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1. Company Snapshot

1.a. Company Description

Derwent London plc owns 83 buildings in a commercial real estate portfolio predominantly in central London valued at £5.4 billion (including joint ventures) as at 30 June 2020, making it the largest London-focused real estate investment trust (REIT).Our experienced team has a long track record of creating value throughout the property cycle by regenerating our buildings via development or refurbishment, effective asset management and capital recycling.We typically acquire central London properties off-market with low capital values and modest rents in improving locations, most of which are either in the West End or the Tech Belt.


We capitalise on the unique qualities of each of our properties - taking a fresh approach to the regeneration of every building with a focus on anticipating tenant requirements and an emphasis on design.Reflecting and supporting our long-term success, the business has a strong balance sheet with modest leverage, a robust income stream and flexible financing.As part of our commitment to lead the industry in mitigating climate change, in October 2019, Derwent London became the first UK REIT to sign a Green Revolving Credit Facility.


At the same time, we also launched our Green Finance Framework and signed the Better Buildings Partnership's climate change commitment.The Group is a member of the 'RE100' which recognises Derwent London as an influential company, committed to 100% renewable power by purchasing renewable energy, a key step in becoming a net zero carbon business.Derwent London is one of only a few property companies worldwide to have science-based carbon targets validated by the Science Based Targets initiative (SBTi).


Landmark schemes in our 5.6 million sq ft portfolio include 80 Charlotte Street W1, Brunel Building W2, White Collar Factory EC1, Angel Building EC1, 1-2 Stephen Street W1, Horseferry House SW1 and Tea Building E1.In 2019, the Group won several awards including EG Offices Company of the Year, the CoStar West End Deal of the Year for Brunel Building, Westminster Business Council's Best Achievement in Sustainability award and topped the real estate sector and was placed ninth overall in the Management Today 2019 awards for 'Britain's Most Admired Companies'.In 2013 the Company launched a voluntary Community Fund and has to date supported over 100 community projects in the West End and the Tech Belt.


The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK.The address of its registered office is 25 Savile Row, London,

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1.b. Last Insights on DLN

Derwent London Plc's recent performance was negatively impacted by a quiet investment market, which likely weighed on its ability to secure new deals. Despite reporting robust rental growth and a raised dividend in its FY 2024 earnings call, the company faces potential financial risks. The lack of investment activity may continue to pressure the company's growth prospects, offsetting the positive effects of its strong lettings and dividend increase.

1.c. Company Highlights

2. Derwent London's 2025 Full-Year Results: A Strong Performance

Derwent London's 2025 full-year results show a solid financial performance, with an actual EPS of 0.593, beating analyst estimates of 0.4719. The company's total accounting return was 5%, and net tangible assets stood at 3,225p per share. The company's leasing performance was resilient in 2025, with £11.3 million of new leases signed, around 10% ahead of ERV. Earnings are expected to be 42p-44p per share in the first half and 52p in the second half, 10% ahead of H2 2025.

Publication Date: Mar -01

📋 Highlights
  • Strong Portfolio Positioning: 75% in London's West End and 81% within 10-minute walk of Elizabeth line stations, enhancing tenant demand and asset value.
  • Capital Recycling Momentum: £216 million in 2025 disposals and £145 million in 2026, targeting £1 billion over 3 years to reinvest in higher-return assets.
  • Rental Growth & Leasing Success: £11.3 million in new leases at 10% above ERV in 2025, with 2026 guidance of 4%-7% ERV increase and £1.5 million in new leases already secured.
  • Development & Returns: Projects like 25 Baker Street delivered 16.5% above appraisal ERV, generating £21.7 million rent and 11.3% ungeared IRR.
  • Financial & Dividend Discipline: Net debt-to-EBITDA target below 9.5x, dividend increased by 1.2%, and £250 million earmarked for share buybacks to close the NAV gap.

Strategic Portfolio Positioning

The company's portfolio is strategically positioned, with 75% of its assets in the West End and 81% within a 10-minute walk of Elizabeth line stations. This positioning is expected to drive rental growth, with a 4% annual rental growth assumption. The company's development pipeline remains a core part of its business model, with a focused and disciplined approach. The company has completed developments, such as 25 Baker Street, which was 100% pre-let at 16.5% above appraisal ERV.

Disposal and Capital Redeployment Strategy

The company aims to dispose of up to £1 billion worth of assets over the next three years, primarily focusing on mature assets with lower prospective returns. Capital redeployment will be disciplined and returns-driven, with a clear focus on execution and total return on capital. The company's ERV guidance for its portfolio is increased to +4% to +7% for 2026. The company's net debt-to-EBITDA target is around 9.5x, and it has a solid balance sheet, with a weighted average interest rate expected to remain stable through to 2031.

Valuation and Growth Prospects

With a P/E Ratio of 12.64 and a P/B Ratio of 0.56, the company's valuation appears reasonable. The company's ROE is 4.48%, and ROIC is 2.98%. The company's 2030 targets include a 25%-30% earnings uplift, driven by investment in projects like 50 Baker Street and Holden. Analysts estimate next year's revenue growth at 2.1%. The company's dividend yield is 3.67%, providing a relatively stable return for investors.

Outlook and Conclusion

The company's CEO, P. Williams, announced his retirement after 38 years, and the company has a clear plan for the accretive redeployment of disposal proceeds, including potential share buybacks. The company's ERV increase for 2026 is expected to be between 4% to 7%, and it has a confident financial outlook. The company aims to utilize its strong balance sheet to invest in accretive projects, distribute capital through dividends and share buybacks, and maintain a robust financial position.

3. NewsRoom

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Derwent London PLC (DWVYF) Full Year 2025 Earnings Call Highlights: Record Rental Income and ...

Feb -26

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Derwent London H2 Earnings Call Highlights

Feb -26

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Taylor Wimpey (LSE:TW.): A Fresh Look at Valuation After a Year of Share Price Pressure

Sep -09

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Assessing Diageo (LSE:DGE) Shares: Is the Current Valuation a Missed Opportunity?

Sep -09

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Does Lloyds Offer More Value After Latest UK Interest Rate Decision?

Sep -09

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HSBC sees gradual unwinding of OPEC+ voluntary cuts over next year

Sep -09

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HSBC HOLDINGS PLC ANNOUNCES RESULTS OF ITS TENDER OFFERS FOR FOUR SERIES OF NOTES

Sep -09

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Form 8.3 - UNITE GROUP PLC

Sep -09

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.46%)

6. Segments

Office Buildings

Expected Growth: 4.5%

Derwent London Plc's 4.5% growth in Office Buildings is driven by increasing demand for high-quality, amenity-rich spaces in prime London locations, coupled with the company's proactive asset management and refurbishment strategies. Additionally, the growth is supported by the ongoing trend of businesses seeking flexible, collaborative workspaces, and the company's strong track record of delivering high-specification, sustainable developments.

Other

Expected Growth: 3.5%

Derwent London Plc's 3.5% growth is driven by increasing demand for office spaces in London, particularly in the tech and creative sectors. Strong rental growth, high occupancy rates, and a solid development pipeline also contribute to this growth. Additionally, the company's focus on refurbishing and redeveloping existing properties enhances its portfolio and drives value creation.

Share of Joint Venture

Expected Growth: 4.0%

Derwent London Plc's 4.0% share of joint venture growth is driven by increasing demand for London office space, strategic asset management, and proactive leasing efforts. Additionally, the company's focus on refurbishment and redevelopment of existing properties, as well as its strong balance sheet, have contributed to this growth.

7. Detailed Products

Office Space

Derwent London Plc offers high-quality office spaces for rent, providing businesses with flexible and modern work environments.

Retail Space

Derwent London Plc provides retail spaces for rent, offering prime locations and flexible lease terms for retailers.

Industrial Space

Derwent London Plc offers industrial spaces for rent, catering to businesses requiring warehouse, manufacturing, or logistics facilities.

Mixed-Use Developments

Derwent London Plc develops and manages mixed-use projects, combining office, retail, and residential spaces in a single development.

Residential Properties

Derwent London Plc offers a range of residential properties for rent, from apartments to houses, in prime London locations.

8. Derwent London Plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Derwent London Plc operates in a niche market, providing high-quality office spaces in London. While there are substitutes available, they are not easily accessible, and the company's strong brand reputation and high-quality services reduce the threat of substitutes.

Bargaining Power Of Customers

Derwent London Plc's customers are primarily large corporations and institutions, which have limited bargaining power due to the company's strong market position and limited alternatives.

Bargaining Power Of Suppliers

Derwent London Plc relies on a network of suppliers for construction and maintenance services. While suppliers have some bargaining power, the company's scale and reputation mitigate this threat.

Threat Of New Entrants

Entering the London office space market is challenging due to high barriers to entry, including high capital requirements and regulatory hurdles. Derwent London Plc's established position and strong brand reputation make it difficult for new entrants to compete.

Intensity Of Rivalry

The London office space market is highly competitive, with several established players competing for market share. Derwent London Plc faces intense rivalry from other major players, which can lead to downward pressure on prices and margins.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 27.58%
Debt Cost 3.95%
Equity Weight 72.42%
Equity Cost 8.67%
WACC 7.37%
Leverage 38.09%

11. Quality Control: Derwent London Plc passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
NEPI Rockcastle

A-Score: 6.3/10

Value: 5.3

Growth: 6.4

Quality: 7.1

Yield: 10.0

Momentum: 4.0

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
Highwoods Properties

A-Score: 6.2/10

Value: 6.0

Growth: 3.1

Quality: 5.5

Yield: 10.0

Momentum: 4.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Colonial

A-Score: 6.1/10

Value: 5.8

Growth: 4.1

Quality: 6.7

Yield: 7.5

Momentum: 4.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
SFL

A-Score: 5.8/10

Value: 3.3

Growth: 3.6

Quality: 6.3

Yield: 6.9

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Gecina

A-Score: 5.8/10

Value: 5.7

Growth: 3.3

Quality: 4.6

Yield: 8.8

Momentum: 2.5

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Derwent London

A-Score: 5.1/10

Value: 4.9

Growth: 2.3

Quality: 6.6

Yield: 6.9

Momentum: 2.0

Volatility: 7.7

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

16.91$

Current Price

16.91$

Potential

-0.00%

Expected Cash-Flows