Derwent London H2 2025 Earnings Report

Derwent London EPS Results

• Actual EPS: GBX 98.40
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Derwent London Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Derwent London Announcement Details

• Quarter: H2 2025
• Date: 2/26/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, February 26, 2026
• Conference Call Time: 5:00AM ET

Derwent London (LON:DLN) owns 66 buildings in a commercial real estate portfolio predominantly in central London valued at £4.9 billion as at 31 December 2023, making it the largest London office-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, Derwent London has committed to becoming a net zero carbon business by 2030, publishing its pathway to achieving this goal in July 2020. In 2019 the Group became the first UK REIT to sign a Revolving Credit Facility with a 'green' tranche. 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 the property companies worldwide to have science-based carbon targets validated by the Science Based Targets initiative (SBTi). Landmark buildings in our 5.4 million sq ft portfolio include 1 Soho Place W1, 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 January 2022 we were proud to announce that we had achieved the National Equality Standard - the UK's highest benchmark for equality, diversity and inclusion. In May 2023 we were recognised on the Sunday Times Best Places to Work List 2023 within the medium-sized organisation category and in the following month we won two OAS awards - West End New Build for Soho Place W1 and Developer of the Year whilst we were also highly commended for The Featherstone Building in the City New Build category. In October 2023, White Collar Factory EC1 won the BCO's Test of Time 2023 award, Soho Place W1 won the British Construction Industry Awards' Best Commercial Property Project of the Year and Derwent London was awarded the EG Employer Award. In March 2023 we placed in the top three of the Property Sector in Management Today's Britain's Most Admired Companies awards 2022. In October 2022, 80 Charlotte Street won the BCO's Best National Commercial Workplace award 2022. In 2013 the Company launched a voluntary Community Fund which has to date supported over 160 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, W1S 2ER.

Derwent London H2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Derwent will accelerate capital recycling with a target to dispose up to £1 billion over three years and redeploy proceeds into selective developments, acquisitions or potential share buybacks while keeping net debt/EBITDA below 9.5x.
• Positive Sentiment: Management expects 2026 EPRA earnings to be slightly down overall (H1 ~£0.42–£0.44, H2 ~£0.52) but forecasts earnings growth in 2027 (+5–10% vs 2025) and a material rise by 2030 (modelled at +25–30%) as rental reversion and project completions feed through.
• Positive Sentiment: Execution on developments and leasing is strong: 25 Baker Street and Network W1 are delivering rents materially above appraisal, asset management generated a record ~£59m of income in 2025, and the leasing pipeline includes £14.4m under offer supporting near-term cash flow.
• Neutral Sentiment: Refinancing is complete and all debt will be unsecured after Q1, with liquidity of ~£627m and net debt/EBITDA reduced to ~9x, but average interest rates rose (2025 average ~3.8%) which partially offsets the balance-sheet strength.
• Positive Sentiment: Management cites an improving London office market—tight supply, strong occupier demand and rising investment liquidity—and has raised 2026 ERV guidance to +4%–+7%, which underpins the company’s growth case.

Presentation

[Paul Williams, CEO at Derwent London]

Well, good morning, everyone, and welcome to Derwent London's 2025 full year's results presentation. Before moving on to the results, you will see another news this morning and a strong sale of a building in Whitfield Street. More to follow. The order of today's presentation is slightly different. As well as me, you'll be hearing from Emily and Damien. While Nigel is not on the stage, he is, of course, here for some Q&A. Turning to slide 2. The group's business model and portfolio provide strong foundations on which to build on an exciting and successful future. Our portfolio is strategically positioned with 75% in the West End and 81% within a 10-minute walk of the Liverpool Street station. These are London's best-performing areas. It is high quality, with significant embedded reversity potential, a diverse tenant base, and robust vault.

[Paul Williams, CEO at Derwent London]

Flexibility has always been fundamental to our approach. We look to continually adapt our portfolio to evolving market conditions to ensure that we are well-positioned for future market evolution. We have an exciting West End-focused development pipeline in some of the strongest submarkets, presenting a real opportunity to drive rents and therefore returns. Our schemes are designed to meet the full spectrum of occupier demand from the London campus, headquarters space, which serves our core customer base, as well as furnished and flex product, all delivered to our exacting standards and complemented with high-quality amenity. We also have good visibility on income growth. Our reversity potential, GBP 70.9 million, will come through into earnings as we continue to lease up and deliver the next phase of schemes. We're not standing still.

[Paul Williams, CEO at Derwent London]

There is substantial opportunity ahead to create further value. Turning over. 2025 was a solid year of execution. We completed asset management transactions with rental income of nearly GBP 60 million, a record year. In the context of a low vacancy rate, we agreed over GBP 11 million for new lettings at rents 10% above ERV. In terms of disposals, we sold GBP 216 million in 2025, and 2026, we're off to a good start. Since the start of the year, we've exchanged contracts of GBP 140 million, including Whitfield Street, announced today, with a further GBP 140 million under offer, broadly in line with December book values. Proceeds will be redeployed into higher return opportunities, including selective developments, acquisitions, and other accretive alternatives. Emily will provide more detail on this shortly.

[Paul Williams, CEO at Derwent London]

2026 has started with strong momentum, with GBP 1.5 million of new leases completed. We're under offer with a further GBP 14.4 million, including all of the offices and Network W1. In addition, there is GBP 4.4 million in negotiations. Slide 4. This momentum provides a springboard for growth. Our market outlook informs our immediate action plan, which is focused on accelerating returns through active portfolio management and disciplined capital allocation. We are now past the inflection point, with the outlook characterized by three powerful drivers. Firstly, London, which is our market. We have unrivaled expertise in demonstrating its enduring dominance as a European and global on the European and global stage. Once again, it is proving its resilience and agility, it adapting to change, reinforcing its position as Europe's undisputed business capital.

[Paul Williams, CEO at Derwent London]

Secondly, the ongoing strength of the occupational market, supported by high demand and very limited supply. You will hear more on this from Emily in due course, who will provide further context on this. Improved liquidity in the investment market, driven by a return of capital flows, both into London and into offices. Turnover is up, with larger lot sizes now transacting. The combination of our proactive execution and positive market dynamic gives us the confidence to increase our 2026 ERV guidance for our portfolio to +4% to +7%. I will now hand over to Emily and Damien, who will take you through our immediate strategy and provide more detail on the financial outlook. Thank you.

[Emily Prideaux, Executive Director at Derwent London]

Thank you, Paul. Looking now at our immediate priorities, our near-term strategy is clear: firmly focused on returns. Position the portfolio to capture the strongest rental growth and capital appreciation opportunities through active portfolio management and disciplined capital allocation, with a clear focus on execution and total return on capital. Recycling will accelerate. We plan to dispose of up to GBP 1 billion over the next three years, and at a faster pace than our historic run rate of GBP 200 million per annum. These disposals will be focused primarily on mature assets, where the business plans have been delivered or where prospective returns are lower than alternative opportunities available to us. Capital redeployment will be disciplined and returns driven. We will systematically assess the relative merits of all options open to us at any one point in time.

[Emily Prideaux, Executive Director at Derwent London]

The foundations of our capital allocation framework will be built on maintaining a strong balance sheet and a net debt to EBITDA below 9.5 times. Within that framework, we will consider share buybacks alongside selective development, where we have confidence in strong returns, and strategic acquisitions that support a pipeline for the next decade and contribute to long-term value creation. Overall, our focus is to proactively manage the portfolio to ensure an appropriate risk-return profile that delivers both earnings growth and attractive total accounting returns. Damian will cover this in more detail shortly. What does this look like in practice? HQ offices will remain our core business, where we continue to have strong conviction.

[Emily Prideaux, Executive Director at Derwent London]

We will also continue to deliver flex and do so at proportionate levels aligned to market demand, and in a way that ensures sensible cost ratios and a simplified operational model that is portfolio rather than asset-by-asset led. As such, our overall flex offering will likely grow to circa 10%-15% of the portfolio from the current circa 8%. Both our HQ and flex workspace are supported and enhanced by our DL/Member platform. Whether we're buying, selling, or investing, we will do so within a disciplined risk-return framework that balances income resilience and earnings growth with value creation. This may well involve the acquisition of Core Plus assets in the future, as well as the development projects we are well known for. We will selectively develop those office schemes where we have confidence in the medium to long-term returns.

[Emily Prideaux, Executive Director at Derwent London]

These include Holden House and Middlesex, where we are already on site, as well as Greencoat and Gordon House and 50 Baker Street, both due to start later this year. We will seek to drive value via strategic unlocking and alternative uses on certain sites, working alongside relevant partners to maximize returns. These include Blue Star House, Old Street Quarter, and 230 Blackfriars Road. We'll touch more on these later. We have an established brand and platform. We believe there's opportunity to leverage this more effectively. This could take the form of development management fees, promotes, partnership structures, or other arrangements that are returns accretive. I'll now hand over to Damian, who will provide more detail on the balance sheet, as well as the outlook for earnings and total accounting return.

[Damian Wisniewski, CFO at Derwent London]

Thank you, Em, good morning, everyone. Taking a look at our returns outlook and earnings first. The two large recent projects at Network and 25 Baker Street are now essentially complete. Baker Street provides annualized rent on a net effective basis of about GBP 18 million a year or GBP 22 million headline. Based off ERV at the year-end, Network's annualized rent will be about GBP 11 million or GBP 13.7 million headline, and we expect rental income here to commence around the middle of the year. Our debt refinancing is complete for now. Our average interest rate increased in June 2025, but is now expected to be largely stable through to 2031. Admin expenses were reduced in 2025, and we're targeting further cost savings to come.

[Damian Wisniewski, CFO at Derwent London]

With rental values growing and cost inflation easing, we now expect to see another period of earnings growth over the medium term. This feeds into our total accounting return outlook, too, also expected to benefit from improving development surpluses on our carefully chosen schemes and accelerated capital recycling. We will not lose our well-established financial discipline. That is based on low leverage, a focus on balancing value creation against interest cover and earnings, and our 18th consecutive year of increased ordinary dividends. Looking at the earnings outlook in more detail. We currently expect 2026 rental income from 25 Baker Street and Network to be about GBP 18 million higher than it was in 2025. This will be supported by rent reviews and other new lettings across the portfolio.

[Damian Wisniewski, CFO at Derwent London]

We've allowed for disposals of about GBP 400 million this year. The earnings impact is small, as the average IFRS rental yield is close to our marginal interest rate. West End projects, including Holden House and the refurbishment of Middlesex House, will, however, reduce earnings in the short term. There are also additional voids at Page Street, which is being marketed for sale, and 50 Baker Street. We're targeting further cuts in admin costs this year. After disposals and CapEx, we forecast our average debt to fall. The refinancing of the convertible bonds in June last year increased our weighted average interest rate by about 50 basis points. We're also expecting about GBP 6 million less interest to be capitalized in 2026 than in 2025.

[Damian Wisniewski, CFO at Derwent London]

Putting this all together, we therefore expect 2026 earnings to be about GBP 0.42-GBP 0.44 a share in the first half, followed by GBP 0.52 in the second half. That is 10% ahead of H2 2025. Overall, about 3%-5% lower than in 2025, but rising significantly in H2. 2027 should see EPRA earnings step up. We estimate that about 5%-10% growth from the 2025 level, or about 15% above 2026 levels. This is as growing rents are captured, and we capitalize more interest. By 2030, we see earnings rising very substantially. Our models indicate at least 25%-30% of uplift as rental reversion is captured and income flows from completed projects at Holden House, 50 Baker Street, and elsewhere. Now considering the total accounting return.

[Damian Wisniewski, CFO at Derwent London]

The three main building blocks are shown on this chart: earnings, capital growth, and development returns. These are now supplemented by a fourth, a renewed focus on accelerated disposals to provide further options to boost our returns. Earnings first, assuming investment yields in our sector remain stable, 3% or a little more, based on NTA, is a realistic level. As the NTA grows, so will earnings. Next, capital growth, where we believe 3%-5% of NAV is a reasonable outlook, allowing for the rental growth we're now seeing, backed by stable investment yields and allowing for a typical 1% or so adjustment for CapEx and voids. The third aspect is the increasingly attractive development returns, now growing again after being squeezed over recent years.

[Damian Wisniewski, CFO at Derwent London]

IRRs up to expected letting are now regularly hitting 10% or more for our current and future projects, but rental growth could push these further. Our analysis shows a positive development contribution every year since our first major scheme in 2010. The final element is to free up capital from the higher disposals mentioned earlier into an improving investment market. This could be for future value creation schemes, as well as potential share buybacks, should that be more attractive at the time. We've set a GBP 1 billion sales target over the next three years, which could provide up to about GBP 250 million of excess capital. That's after allowing for planned schemes and the acquisition of Old Street Quarter in late 2027. Now moving back to our 2025 results and the financial highlights. These show a solid performance for 2025.

[Damian Wisniewski, CFO at Derwent London]

The Net Tangible Assets up to GBP 32.25 per share, and a 5% total accounting return. Gross and net rental income was slightly higher than 2024. EPRA earnings were affected by lower surrender premiums and higher finance costs after the mid-year refinancing. Note also that our trading profits are excluded from the definition of EPRA earnings. Our debt metrics were all very sound, helped by the disposals, totaling GBP 216 million and a busy year of refinancing. Finally, the dividend, which has been increased again by 1.2% and remains well covered by EPRA earnings. The 2.4% uplift in EPRA NTA over the year. After dividends, the group retained GBP 0.25 per share from earnings, including GBP 0.08 from disposal profits and other items.

[Damian Wisniewski, CFO at Derwent London]

The trading profits all came from our 25 Baker Street scheme, the majority from the sale of 24 out of the 41 residential units at George Street. The revaluation surplus in 2025 was equivalent to 51 pence per share. Of this, 20 pence, or about 40%, came from development surpluses. These figures are after slightly higher than normal deductions for additional CapEx and voids in 2025, together about 40 pence per share. The next slide, some additional valuation data. As in 2024, our ERVs grew at about 4%, with the West End outperforming. Valuation yields remained stable, helped by the rental growth outlook and moderating central bank rates and inflation. Our topped-up initial yield on an EPRA basis at the year-end was 5.1%, and the true equivalent yield was 5.71%.

[Damian Wisniewski, CFO at Derwent London]

The portfolio remains good value, with average topped-up rents around GBP 65 per sq ft. EPRA earnings. These are set out here with the three main categories: property, admin, and finance. Gross rents were up by GBP 3.5 million, after property costs and impairment, net rental income was slightly higher than 2024, too. Surrender premiums were GBP 2.5 million lower this year, overall, net property and other income was GBP 1.7 million down on 2024. As mentioned earlier, we focused on cost efficiencies again in 2025, admin expenses were down by GBP 2.4 million on an EPRA basis, despite inflationary cost pressures. Net finance costs were up significantly in the second half of the year.

[Damian Wisniewski, CFO at Derwent London]

This is mainly due to the GBP 175 million of convertible bonds, which had an IFRS rate of 2.3%, being refinanced in June with new seven-year bonds at five and a quarter percent. This took our weighted average interest rate up by about 50 basis points over the year. Average debt was also GBP 110 million higher than in 2024, though this was partly offset by GBP 2.9 million more capitalized interest. The higher finance costs took EPRA profits down to GBP 0.984 per share. If we add back the trading profits, which are excluded from EPRA EPS, adjusted EPS was GBP 1.021. The next slide shows movements in gross rents.

[Damian Wisniewski, CFO at Derwent London]

After a delayed completion date, 25 Baker Street contributed GBP 5.4 million in 2025, and the retail units at Soho Place, another GBP 0.9 million. GBP 10.2 million of income was lost due to space taken back or becoming vacant. Like for like, gross rents were up 2.4%, impacted by our EPRA vacancy rate increasing from 3.1%-4.1% through the year. We incurred GBP 182 million of CapEx in 2025, almost half of which was at Network and 25 Baker Street. The ungeared IRR up to PC at Baker Street was 11.3%, with Network expected to deliver between 8 and 9. We'll update these figures later in the year.

[Damian Wisniewski, CFO at Derwent London]

These both represent good returns after significant yield expansions through the life of each project, helped by disciplined cost control and rents almost 20% above original appraisal levels. CapEx in 2026 is expected to be 22% lower, at about GBP 142 million. 50 Baker Street is not yet committed, but we do expect it to move ahead in the summer and are particularly optimistic about return prospects here. Emily will take you through these later. The ERV bridge, which we're now showing on a net effective rent basis to help make earnings forecasting easier. The previous headline rent basis is also shown at the bottom of the chart. Total rental income reversion is now GBP 70.9 million, after incentives allowed at 20% and with GBP 216 million of future CapEx.

[Damian Wisniewski, CFO at Derwent London]

Note that the pure reversion on the right-hand side from reviews and expiries remains at GBP 15.9 million, This figure is after reclassifying GBP 3.8 million of reversion into the major projects category. Refinancing, and as noted earlier, we were busy in June issuing new unsecured 7-year bonds and redeeming the convertibles. As noted, this caused our weighted average interest rate to rise, giving an average through the year in 2025 of 3.8%, up from 3.3% for the whole of 2024. We expect our spot rates to fall in March 2026, when we repay the 6.5% LMS bonds. This should keep the average for 2026 at around 3.8%, We believe lower in the second half than in the first.

[Damian Wisniewski, CFO at Derwent London]

Redeeming those LMS bonds will also mean that by the end of Q1, all of our debt will be unsecured. At the moment, we're not expecting to issue any more fixed-rate debt in 2026, any funding needed most likely coming from bank facilities. It's good to know that other debt capital markets remain both liquid and competitive, with margins looking increasingly attractive. Our debt position is summarized on the last slide, with all debt ratios and covenants comfortable. Cash and undrawn facilities rising over the year to GBP 627 million. Fitch retained our A- senior unsecured rating last year, since when our gearing has fallen. Our borrowings had a weighted average unexpired term of 4.2 years at year-end, and net debt to EBITDA was reduced to 9 times. We anticipate it falling further through 2026. Thank you. Now back to Emily.

[Emily Prideaux, Executive Director at Derwent London]

Before moving to our operational activity, let me set the scene with an overview of the London office market, where we have good reason to be optimistic as we look ahead. London itself, where we have the highest concentration of top universities worldwide, providing an unmatched talent base. It is Europe's unicorn capital and number one VC investment, as well as Europe's leading financial center. It also ranks third globally for AI venture capital investment, behind only the Bay Area and New York in the U.S., and is Europe's biggest hub for generative AI. We recognize the ongoing debate on this topic, it will of course, change how people work. Overall, we do not believe AI will remove the need for high-quality offices, we believe London is one of the global cities best positioned to benefit, given its depth of talent, innovation, and global connectivity.

[Emily Prideaux, Executive Director at Derwent London]

As with any fast-moving driver of change, we will stay close to these developments and be ready to adapt as the opportunity evolves. London's strength is also reflected in sector-diverse office demand, underpinned by a broad knowledge-based economy and finance, technology, and creative industries, all in growth. This global city attracts both blue-chip corporates and high-growth occupiers, and its diversity makes it significantly more resilient through the cycles. London is where global businesses want to be. The office occupier market fundamentals are strong. 2025 saw robust activity, 11.4 million sq ft of take up, with over 3.5 million sq ft under offer. Importantly, 80% of deals over 20,000 sq ft were expansionary, signaling genuine business growth. Vacancy remains low and prime vacancy sub 2%.

[Emily Prideaux, Executive Director at Derwent London]

Looking ahead, we expect a significant supply crunch, rental growth, and lease events working in landlord's favor, with occupier renewals extending income and rent reviews now delivering good reversion. The occupational market is inflecting positively, we're well-positioned to benefit. What are occupiers looking for? Real estate quality matters more than ever, buildings with arrival impact, rich amenity, flexibility, and quality, be that retrofit or new build. Location and connectivity, very important. Proximity to Crossrail, transport more generally, talent, and amenity. Critically, all that London has to offer is what makes it a city which attracts domestic and European businesses and HQs. The scale and depth of industry and skill is unmatched in Europe. We understand these drivers, our portfolio is built around them, and our forward-look strategy is designed to capture the value they create. Finally, turning to the investment market, liquidity is now improving.

[Emily Prideaux, Executive Director at Derwent London]

Investment volumes in 2025 totaled GBP 7.1 billion, a 40% increase on the year previous. Yields have stabilized, the market has inflected, and investor confidence is improving, driven by a strong occupant client market and supply crunch, as we heard earlier. 2025 also saw the return of the large lot size transactions, with double the number seen the year before. This is a trend we're expecting to continue in 2026 as debt costs reduce, boosting overall levered returns. GBP 23.5 billion of equity is now targeting London, an 18% increase on 2024, Knight Frank reported in a recent survey that offices are the most targeted sector by investors in 2026. Geopolitical events elsewhere are enhancing London's appeal and its position as global safe haven.

[Emily Prideaux, Executive Director at Derwent London]

All this means that we are expecting a further increase in turnover in 2026 to over GBP 10 billion. This will contribute positively to our plans for disposals. Now to our own portfolio activity. We completed GBP 216 million of disposals in 2025. We exchanged contracts for disposals totaling GBP 145 million in 2026 so far. In addition, we have GBP 135 million under offer and are in discussions on GBP 100 million. These sales support our target of GBP 1 billion of capital recycling into an improving investment market, where proceeds can be more effectively redeployed elsewhere into higher return opportunities. In addition, we will continue to selectively hunt for value-creative opportunities to acquire, be that to support medium long-term value through development or to support income in the nearer term. Turning to leasing performance.

[Emily Prideaux, Executive Director at Derwent London]

2025 was a resilient year, with GBP 11.3 million of new leases signed, around 10% ahead of ERV. As the chart shows, leasing activity across the standing portfolio has been broadly consistent with long-term averages for a number of years. Excluding pre-lets, this highlights the strength of underlying demand for our space. We've started 2026 with strong momentum. GBP 14.4 million under offer, including all of the space at Network, as well as the GBP 1.5 million transacted and a further GBP 4.4 million in negotiations. These figures support a strong year ahead for leasing activity. Turning to slide 29 and asset management. 2025 was a record year for asset management, with transactions completed across GBP 59 million of income, almost 30% above our previous peak. More importantly, though, was the quality of what we achieved.

[Emily Prideaux, Executive Director at Derwent London]

Our focus was on capturing reversion, extending income, and aligning lease profiles with our longer-term asset strategies. Through early and proactive engagement with occupiers, we were able to structure transactions that balance flexibility with greater income visibility, while mitigating void risk and future CapEx. Rent reviews of GBP 37.4 million, secured at over 77% above previous rents, reflected the strong rental growth across sub-markets. Renewals and re-gears with long-standing occupiers, extended lease lengths and deepened relationships. Transactions such as Adobe at White Collar Factory and Burberry at Horseferry House demonstrate the strength of our occupier partnerships and reflect the positives for us of occupiers taking the stay-put option. Major rent reviews at Brunel and 80 Charlotte Street enabled us to capture good reversion.

[Emily Prideaux, Executive Director at Derwent London]

Overall, this was a year where active management translated directly into stronger income security and enhanced reversionary potential, this will be an important part of business activity as we look ahead in this market. Moving to developments. At 25 Baker Street, which completed in August 2025, offices were 100% pre-let at 16.5% above appraisal ERV, generating headline rent of GBP 21.7 million and an ungeared IRR of 11.3%. At Network W1, the offices are now fully under offer. Practical completion of the building is expected within the next week. Full details of financials on this will be confirmed once transacted in coming weeks. We've maintained good returns on these schemes in spite of significant outward yield shift.

[Emily Prideaux, Executive Director at Derwent London]

Looking ahead, we have a focused and disciplined development pipeline, which remains a core part of our business model and driver of future returns. We're making good progress on site at Holden House, and strip-out works have commenced at Greencoat and Gordon House. Both of these schemes are in well-connected locations, in sub-markets with strong demand and limited supply, with completions targeted in 2027 and 2028 respectively. We're also on site now with the comprehensive refurbishment of Middlesex House, where we're giving new life to this characterful 1930s art deco warehouse building in the heart of Fitzrovia. Together, these schemes, two of which are traditional refurbishments, represent a substantial value opportunity for the group, with double-digit attractive expected returns, and importantly, this growth potential is already within the portfolio, driven by projects under our control, providing clear visibility over future earnings and value creation.

[Emily Prideaux, Executive Director at Derwent London]

At 50 Baker Street, we're due to commence an exciting new build development later this year. This is a scheme positioned in a sub-market with very limited supply, great connectivity, and strong growth prospects, which deliver all those things on the occupier wish list: amazing arrival and amenity, large floor plates, flexibility, and quality design and architecture, of course. Our base appraisal shows strong returns, with rental growth expected to enhance them further, given the strength of the Marylebone occupier market, as well as the product to be delivered. Alongside our near-term development pipeline, we also have over 1 million sq ft, where we are actively exploring alternative, primarily living-led uses and strategic partnerships to maximize long-term value creation. At Blue Star House, working with an operating partner, planning consent is in place for an aparthotel development scheme.

[Emily Prideaux, Executive Director at Derwent London]

At Old Street Quarter, we are working with Related Argent in a development management capacity for the time being, to progress a mixed-use, living-led campus. Importantly, the structure of this allows flexibility over delivery, including joint ventures, forward funding, or indeed plot sales, allowing us to deploy capital selectively and efficiently. At 230 Blackfriars Road, early feasibility work indicates significant residential-led potential, with scope to materially increase floor area. Together, these assets provide meaningful optionality to partner, develop directly, or realize value through sales. In summary, operationally, 2025 has been a strong year, accelerating capital recycling as liquidity improves, resilient leasing activity, record asset management activity, successful delivery and pre-letting of major developments, and a disciplined pipeline with attractive expected returns. Over to Paul, who'll wrap up.

[Paul Williams, CEO at Derwent London]

Thank you very much indeed, Emily. Now to our look on page 35. As you heard, there is significant activity across the business. We are busy. GBP 140 million of disposals signed since the start of the year, with a similar amount under offer and a further GBP 100 million in negotiations. The stage is set for 2026 to be a strong year for leasing, and we're on site of three really exciting projects, which we are forecast will deliver an average IRR in excess of 10%. We have a clear plan for the accretive redeployment of disposal proceeds as we seek to balance near-term income with value creation in the medium term. This includes potential share buybacks. London feels different. The fundamentals are good. The office cycle has really turned a corner.

[Paul Williams, CEO at Derwent London]

Rents are growing strongly, investment liquidity has improved markedly, with London offices being the most in-demand sector. There has been a notable pickup in activity. We're seeing more inquiries from potential occupiers, an increasingly broad range of investors are knocking on our door. This is the foundation of our ERV increase for 2026, to +4% to +7%, and our confident financial outlook. Now, a personal reflection. As you know, I've made a decision to retire after 38 years at Derwent. I've been with the business man and boy, I'm proud of what we have achieved over that time. I'm excited for 2026 and beyond, knowing that the business is well-placed with a great team. Thank you. We're now going to take questions from the room and then from those who are joined remotely. Questions, please. Please, come.

[Thomas Musson, Director and Real Estate Equity Analyst at Berenberg]

Thanks. Good morning, it's Thomas Musson at Berenberg. Question first on the perceived AI risk to tenants. The market's beginning to price some of this in recent share price moves. Interestingly, a lot more in the U.S. Would you expect property valuers to react here, perhaps assuming greater tenant covenant risk or changing assumptions around lease renewal probabilities? Just would be interested if any of this has been part of conversations you've had with them.

[Emily Prideaux, Executive Director at Derwent London]

I think firstly, one of the benefits we obviously have is how close we are to our occupiers and indeed other occupiers in the market, so any area of change like this, we will always stay close to. I think in terms of the property sector, more specifically in the valuation point you made, there's two strands to the AI debate at the moment. One is the direct demand versus the indirect impact, if you like. To date, we are not seeing that reflected negatively by any means in the valuation piece. I think the covenant point is, as with any of the other big tech booms we have seen over the cycles, there will obviously be winners and losers in that, and from our perspective, we always take that covenant risk piece very, very seriously.

[Emily Prideaux, Executive Director at Derwent London]

On a more general piece, in terms of the AI story, I think we feel as I mentioned, that globally, I think London is somewhere that should really position themselves well for that. It's something we're going to stay very close to as things evolve.

[Thomas Musson, Director and Real Estate Equity Analyst at Berenberg]

Thanks. Second one, you mentioned potential share buybacks in the event of being in a surplus capital position. At what point would you consider yourselves to be in a surplus capital position? Do we wait until you've cleared this year's CapEx requirement, for example, or some of next year's too? Just interested how you think about that.

[Paul Williams, CEO at Derwent London]

Look, we have a plan to sell something over GBP 1 billion over the next three years. We've started off really well this year. We have got some investment going into the portfolio for really accretive developments, but as we build up those resources, I think we should have a look, good look and be open-minded. Damien, do you want to add a bit to that?

[Damian Wisniewski, CFO at Derwent London]

Yeah. I think, Tom, it's a good question. Well, I think let's get some disposals out of the way. We've made a good start to the year. Personally, I think we need to get sort of 200 plus under our belt before we can seriously look at, what we do.

[Paul Williams, CEO at Derwent London]

We do have Old Street Quarter coming up in probably late 2027. We need to look at that in our forward funding plans as well. I think the GBP 400 this year is a good start. We've mentioned there could be up to GBP 250 million of excess capital over the 3 years. That doesn't mean to say we have to wait for 3 years. I think we will look at this as we go, and we will see how things progress. I don't want to commit to a particular number today, but I hope you can see how we're thinking about this.

[Thomas Musson, Director and Real Estate Equity Analyst at Berenberg]

That's helpful. Thank you. Maybe if I could ask one last one just on the residential sales at 25 Baker Street. I think at the half year, you'd exchanged on 23 of the 41 units. Today, I think you say you sold 24, so one more. What's the demand like right now for those, and are you having to meaningfully adjust price there to generate interest at this point? Should we adjust our trading profit expectations for the rest of the units?

[Paul Williams, CEO at Derwent London]

I think we started off really well, with prices well above our underwrite, and we had some very strong prices for, particularly for the bigger units, GBP 3,700 sq ft. We've got the little ones left. They will take a little bit longer to time, but they're great flats in a great location, but it will take a little bit longer. Damian, do you want to add to that?

[Damian Wisniewski, CFO at Derwent London]

Yeah, just one other point to make is that the 2025 result included the cost of all the affordable housing. From here on, it's essentially profit. Now, I, the market has definitely got slower.

[Paul Williams, CEO at Derwent London]

Yeah

[Damian Wisniewski, CFO at Derwent London]

I'm pretty sure we'll see pricing coming off a bit, but we've got quite good headroom here, so confident that at some point we will see a pickup. There are a lot of one beds for sale, so if anyone's interested, please let us know.

[Thomas Musson, Director and Real Estate Equity Analyst at Berenberg]

Thanks very much.

[Paul Williams, CEO at Derwent London]

Thanks, Tom. Please.

[Adam Shapton, Senior European Research Analyst at Green Street]

Morning, Adam Shapton at Green Street. I had to put my hand down then when Damian talked about the one beds. I didn't want to look like I was volunteering.

[Paul Williams, CEO at Derwent London]

Yeah.

[Adam Shapton, Senior European Research Analyst at Green Street]

Firstly, congratulations, Paul and Nigel, on retirement. Let me say that. Before I get into questions, just a clarification on the GBP 1 billion of disposals number. Is that in addition to what's already exchanged and under offer?

[Paul Williams, CEO at Derwent London]

No.

[Adam Shapton, Senior European Research Analyst at Green Street]

Increased-

[Paul Williams, CEO at Derwent London]

The GBP 1 billion includes the figures that we've done this year.

[Adam Shapton, Senior European Research Analyst at Green Street]

Yeah.

[Paul Williams, CEO at Derwent London]

GBP 1 billion over three years.

[Adam Shapton, Senior European Research Analyst at Green Street]

A quarter is already exchanged.

[Paul Williams, CEO at Derwent London]

We would've done, you know, 280, I think, with, as the next deals get done. That's a good start here.

[Adam Shapton, Senior European Research Analyst at Green Street]

Yeah.

[Paul Williams, CEO at Derwent London]

We're hoping that we're going to get something close to GBP 400 million this year.

[Adam Shapton, Senior European Research Analyst at Green Street]

Yeah.

[Paul Williams, CEO at Derwent London]

That's the plan.

[Adam Shapton, Senior European Research Analyst at Green Street]

Just in that context, if I may say, 3 years sounds quite conservative to do another 750. What's the limiting factor there? I mean, you've talked about improving market. You quoted Knight Frank on all the equity chasing office.

[Emily Prideaux, Executive Director at Derwent London]

I think don't view the GBP 1 billion as a cap. I think what we're looking to do is proactively dispose here, mature assets where the business plan is delivered and where we think we can deploy other more accretive opportunities. It's not-

[Adam Shapton, Senior European Research Analyst at Green Street]

Okay

[Emily Prideaux, Executive Director at Derwent London]

-a fixed number per se.

[Adam Shapton, Senior European Research Analyst at Green Street]

Okay

[Emily Prideaux, Executive Director at Derwent London]

You know, depending on the market-

[Adam Shapton, Senior European Research Analyst at Green Street]

Yeah

[Emily Prideaux, Executive Director at Derwent London]

-and where we're at in terms of other opportunities, that may move.

[Adam Shapton, Senior European Research Analyst at Green Street]

Both the number and the timescale might be-

[Paul Williams, CEO at Derwent London]

Well, and we.

[Adam Shapton, Senior European Research Analyst at Green Street]

-conservative. Is that fair?

[Paul Williams, CEO at Derwent London]

We're seeing liquidity improve because obviously, big assets are GBP 100 million today. You know, last year, I think they doubled GBP 100 million. The year before was difficult. I think as we see liquidity go up. If we can get a strong price for those assets, we're gonna be realistic and sensible. I think, you know, we want to make sure when we do sell, we sell well, and we sell at the right price, with the balance sheet in good place. I want to make sure that we do it strategically. Richard and his team are well set up to do that. I'd say we will accelerate disposals when we see a strong price for something, and we can use the money more accretively, we will certainly do that.

[Adam Shapton, Senior European Research Analyst at Green Street]

Great. Just two more. On the flex growth, Emily, you mentioned going from 8% to 10% to 15%. I think I'm right in saying the 8% is a mixture of F&B and third-party operators?

[Damian Wisniewski, CFO at Derwent London]

Yeah.

[Emily Prideaux, Executive Director at Derwent London]

Yes.

[Adam Shapton, Senior European Research Analyst at Green Street]

What?

[Emily Prideaux, Executive Director at Derwent London]

It-

[Adam Shapton, Senior European Research Analyst at Green Street]

What's the shape of that? Not quite doubling.

[Emily Prideaux, Executive Director at Derwent London]

The growth is from the 8 to 15 is more around our portfolio and what expires within that timeframe of a size and location where we think we'll naturally move to flex.

[Adam Shapton, Senior European Research Analyst at Green Street]

Yeah.

[Emily Prideaux, Executive Director at Derwent London]

It's not proposing that we're going out shopping per se for an extra 7% of that stock.

[Adam Shapton, Senior European Research Analyst at Green Street]

Sure.

[Emily Prideaux, Executive Director at Derwent London]

It's more that we're looking at where the sub 10,000 sq ft units coming back in the right-

[Adam Shapton, Senior European Research Analyst at Green Street]

Yeah

[Emily Prideaux, Executive Director at Derwent London]

-submarkets, and they will likely convert.

[Adam Shapton, Senior European Research Analyst at Green Street]

Okay, we should expect it to be more your in-house, as it were-

[Emily Prideaux, Executive Director at Derwent London]

Correct

[Adam Shapton, Senior European Research Analyst at Green Street]

-rather than leasing to

[Paul Williams, CEO at Derwent London]

Yeah.

[Emily Prideaux, Executive Director at Derwent London]

Exactly.

[Paul Williams, CEO at Derwent London]

We've got a number of refurbishments at the moment.

[Emily Prideaux, Executive Director at Derwent London]

Yeah

[Paul Williams, CEO at Derwent London]

We're ideally placed for that sort of thing.

[Adam Shapton, Senior European Research Analyst at Green Street]

Okay. Maybe somewhat related to that, on admin costs, you made some good progress. How should we think about a floor of where that could get to in today's money?

[Paul Williams, CEO at Derwent London]

Damian

[Adam Shapton, Senior European Research Analyst at Green Street]

Given your strategic ambitions, you want to sweat the platform more-

[Paul Williams, CEO at Derwent London]

Yeah

[Adam Shapton, Senior European Research Analyst at Green Street]

-where could the admin costs be?

[Damian Wisniewski, CFO at Derwent London]

I think our target for this year is another GBP 2 million. I think that at that stage, that feels like it's quite lean.

[Adam Shapton, Senior European Research Analyst at Green Street]

Okay. Yeah.

[Damian Wisniewski, CFO at Derwent London]

There would have to be quite structural changes.

[Adam Shapton, Senior European Research Analyst at Green Street]

Yeah

[Damian Wisniewski, CFO at Derwent London]

We could go much lower than that, but that's a reasonable target for now.

[Adam Shapton, Senior European Research Analyst at Green Street]

Okay. Thank you.

[Paul Williams, CEO at Derwent London]

Thanks, Adam.

[Emily Prideaux, Executive Director at Derwent London]

Thanks, Adam.

[Callum Marley, Assistant VP and Equity Analyst at Kolytics]

Callum Marley.

[Paul Williams, CEO at Derwent London]

Hi, Callum. You all right?

[Callum Marley, Assistant VP and Equity Analyst at Kolytics]

Kolytics. Couple of questions.

[Paul Williams, CEO at Derwent London]

Yep.

[Callum Marley, Assistant VP and Equity Analyst at Kolytics]

Outlined the new strategy today with disposals and buybacks, but the stock has obviously been trading at a material discount now for a few years, and you've had a while to act on it. Why are you committing to this now?

[Emily Prideaux, Executive Director at Derwent London]

I think in terms of the strategy, well, in terms of, you know, we're looking at all optionality here, so, you know, we're disposing, but then obviously focusing on the balance sheet, you've seen track record development and investment where we're committed and where we want to commit. Obviously, looking at the dividend, and as Damian touched on, which he can pick up on, the share buybacks come as and when we reach that surplus. It's looking at the whole picture and that optionality around that, keeping open-minded to that.

[Damian Wisniewski, CFO at Derwent London]

I think also the key really is how the investment market is now opening up.

[Paul Williams, CEO at Derwent London]

That's right.

[Damian Wisniewski, CFO at Derwent London]

We have had two years where it's been quite challenging to sell large lot sizes, and as a result, the leverage has crept up a bit. The balance sheet's still strong, but maintaining a strong balance sheet has always been one of our foremost requirements. We now have more options coming open to us as well. The other thing, of course, is maintaining earnings. You've got the situation now where the IFRS yield on most of the things we're looking to sell is probably very close to our marginal interest rate. The earnings impact of disposals is much less than it was, say, three or four years ago. I hope that gives you some idea of the how.

[Paul Williams, CEO at Derwent London]

Yeah, I think that's the point. With the market opening up, more liquidity, give more opportunity to sell and consider what we do with that money. I think as to the market, liquidity has improved a lot.

[Callum Marley, Assistant VP and Equity Analyst at Kolytics]

Got it. Then, the 25% earnings growth target, is that built on sustained rental growth? If so, what's the number?

[Damian Wisniewski, CFO at Derwent London]

The rental growth to 2030. Yeah, essentially, what we're doing is we're building into our models some growing reversion from rental growth of around 4% per annum. We've also got, I think, expecting increasingly attractive returns from projects like 50 Baker Street and Holden, where the gearing impact as well, it improves those returns still further. You factor that in, about half of the rental growth comes from those two projects, and about half of it comes from the rest of the portfolio.

[Callum Marley, Assistant VP and Equity Analyst at Kolytics]

So, so four percent is, uh-

[Damian Wisniewski, CFO at Derwent London]

Roughly 4% per annum is what we're putting in our models going forwards. Yep.

[Callum Marley, Assistant VP and Equity Analyst at Kolytics]

If I can just ask on page 22, just looking at the prime office rents, they seem to be flat from 2015 to 2019. What makes you think that 2025 to 2030, that is gonna be 4% a year going forward?

[Paul Williams, CEO at Derwent London]

Well, I think firstly, I think there's a pretty tight supply crunch, you know, that demand is pretty good. People are growing. 80% of the deals last year were 20,000 sq ft people were growing. Rents do need to increase in order to, you know, there are more proportion of people's outgoings, I think if people want to be in good locations, they need to pay the right rent for the right location. I think it is time for landlords to earn a bit, earn a bit more money. I think we feel pretty positive about it. Last few years, despite the difficult macroeconomics, we've been consistently letting at 10% above ERV. We have strong visibility about inspections, and viewings, and tenant demand. I think we feel pretty positive about it.

[Paul Williams, CEO at Derwent London]

London's the place to be. People want to be in town. Emily, do you want to add to that?

[Emily Prideaux, Executive Director at Derwent London]

Yeah, I think the 4%, if you, if you look at the sort of big houses prospects over the next 5 years, that's probably pretty conservative. I think the supply crunch is the big driver at the moment. London's got a supply shortage that we haven't seen before. part of our repositioning is making sure we're in the right place for that. I think the, the 4%, we're pretty comfortable with, from a market perspective. This year, we're in a place where every submarket in London is now projecting growth, whereas before it has been much more spiky following COVID. You're really seeing that evening out now in terms of a more lateral growth across the city.

[Damian Wisniewski, CFO at Derwent London]

I mean, rents have fallen behind other costs quite substantially over the last five years. They're now beginning to catch up, and we're seeing our rents growing now at a slightly faster rate than overall costs. Really, that's been squeezed quite a bit over the last five years. If you go back to the last big rental cycle, which was sort of 2012 onwards to 2015, our earnings pretty much doubled in that period. I'm not forecasting a doubling of it. That would be nice. We'll come back next year, hopefully. I think that, I think our 30% increase feels very realistic, given that we are seeing really quite a shift in the dynamics and overdue, I think.

[Callum Marley, Assistant VP and Equity Analyst at Kolytics]

Thank you.

[Paul Williams, CEO at Derwent London]

Thank you. Please? Zach.

[Zachary Gauge, Senior Equity Research Analyst at UBS]

Morning, it's Zachary Gauge from UBS. A couple of questions from me. One is on the ERV growth conversion into capital growth during 25. Obviously, 4% ERV growth. I think at the portfolio level, you're only 0.8% on capital growth. Can you touch on why the values aren't giving you the uplift when yields were effectively stable, and why you're confident that going forward, that will convert into the 3%-5% capital growth that you've guided to? The second one, sort of again, picking up on the share buybacks point and capital allocation. I noticed that the net debt to EBITDA target seems to have shifted slightly from getting it below 9 at the end of this year to now sort of 9.5 going forward.

[Zachary Gauge, Senior Equity Research Analyst at UBS]

Bearing that in mind and the capacity that gives you, should we sort of see the GBP 250 million of excess capital from the GBP 1 billion of disposals as the high water mark for buybacks? Would that then be sort of flexible, depending on where you sit on the net debt to EBITDA ratio and obviously, doing potentially more disposals than GBP 1 billion?

[Paul Williams, CEO at Derwent London]

Damian, do you want to start with?

[Damian Wisniewski, CFO at Derwent London]

Should I start with the second question?

[Paul Williams, CEO at Derwent London]

Yeah.

[Damian Wisniewski, CFO at Derwent London]

The 9.5 isn't the target. No, we've currently got it down to 9. I'd prefer it to be lower than that. We're expecting it to be lower by the end of this year. 9.5 is really where I think we see the upper limit over the next few years. Could there be a bit more available? Yes. I think we need to see how we go on this. We'll update you as we go. The 9, the 9.5 is very much an upper, an upper target. On the valuation point, I think I mentioned earlier, we've got about 40 pence a share of additional CapEx and discounting for voids and the time effect of rental growth coming through.

[Damian Wisniewski, CFO at Derwent London]

Did impact us in 2025. We've looked over the last 10, 15 years, the average amount by which we see valuations impacted by CapEx and voids is roughly 1% per annum. Last year, it was more like 2%-2.5%. We have been looking at a number of new schemes to try and grow rents, I think that was one of the reasons you've seen a bit of a step up in 2025. We don't think that is a normal level, and we think it will come back down closer to its 1%. The only other point to make is that our 3-5 is on NTA.

[Damian Wisniewski, CFO at Derwent London]

And the, obviously, the rental growth is on the gross asset value, so there's an impact there as well, which helps. Thank you, Zach.

[Zachary Gauge, Senior Equity Research Analyst at UBS]

Sorry, on the GBP 250 million being the top end of buybacks and dependent on additional disposals?

[Paul Williams, CEO at Derwent London]

Not a top end at this stage. I mean, let's wait and see. I don't think it's all gonna come in one go either. You know, I think we need to get the disposals underway, look at the capital allocation at the time, and we'll take it from there. Three years isn't forever either, so let's see where we go.

[Emily Prideaux, Executive Director at Derwent London]

I think it's going back to the plan we've talked about, Zach, in terms of looking at all of those, the options available to us alongside one another.

[Paul Williams, CEO at Derwent London]

Paul, I think you had your hand up. Yeah?

[Paul May, Director and Head of Real Estate Equity Research at Barclays]

Thanks. It's Paul May from Barclays. About three questions, I think, from me. You regularly provide the ERV target, I think through the presentation, I've noticed a sort of welcomed, increased focus on earnings and cash flow moving forwards. Do you think you'll consider providing a like-for-like rental growth target per annum moving forward? I appreciate you've said the 4%, just sort of give some color there in terms of converting ERV growth into actual cash flow would be sort of welcome. Regarding the disposal of Whitfield Street, obviously, I understand Lone Star Funds is a pretty high cost of capital enterprise. Do you have any indication as to what they're expecting on that site and why they can hit their sort of 20%+ IRR targets versus what you would have expected to achieve on that site?

[Paul May, Director and Head of Real Estate Equity Research at Barclays]

Just on the 2030 target, is it reasonable to assume that's relatively back-end loaded? There'll be a little bit of bumpiness between 2027 and 2029, and then as other schemes complete, that should come through into 2030.

[Paul Williams, CEO at Derwent London]

Well, just touching on Whitfield Street first, I mean, obviously, they will have a fairly, a slightly different, probably a bit more aggressive view on rental growth. We're very happy with the price. I think a net initial of the price of 5%, initial yield of 5% is good. There's a bit of vacancy coming up. It's a 20-year-old building. I can't really speak for them as to where they think their returns could be. They're probably reflecting the same thing we are, in as much as the West End is very tight, rents are growing, and it's a good opportunity. It's a very good location. They're probably targeting pretty aggressive rental growth.

[Paul Williams, CEO at Derwent London]

For us, we think, you know, recycling support and getting some more money into the portfolio, we can secure a strong price, which we did, then we're invested elsewhere. I think it's all about their view about where rents might grow. We're not renowned for being overly aggressive on where we see rents grow. I should say, we're delighted with the start of the year, how much sales we've done, how much we've got under offer. We wish them well with the purchase. I'm sure they'll be delighted with it sometime. We'd, as I say, we've made our money there. It's a 20-year-old building, and we've got plenty of other opportunities to spend the money. Do you want to talk about Paul's other two?

[Damian Wisniewski, CFO at Derwent London]

Yes, first of all, on the like-for-like rent, it's an interesting idea. I think we'll certainly consider it. I mean, the point to make here is that the rental growth grows the reversion, and it takes time for that to be captured into earnings. You tend to get this cycle where initially, the like-for-like rents lag behind the ERV growth, but at the end of the cycle, they can often outpace it. We found in that period of, we mentioned earlier, that five years when rental growth was very low, for the first two or three years of that, our like-for-like rents were still growing nicely because they were based on previous reversion. You get this slightly different timing impact coming on.

[Damian Wisniewski, CFO at Derwent London]

We'll think about how we might guide to that going forward. In relation to the earnings, you are right. A lot of the uplift comes from 50 Baker Street and Holden House, and others coming through probably in late 2029, early 2030. It is quite a step up in 2030. We do think, though, that there'll be some nice, solid earnings growth in 2028, 2029, but it's really then a step up in 2030.

[Paul May, Director and Head of Real Estate Equity Research at Barclays]

Oh, perfect. Sorry, last couple. One, coming back to the initial question on AI. Do you think your portfolio or your tenant base of smaller, generally smaller tenants, smaller floor plates, actually offers some protection in that AI world, given it's probably larger entities that are cutting back on some of the graduate recruitment?

[Damian Wisniewski, CFO at Derwent London]

Well, short answer, yes. I think very big, I mean, banks, et cetera, who knows? I think one of the London's great benefits is diverse base. Average, I think average size of our lettings across our portfolio, about 15,000 sq ft. I think that gives quite a lot of resilience with such a range of different occupiers. Emily, do you want to add to that?

[Emily Prideaux, Executive Director at Derwent London]

I think that covers it most, other than to say, obviously, the way we look at our portfolio generally, and AI falls into this, is to make sure we've got everything to meet that match demand. The high growth at the lower end, probably in the fitted space, growing up to the 50 Baker Street. I think like any other, I think we'll make sure it's balanced in that way.

[Paul May, Director and Head of Real Estate Equity Research at Barclays]

Sorry, just final one linked to that. The 10%-15% on flex, given that 15,000 sq ft sort of average tenant mix, and that's probably skewed by a few large ones and then quite a few even smaller ones. Could flex become a significantly larger part of your portfolio than the 10%-15%?

[Emily Prideaux, Executive Director at Derwent London]

At the moment, we think the 15 is probably where it still makes sense from a maintaining everything that we have to look at in terms of cost ratios, operational efficiencies, and overall net returns in terms of extra CapEx and everything else that goes into it. At the moment, that's where we think. We will always continue to kind of mirror the market and make sure we're delivering what we believe the market is. Over the years of Flex and all the headlines it's grabbed, it's never really moved much from the sort of 4%-7% of the total market activity. It feels we're looking at that on all the financial metrics, but also where we think the market is.

[Emily Prideaux, Executive Director at Derwent London]

Of course, it could change in the future, and we'll adapt as we need to, but that's where we feel it's right at the moment.

[Paul Williams, CEO at Derwent London]

Yeah, I think that's a good point. As a percentage of the pool for out of the market, it's relatively small. We obviously got a lot of headlines, and it's done well, but we also like our headquarters. Nice long leases helps our valuations. Thank you, Paul. Any other questions we've got from the room, or do we have anyone online, on telephone?

[Operator]

The first question from the phone comes from the line of Marc Mozzi from Bank of America. Please go ahead.

[Marc Mozzi, Managing Director and Head of EMEA Real Estate Equity Research at Bank of America]

Thank you very much. Very good, everyone. Mark, this question is around, how is the board weighing M&A optionality as a way to boost shareholder returns and addressing the succession gaps that have been created by the recent senior departures?

[Emily Prideaux, Executive Director at Derwent London]

I think his question around.

[Paul Williams, CEO at Derwent London]

It wasn't a very good line. Sorry.

[Emily Prideaux, Executive Director at Derwent London]

Was the question, just bear with me, how do we think about M&A-

[Marc Mozzi, Managing Director and Head of EMEA Real Estate Equity Research at Bank of America]

Sorry, I got you.

[Emily Prideaux, Executive Director at Derwent London]

-respective addressing succession matters?

[Paul Williams, CEO at Derwent London]

I mean, obviously, we're very focused on our business at the moment. Obviously, I've made a decision that I'm gonna retire, and now there is a process going ahead with finding a successor. The focus is on the business. There's nothing to report to say about M&A, particularly. Unless we've misunderstood your question, Marc. It's wasn't a great line.

[Marc Mozzi, Managing Director and Head of EMEA Real Estate Equity Research at Bank of America]

No, well, it was a question. My second question is around effectively, given AI driven derating of New York office stocks prices, do you still view share buybacks as the right call in that environment? The next one related to that is: How confident are you in the long-term earnings and total returns, specifically, target that you've provided through 2030?

[Paul Williams, CEO at Derwent London]

I think firstly, there's always got to be a balance between buybacks and investment, and all the rest of it, and obviously, it's got to be seen as an opportunity at the moment. Jamie, do you wanna add anything to that?

[Damian Wisniewski, CFO at Derwent London]

Yeah. I mean, the principal things we're trying to do here, we're trying to accelerate disposals to give us more options. The first thing we do is maintain a strong balance sheet. The second thing is we invest in our accretive returns for our schemes. After that, we have options. The AI is one of the many factors we take into account in looking at investment decisions, and we're all trying to work out what it means short term, medium term, and long term. For now, though, I think, hopefully, our capital allocation outlook is clear, and we will keep our eyes and ears open to see how things move forward. I'm not sure we can say much more at this stage.

[Marc Mozzi, Managing Director and Head of EMEA Real Estate Equity Research at Bank of America]

I just wanted to have you assured. The final question for me is: How much disposals are you assuming in your 2030 target?

[Emily Prideaux, Executive Director at Derwent London]

Your which target?

[Damian Wisniewski, CFO at Derwent London]

2030. We're assuming about GBP 1 billion in the next 3 years, and I think GBP 200 million a year per annum after that. Is that right, Jennifer?

[Jennifer Whybrow, Head of Financial Planning and Analysis at Derwent London]

Yes.

[Damian Wisniewski, CFO at Derwent London]

Yes.

[Paul Williams, CEO at Derwent London]

Yeah.

[Damian Wisniewski, CFO at Derwent London]

Jennifer does all the modeling, so she knows.

[Marc Mozzi, Managing Director and Head of EMEA Real Estate Equity Research at Bank of America]

1.2, 1.3?

[Damian Wisniewski, CFO at Derwent London]

About 1.3, 1.4, yeah, over the five years.

[Marc Mozzi, Managing Director and Head of EMEA Real Estate Equity Research at Bank of America]

Thank you very much.

[Paul Williams, CEO at Derwent London]

Thank you, Marc.

[Emily Prideaux, Executive Director at Derwent London]

Thank you.

[Paul Williams, CEO at Derwent London]

We've got one more.

[Operator]

The next question comes from Alex Kolsteren from Van Lanschot Kempen. Please go ahead.

[Alex Kolsteren, Equity Research Associate at Van Lanschot Kempen]

Hi, team. Thank you for the presentation. Two questions on this presentation. You mentioned GBP 2 million of cost savings started in 2026. What's your regional amount to assume for 2027 on top of that?

[Emily Prideaux, Executive Director at Derwent London]

Cost savings.

[Damian Wisniewski, CFO at Derwent London]

Cost savings.

[Paul Williams, CEO at Derwent London]

Savings.

[Damian Wisniewski, CFO at Derwent London]

We took about, I think, GBP 2.4 million came off our EPRA costs in 2025. We're anticipating a similar level in 2026. I think our models assume inflation after that, we will be looking to make this business as efficient as we possibly can. Anything we can do after that to reduce cost will be done. There isn't a specific cost target, I think, in the 2027 model at this stage, that doesn't mean to say we won't look at further efficiencies.

[Alex Kolsteren, Equity Research Associate at Van Lanschot Kempen]

Right. One more on the capitalized interest. On slide 9, you say that the capitalized interest in 2027 is about GBP 8 million higher than in 2026. When you get slide 51, where you break down your CapEx pipeline, the 2026 number is GBP 6 million, and 2027 number is GBP 8 million. Where is the remaining GBP 6 million increased come from?

[Emily Prideaux, Executive Director at Derwent London]

50 Baker Street, yeah.

[Damian Wisniewski, CFO at Derwent London]

Yeah, I mean, we, these figures in the back here are for essentially the committed schemes. If you look at the top half of the report. In the bottom, it says, "Consented, 50 Baker Street." That is not yet in the top half of the project because it's not been committed. When it does get committed, and we're assuming it will do, it will go into the top half, and we'll show you the capitalized interest. That figure in the outlook includes capitalized interest for 50 Baker Street. The appendix doesn't.

[Alex Kolsteren, Equity Research Associate at Van Lanschot Kempen]

Okay, great. Thank you very much.

[Paul Williams, CEO at Derwent London]

Thank you very much for the call.

[Emily Prideaux, Executive Director at Derwent London]

Thank you.

[Paul Williams, CEO at Derwent London]

Have we got any other?

[Company Representative at Derwent London]

There are two questions on the webcast.

[Paul Williams, CEO at Derwent London]

Okay.

[Company Representative at Derwent London]

The first says: While you've mentioned the possibility of share buybacks, are you taking any other active steps to reduce the gap between the current share price and the net asset value?

[Damian Wisniewski, CFO at Derwent London]

Well, we're hoping this presentation will help.

[Paul Williams, CEO at Derwent London]

Yeah, exactly. Yeah, I mean, we're letting, you know, we think the market's improving, you know, the fundamentals are good. Actively, we're looking at other options of, you know, whether it... buybacks or something similar. Emily?

[Emily Prideaux, Executive Director at Derwent London]

Yeah, exactly that. The plan you've heard today is laser-focused on shareholder returns and what we get and where our focus is in that regard.

[Paul Williams, CEO at Derwent London]

Thank you.

[Company Representative at Derwent London]

The last question is: Within the 2030 guidance, does it take account of a potential share buyback?

[Damian Wisniewski, CFO at Derwent London]

No.

[Paul Williams, CEO at Derwent London]

Okay.

[Damian Wisniewski, CFO at Derwent London]

Nice, easy answer.

[Paul Williams, CEO at Derwent London]

That's easy answer. Thank you, everyone, for today.

[Emily Prideaux, Executive Director at Derwent London]

Thanks, everyone.

[Paul Williams, CEO at Derwent London]

We're all around if anyone wants to have a chat afterwards, pick up the phone. We're obviously on tour as well. Thank you for your attending today. I know it's a busy week for everyone. Have a good day. Thank you very much.

[Operator]

This presentation has now ended.

Participants

Executives

• Damian Wisniewski, CFO
• Emily Prideaux, Executive Director
• Jennifer Whybrow, Head of Financial Planning and Analysis
• Paul Williams, CEO
• Company Representative

Analysts

• Adam Shapton, Senior European Research Analyst at Green Street
• Alex Kolsteren, Equity Research Associate at Van Lanschot Kempen
• Callum Marley, Assistant VP and Equity Analyst at Kolytics
• Marc Mozzi, Managing Director and Head of EMEA Real Estate Equity Research at Bank of America
• Paul May, Director and Head of Real Estate Equity Research at Barclays
• Thomas Musson, Director and Real Estate Equity Analyst at Berenberg
• Zachary Gauge, Senior Equity Research Analyst at UBS