Derwent London Share News (DLN)

(Sharecast News) - Derwent London said in a trading update on Thursday that £5.5m of new lettings had been achieved to-date in the second half, at an average 2.4% above last December's estimated rental value (ERV).

In a separate announcement, the FTSE 250 company said it had exchanged contracts to acquire the 100-year leasehold interest in Conoco House and Quadrant House at 230 Blackfriars Road, Southwark, for £55m before costs.

Year-to-date lettings totalled £9.4m at an average 0.7% above ERV, with a further £3.3m under offer, while the firm's EPRA vacancy rate remained "low" at 1.9%, down from 3.3% at the end of the first half.

Derwent said 97% of total September quarter day rents had been collected, up from the 94% it reported on 12 October.

On the investment front, Derwent noted the October completion of the acquisition of two properties and the formation of a 50-50 joint venture with future redevelopment potential from Lazari Investments for £279m after costs.

The company also noted the previously-announced disposal of Angel Square EC1, adding that the acquisition of the outstanding head lease at Bush House, South West Wing WC2 completed in August.

Looking at the acquisitions on Blackfriars Road, Derwent said the ground rent was a fixed £5,000 per annum.

It described Conoco House as a 1970s office building comprising 60,300 square feet, which was multi-let at a passing rent of £2.1m, with all leases expiring in 2025 and tenant breaks in 2023.

The net initial yield was 3.5%, which would rise to about 4.2% on letting the 9,400 square feet of vacant space.

Derwent said the acquisition cost, excluding Quadrant House, equated to £880 per square foot on the existing space.

The adjoining Quadrant House is a 36-unit residential building let to 2074 at a nominal rent, and together the properties occupied a 0.8 acre site, which included 30 car parking spaces, with "medium-term" potential for a "substantial" office-led development.

On developments, Derwent said construction of Soho Place W1 and the Featherstone Building EC1, together totalling 410,000 square feet, remained on time and on budget for completion in the first half of 2022, with 61% pre-let or pre-sold.

Works had started at 19-35 Baker Street W1, the firm's latest development, totalling 298,000 square feet.

Financially, the board said the company was in a "strong" financial position, with a loan-to-value ratio of 16.6%, rising to 21% on a proforma basis allowing for fourth quarter acquisitions completed to date.

Undrawn facilities and cash totalled £555.2m as at 30 September.

"Improved market sentiment and higher levels of business activity have led to increased leasing demand and given us the confidence to commence the group's next net zero carbon development at 19-35 Baker Street," said chief executive officer Paul Williams.

"Our strong relationships and financial position have enabled us to secure off-market investment opportunities, such as 230 Blackfriars Road and the acquisitions from Lazari Investments, enhancing our medium-term development pipeline."

At 0857 GMT, shares in Derwent London were up 1.61% at 3,416p.