Derwent London plc Registered office: 25 Savile Row, London W1S 2ER T +44 (0)20 7659 3000 Derwent London plc www.derwentlondon.com Report & Accounts 2020 Registered No: 1819699 Strategic report 01 Contents 2020 summary ..............................................................04 Operating in challenging times ..................................06 Strategic report A resilient business ......................................................08 Delivering value to our customers .............................10 Supporting our stakeholders in 2020 .......................12 Derwent Chairman’s statement ..................................................14 Chief Executive’s statement .......................................16 Central London office market .....................................18 A well placed portfolio .................................................22 Investing in our pipeline ............................................... 24 Our stakeholders ..........................................................26 London plc Our pathway to net zero carbon ................................28 Our business model .....................................................30 The largest London-focused REIT Our strategy ...................................................................32 with a distinctive 5.6 million sq ft Measuring our performance ......................................42 Responsibility ................................................................46 office-based portfolio across Property review .............................................................64 Valuation ....................................................................65 14 ‘villages’. Asset management & investment activity ........68 Development & refurbishment .............................71 Our purpose Finance review .............................................................. 74 Our purpose is to help improve and upgrade the stock of Viability statement .......................................................82 office space in central London. By taking poorer quality Our principal risks .........................................................84 ‘brown’ buildings and turning them into modern, adaptable and ‘green’ workspaces, we aim for above average long-term returns to our shareholders while bringing social, environmental and economic benefits to all our Introduction from the Chairman ..............................102 stakeholders. With an open and progressive corporate Governance at a glance ..............................................103 culture and by promoting values that include building Governance The section 172(1) statement ....................................104 lasting relationships, our design-led ethos has created Board of Directors ....................................................... 106 a brand of well-designed, flexible and efficient buildings Senior management .................................................. 108 at a wide range of rents. These help our occupiers attract Corporate governance statement ........................... 110 and retain talent but also revitalise neighbourhoods and Nominations Committee report ...............................124 benefit local communities. Our approach contributes to Audit Committee report .............................................130 workforce wellbeing and helps maintain London’s position Risk Committee report ...............................................138 as a leading global business location. Responsible Business Committee report .............146 Remuneration Committee report Annual statement ...................................................150 Our culture Remuneration at a glance ....................................152 • Hard-working and adaptable Annual report on remuneration ..........................153 • A passion to improve London’s office spaces Schedule to the annual report • Strong customer focus on remuneration .....................................................167 • Progressive and pragmatic Directors’ report ...........................................................172 • ‘Open door’ and inclusive • Collaborative and supportive Our values Statement of Directors’ responsibilities ................178 • Reputation, integrity and good governance Independent Auditor’s report ...................................179 • Building long-term relationships and trust Group income statement ...........................................187 • Focus on creative design and embracing change Financial statements Openness and transparency Group statement of • comprehensive income .............................................188 • Sustainability and responsibility Balance sheets ............................................................189 Statements of changes in equity ............................ 190 Cash flow statements ................................................ 191 Notes to the financial statements ...........................192 Other information Ten-year summary ..................................................... 242 EPRA summary ........................................................... 243 Principal properties ................................................... 246 List of definitions ........................................................ 248 Communication with our shareholders ................252 Awards & recognition ..................................................IBC Front cover and back cover images: 80 Charlotte Street W1 ‘Choreographic Form, 2020’ by Hugo Dalton 80 Charlotte Street W1 02 Derwent London plc Report & Accounts 2020 Strategic report 03 Strategic report 2020 summary ..................................................04 Operating in challenging times .....................06 A resilient business .........................................08 Delivering value to our customers ................10 Supporting our stakeholders in 2020 ..........12 Chairman’s statement .....................................14 Chief Executive’s statement ..........................16 Central London office market .......................18 A well placed portfolio ....................................22 Investing in our pipeline .................................. 24 Our stakeholders ..............................................26 Our pathway to net zero carbon ...................28 Our business model .........................................30 Our strategy .......................................................32 Measuring our performance .........................42 Responsibility ...................................................46 Property review ................................................64 Valuation ........................................................65 Asset management & investment activity .....................................68 Development & refurbishment .................71 Finance review .................................................. 74 Viability statement ..........................................82 Our principal risks ............................................84 We were attracted to this particular space because of the superb location next to a strategic Crossrail station, the quality of the buildings and our firm belief in the regeneration of this area which has an exciting future. Despite these challenging times, I have great faith in the future of the office market of Central London. Sir Lloyd Dorfman Soho Place W1 04 Derwent London plc Report & Accounts 2020 Strategic report 05 Financial highlights Non-financial highlights Gross rental income NetNet rental rental income income (£m) (£m) Total property return 2020 2019: £191.7m Total property return of 200 0.3%, substantially above 178.0 174.3 180 benchmark MSCI IPD 161.1 161.1 Central London Offices 160 145.9 138.7 Index of -2.4% 140 128.7 121.7 summary 116.2 114.1 120 The year started with an optimistic +5.8% £202.9m 100 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0.3% outlook, low vacancy rates and with strong occupier demand backed EPRA earnings per share (EPS) EPRAOrdinary EPS dividend (p) (p) Vacancy rate 2019: 103.1p Our EPRA vacancy rate up by firm investment yields. As 113.11 120 increased during the 103.1 99.2 94.2 we approached the end of Q1, the 100 year but remains low 77.0 71.3 significance of the Covid-19 pandemic 80 57.1 51.6 53.9 became more apparent and lockdown 60 50.4 took hold, forcing an unprecedented 40 20 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 fall in economic activity in the UK. -3.8% 99.2p 1.8% We responded by focusing on the health and safety of Dividend per share (p) OrdinaryOrdinary dividend dividend (p) (p) Carbon intensity our employees, occupiers and communities, enhancing 2019: 72.5p Like-for-like carbon intensity communication and providing support where it was 74.45 80 72.45 reduced by 27% (tCO2e/m²) in most needed. We kept our buildings open with tailored 65.85 2 the year and by 57% since 2013 cleaning and maintenance regimes while progressing 68 59.73 52.362 with our development projects and ESG/climate change 56 43.40 39.65 responsibilities. Our second half focus has continued to 44 36.50 33.70 support our customers and other stakeholders through 31.35 32 the various phases of lockdown and business continuity, while extending leases where we can and pursuing further +2.8% 74.5p 20 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 27% regeneration opportunities. Operating highlights • 2021 lease expiries reduced from 26% of passing rents EPRA NTA per share Loan-to-value ratio ratio (%) Net zero carbon to 17%, now 13% 2019: 3,957p Publication