StockMarketWire.com - Derwent London upgraded its guidance after swinging to a profit in the first half of the year amid rising property prices and drop in vacancy rates in London.

'[W]e are raising our average portfolio ERV (estimated rental value) guidance to +2.0% to -2.0% for the year ending December 2021. This compares to our March 2021 estimate of 0% to -5%,' the company said.

For the half year ended 30 June, pre-tax profit was £121.1 million, compared to a loss of £14.0m in H1 2020 as total return grew 2.7%, from a. decline of 0.1% a year earlier.

Net rental income was £90.1 million, up from £84.4 million in H1 2020.

The interim dividend was raised 4.5% to 23.0p from 22.0p in 2020.

Derwent London also said it had acquired two properties in the West End, London and signed a joint venture to acquire a further three properties with Lazari Investments.

The company exchanged contracts to acquire two properties in London's Knowledge Quarter, totalling 182,100 sq ft for £214.6m inclusive of costs.

The combined rent was £5.3 million per year, reflecting a net initial yield of 2.5%.

The company also signed a detailed memorandum of understanding with Lazari Investments to establish a new 50:50 joint venture which is expected to acquire three properties already owned by them in Baker Street W1 totalling 122,200 sq ft.

Derwent London's initial consideration for the joint venture will be £64.4 million and its share of passing rent will initially be £2.6 million.

'The joint venture adds an exciting development opportunity opposite our 19-35 Baker Street project due to start later in 2021,' the company said.

'The current market value of our 50% interest is estimated at c.£50m. We anticipate the valuation will rise significantly upon a successful planning and headlease regearing outcome,' it added.

'Based on the initial rental income, we expect the combined transactions to have an [about] £4m p.a. positive impact on the group's EPRA earnings, assuming a cost of debt of c.1.5%.'



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