Derwent London reports improved momentum, announces £110.5m disposal

(Sharecast News) - Derwent London reported improved momentum in its 2025 results on Thursday, and set out plans to accelerate disposals as it looks to recycle capital into higher-returning opportunities, while separately agreeing the £110.5m sale of a Fitzrovia office building. For the year ended 31 December 2025, gross rental income rose 1.6% to £218.3m, while IFRS profit before tax increased 39.2% to £161.5m.

The FTSE 250 company said its total accounting return improved to 5.0% from 3.2% a year earlier, with EPRA net tangible assets per share up 2.4% to 3,225p.

It increased its dividend 1.2% to 81.5p.

EPRA earnings per share fell 7.6% to 98.4p, reflecting the impact of mid-year refinancing, although the figure excluded 3.7p of trading profits.

Net debt reduced to £1.45bn from £1.48bn, with EPRA loan-to-value edging down to 29.4% from 29.9%.

Cash and undrawn facilities totalled £627m at year-end.

The equivalent yield was broadly stable at 5.71%.

Operationally, the group signed £11.3m of new leases during 2025 at 9.9% above estimated rental value, alongside £58.9m of asset management activity delivering a 6.4% uplift in rents.

Total disposals reached £216.1m during the year.

In early 2026, Derwent completed £1.5m of new leases and has £14.4m under offer, including all offices at Network W1, with negotiations ongoing on a further £4.4m.

It also exchanged contracts on £33m of disposals this year, with a further £240m under offer.

"We had an active 2025, with new lettings of £11.3m signed at 10% ahead of ERV and a record year of asset management activity. 2026 has started with strong momentum," said chief executive Paul Williams.

He added that the investment market recovery had "continued into 2026, with liquidity improving, particularly for larger lot sizes, and occupational dynamics remain strong", noting that London's position as "the HQ capital of Europe" was supporting rental growth against a shortage of new space.

The group increased its 2026 portfolio ERV growth guidance to 4% to 7%.

Looking ahead, Williams said Derwent was "targeting £1bn of disposals over the next three years and expect our TAR to reach 7% to 10% per annum as we redeploy proceeds into a range of accretive opportunities".

The company said it expected a near-term reduction in EPRA earnings until income from Network starts, with growth anticipated in the second half of 2026 and into 2027.

It was forecasting 25% to 30% growth in EPRA earnings per share by 2030, driven mainly by reversion capture and development leasing.

In a separate statement, Derwent said it had exchanged contracts with Lone Star Real Estate for the sale of 90 Whitfield Street W1 for £110.5m before costs, reflecting a capital value of around £1,100 per square foot and a 5% net initial yield.

The price was slightly below the December book value, with completion scheduled for August.

The 103,500 square foot freehold property, developed in 2007, generates passing income of £5.9m per annum and is 88% occupied by area, with a weighted average unexpired lease term to break of 3.7 years.

The disposal was expected to be broadly earnings neutral and will reduce leverage.

"Following the successful conclusion of a number of recent lettings, we took the decision to dispose of this relatively mature property," Williams said.

"Capital recycling is a key component of our business model and the proceeds have been earmarked for reinvestment into higher returning opportunities."

At 0825 GMT, shares in Derwent London were down 0.38% at 1,823p.

Reporting by Josh White for Sharecast.com.