the buildings and to other businesses in the vicinity,which we believe adds to each propert
300、ies utility and vibrancy.Derwent London(by rental value)Derwent London(by floor area)0642CBRE West End(by floor area)Five-year vacancy trendDec2010Dec2011Dec2012Dec2013Dec2014Dec2015%Profile of rental income expiry1No lease breaks exercised1 Based upon annualised net contracted rental income of 137.
301、1m.Lease breaks exercised at first opportunity355318117.83431914473020504060100Up to 5 5-1010-15 15-20Over 20%Years to expiry48Strategic reportWest EndCity Borders0106842Central LondonAverage unexpired lease length1 H22015H12015H22014H12014H22013H12013H22012H12012H22011H12011H220101 Lease length wei
302、ghted by rental income and assuming tenants break at first opportunity.yearsDuring 2015 the Group carried out 35 rent reviews on 357,300sq ft and 29 lease renewals on 72,300 sq ft.In total this increased the income from these properties by 27.7%to 18.2m pa.98%of all rents were collected within 14 da
303、ys of the due date.In the current year to date we have let 132,300 sq ft for 10.1m pa gross(9.2m net).The most significant letting was of the 87,150 sq ft office element at The Copyright Building W1 which was announced today.Capita is taking a 20-year lease for a gross rent of 7.4m pa.After ground r
304、ents we will receive 6.5m pa.The average office rent is 86 per sq ft,which was above December ERV,but after allowing for rental incentives equivalent to a 34 months rent-free period and a payment to Capita s current landlord to extend their lease to allow a back-to-back move into The Copyright Build
305、ing,the terms are in line with December levels.The other major letting in the period was a further two floors at White Collar Factory where Adobe has pre-let 28,600 sq ft for 1.8m pa.“We have been at Greencoat House for over ten years.The building works well for us and our occupation has grown with
306、our business so we now occupy 50,000 sq ft.Moreover,we see the refurbished building as an important element of our brand.Our expansion in the building has been achieved as a result of a truly collaborative relationship with the team at Derwent London.”CHIME COMMUNICATIONSDerwent London plc Report&Ac
307、counts 201549PROJECTSDuring 2015 we completed four major projects totalling 226,000 sq ft,the commercial elements of which are now virtually fully let.Our residential scheme at 73 Charlotte Street W1 was completed in September,and we have sold nine apartments leaving one under offer and one availabl
308、e.These projects have proved very profitable providing the Group with 10.3m of net rental income and the four major projects recorded a 72%profit on cost.We are now on-site at four major projects.White Collar Factory is our signature Tech Belt development overlooking Silicon Roundabout.Following fiv
309、e years research by our own design team,together with AHMM(architects)and Arup(engineers),it incorporates a number of design principles which enhance its flexibility,utility and sustainability to occupiers.The ERV has risen 12%to 16.5m pa in 2015 and we have budgeted to spend a further 62m of capita
310、l expenditure to complete the project in Q4 2016 with 38%already pre-let.At The Copyright Building W1 we have today announced the letting to Capita of the entire office element leaving 20,000 sq ft of retail still to let.The ERV of this retail space is 1.1m pa gross(1.0m net).We estimate future capi
311、tal expenditure at 49m to complete the scheme in H2 2017.At 80 Charlotte Street in the heart of Fitzrovia,we have commenced stripping out with full demolition of the existing property to start later this year.The major island site will comprise a 309,000 sq ft office building capable of being multi-
312、let as well as ancillary retail and residential space.This ancillary space will include the development of 67 Whitfield Street with 14,000 sq ft residential,and the redevelopment of the neighbouring Asta House which will comprise 12,000 sq ft offices and 31,000 sq ft residential including 32%afforda
313、ble.The project s estimated ERV is 23.9m pa and capital expenditure to complete is estimated at 207m.Following delays in finishing other projects,completion is now expected in H1 2019.During 2015 we delivered four major projects.These have proved very profitable providing 10.3m of net rental income
314、and a 72%profit on cost.SIMON SILVER EXECUTIVE DIRECTOR31.5%increase in value of development properties1.0m sq ftof on-site projects50Strategic reportWe are also on site at the Brunel Building W2,where our scheme will provide modern flexible office space and enhance the immediate location by opening
315、 up the canal side beside Paddington station(another beneficiary of Crossrail).In November we fixed the price of the construction contract and the overall capital expenditure to complete is estimated at 122m.The ERV is 14.8m pa net with completion expected in H1 2019.At the half year we highlighted
316、the impact of escalating building costs.We challenged the consensus indices that were reporting 4 to 6%annual inflation arguing that in central London it was actually running closer to 10%pa.We expect it to continue at this level through 2016.Our sensitivity to construction costs principally resides
317、 with The Copyright Building and 80 Charlotte Street as our other two major projects costs are fixed.This leaves approximately half of our four year capital expenditure with variable costs but we have assumed inflation in our estimates.We have made advances on our future projects that could start fr
318、om 2018 onwards.In July we agreed terms at 1 Oxford Street W1 with Crossrail whereby we will be granted a new 150-year lease in return for a payment to them of 55m.Of this sum 2m has been paid,a further 5m will be payable on release of the site,with the residual 48m payable on practical completion o
319、f our buildings.In addition,Crossrail will receive 16%of any development profit and a ground rent equivalent to 5%of the rent on the commercial space.The site,which is currently being developed as the Tottenham Court Road Crossrail station,has planning for 204,000 sq ft offices,37,000 sq ft retail a
320、nd a 34,000 sq ft theatre.Work is due to start in early 2018 and this exciting project represents the west side of a major new central London piazza.Earlier in the year we signed a Memorandum of Understanding with our joint venture partners,The Portman Estate,enabling us to progress preliminary plan
321、ning studies on another major potential project at 19-35 Baker Street W1.The existing buildings,which are fully let off low rents,comprise 146,000 sq ft,but our plans indicate the site is capable of supporting up to 250,000 sq ft.Our ownership is 55%and the earliest possession date is 2018.Capital e
322、xpenditureEstimated capital expenditure007008006005004003002001002102401801501209060302007201920172015201320112009Completions and capital expenditureMajor completionsCapital expenditure mMajor completions 000 sq ftDerwent London plc Report&Accounts 201551PROJECTSCONTINUEDMajor projects pipelineArea
323、sq ft1DeliveryCommentProjects completed in 2015Turnmill,63 Clerkenwell Road EC170,500Q1 2015Offices and retail 100%letTottenham Court Walk W138,000Q2 2015Retail 93%let40 Chancery Lane WC2102,000Q3 2015Offices and retail 100%let73 Charlotte Street W115,500Q3 2015Residential and offices 77%sold/let226
324、,000Projects on siteWhite Collar Factory,Old Street Yard EC1293,000Q4 2016Office-led development 38%pre-letThe Copyright Building,30 Berners Street W1105,0002H2 2017Offices and retail 81%pre-let80 Charlotte Street W1380,000H1 2019Offices,residential and retailBrunel Building,55-65 North Wharf Road W
325、2240,000H1 2019Offices1,018,000Major planning consents1 Oxford Street W1275,000Offices,retail and theatreMonmouth House EC1125,000Offices,workspaces and retail400,000Grand Total1,644,0001 Proposed areas.2 Excludes reception area.“Grey Advertising was one of the first occupants of the Johnson Buildin
326、g in 2006 sharing Derwent Londons vision for this exciting new office area.We love the vibrancy of the location and the flexibility of the building,and with our own entrance and frontage weare able to promote our profile on the street.”GREY ADVERTISING521mof estimated capital expenditure to complete
327、 committed programme 19.6%of on-site projects pre-let52Strategic reportIn June we received planning consent for a 110,000 sq ft hotel and offices at Wedge House,40 Blackfriars Road SE1.The existing property is a 38,700 sq ft building and we had previously engaged with Ennismore,the owners of The Hox
328、ton,to draw up new plans.Following the success of our application and the resolution of a number of outstanding matters we sold the building to Ennismore for 33.0m after costs in December releasing value early and securing a substantial capital uplift.We are being retained as development manager for
329、 which we will receive a fee of 1.5m.Completion of the new 192-room Hoxton is expected in 2018.Since the year end we have received planning permission for two projects:Monmouth House EC1 and Balmoral Grove N7.The former would involve the redevelopment of two existing office buildings of 69,000 sq ft
330、 into a new property providing 125,000 sq ft of offices,workspaces and retail.It is located adjacent to White Collar Factory and therefore will benefit from the latter s progress in transforming the south western corner of Silicon Roundabout.Our earliest possession date for this site is 2017.Balmora
331、l Grove is 67,000 sq ft of industrial and office space in Islington.Consent has been obtained to redevelop this site with 280,000 sq ft of residential and commercial space,of which 44%of the residential will be affordable.We have agreed terms to sell this property to a residential developer subject
332、to the resolution of a few outstanding matters.“Everything we hoped it would be,and a little bit more.Derwent has been incredibly flexible and understanding of our vision.”BRANDOPUS(1-2 STEPHEN STREET W1)80 Charlotte Street W1The Copyright Building W1Brunel Building W2Derwent London plc Report&Accou
333、nts 201553PROJECTSCONTINUEDProject summary 2016-2017 on sitePropertyCurrent netincomem paPre-schemearea000 sq ftProposedarea000 sq ft2016capexm2017capexm2018+capexmTotal capex to completemDelivery dateCurrentoffice c.ERV psfOn-site projectsWhite Collar Factory EC112429360262Q4 201660The Copyright Building W1(0.2)8610512820149H2 20178080 Charlotte Street W1234380229986207H1 201975Brunel Building W2
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