14th Aug 2014 11:30
LONDON (Alliance News) - Property investment company Derwent London PLC Thursday reported an increase in profit for the first half, following strong valuations gains.
The London-focused company, which bought a Holborn office block for GBP59.3 million in January, posted pretax profit of GBP371.4 million for the six months to June 30, up from GBP219.8 million a year earlier, boosted by revaluation gains of GBP330.8 million compared with GBP175.3 million a year earlier.
Gross property and other income rose to GBP83.2 million from GBP77.8 million a year earlier.
The real estate investment trust said its EPRA net asset value per share increased 14% to 2,572 pence from 2,264 pence at December 31. EPRA is the European Public Real Estate Association, the industry body for European REITs.
Derwent said, although recurring earnings have grown, the majority of the increase in net asset value was due to another strong portfolio valuation surplus.
?The largest component of the net asset value increase was the valuation surplus,? Chief Executive John Burns said in a telephone interview. ?About 55% of the valuation is down to yield shift, we had about 26 basis points of shift in the six months, which I think is the most we've had in recent years. Estimated rental value growth is also very strong across the portfolio and that gave rise to about 31% of the upside.?
?The development profits are relatively small because a lot of our development pipeline is pre-let, and we are at an early stage with our next big scheme the White Collar Factory where we have just finished demolition,? Burns said.
The White Collar Factory near Old Street underground station is one of Derwent London?s most ambitious schemes to date. The scheme includes a new 16-storey, 237,000 square foot office tower. Work on site started in January 2014 and completion is expected in 2016.
Burns said the company is beginning to reap the rewards of investing in East London.
?Our Tech belt, which for us starts at Kings Cross, skirts the City and goes to Whitechapel has performed better than our West End portfolio. Rents have really gone up there. Rental growth across the portfolio was 4.2% and in the West End 3.7% and the Tech Belt and the City borders about 5.5%. So the Tech Belt was a lot stronger than the West End,? Burns said.
?There was a catch up, insofar as rents were quite low and the area has been improved drastically over the years. You have technology companies and you have places like Shoreditch, where people want to work and live. You are also getting people coming from out of town who want to work in these areas. So rents have really done well there, and they can still go further.?
At an operating level, the company disposed of its Prague joint venture, a legacy from its merger with London Merchant Securities PLC in 2007, for GBP6.8 million.
In terms of acquisitions, Derwent said it was a quiet period although it bought an office block near Old Street underground station for GBP12.4 million.
Overall, the company said its portfolio was valued at GBP3.74 billion.
FTSE 250-listed Derwent said it is operating in "favourable" market conditions, although it recognises that there are significant political and global risks, such as next year's general election, and a number of international trouble spots.
However, it said: "Our business model retains considerable flexibility which enables us to alter course if the economy slows or occupational demand weakens."
On the back of its performance the company increases its interim dividend to 11.65 pence from 10.75 pence a year earlier.
The stock was quoted up 3.2% at 2,763.00 pence Thursday afternoon.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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