发帖
雷达卡
Europe United Kingdom
Real Estate
19 December 2008
UK Real Estate
Initiating Coverage on the
West End Office Companies
John Perry
Research Analyst
(44) 20 754 70560
john.perry@db.com
Starting DLN at a Buy/GPOR at a Hold
We are initiating coverage of Derwent London with a Buy rating (880p target) and
Great Portland Estates with a Hold rating (265p target). Both companies are
primarily office-focused landlords/developers with the bulk of their holdings
located in London's West End.
Deutsche Bank AG/London
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at
http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1.
Coverage Change
Companies featured
Great Portland Estates (GPOR.L),GBP251.00 Hold
2008A 2009E 2010E
DB EPS (GBP) 12.59 13.69 11.34
P/E (x) 46.8 18.3 22.1
EV/EBITA (x) 29.4 16.9 19.8
Derwent London (DLN.L),GBP732.00 Buy
2007A 2008E 2009E
DB EPS (GBP) 34.99 34.98 32.93
P/E (x) 45.6 20.9 22.2
EV/EBITA (x) 20.3 19.5 20.0
Global Markets Research Company
Modest West End outperformance expected
In general, we would expect both companies’ portfolios to hold up somewhat
better than many of their office-focused peers in the current downturn due
primarily to their West End exposure. Specifically, it is the relatively low levels of
new supply and the greater tenant diversification of the West End which leads us
to expect some modest outperformance. That being said, the West End is
certainly not immune to the difficulties facing the global real estate markets and is
already coming under considerable pressure (please see the “London Office
Market Overview” section of this report for more details). We would expect that
pressure to persist into 2010.
Low in-place rents provide some downside protection
Within their markets, we believe both of these companies are attractively
positioned with very low in-place rents. As such, both benefit from significant
(~30%) reversionary potential which should give them considerable leeway to
defend occupancy. It is also worth pointing out that both companies have solid
balance sheets, characterized by relatively low LTV ratios (<35%), few near- to
intermediate-term funding requirements, plenty of liquidity and significant
headroom before debt covenants are tripped.
Valuation/lower lease roll risk lead us to favor DLN at this stage
DLN and GPOR are trading at discounts to our low-on-the-Street trough NAV
estimates of 21% and 11%, respectively. This 1,000 bps gap largely forms the
basis for our preference of DLN over GPOR. Plus, we estimate DLN is trading at
an implied cap rate of 7.5% versus GPOR’s 6.4%. Furthermore, we believe GPOR
offers higher operational risk in the near- to intermediate-term due to the fact that
18% of its leases are subject to either expiration or break over the next 12
months. This is a high number and looks like it will occur just as the market is at its
weakest. We believe it will be difficult for GPOR shares to move meaningfully
higher until there is better visibility on retention rates and its re-leasing efforts.
Targets based on trough NAV estimates
We have set our target prices for DLN and GPOR based on a modest (~5%)
discount to our trough NAV estimates. This is consistent with the methodology we
use for the rest our UK coverage universe. Detailed assumptions underpinning our
NAV estimates can be found in the “Company Overview” sections of this report.
In addition to GPOR’s near-term lease roll risk, a decline in asset values greater
than what we are looking for which would cause the companies to breach debt
covenants, is the top risk for both DLN and GPOR in our view.
Table of Contents
Investment thesis .............................................................................. 3
Starting DLN at a Buy/GPOR at a Hold......................................................................................3
Both stocks are down approximately 47% YTD........................................................................4
GPOR: Company Overview............................................................... 6
Portfolio: A leading player in the heart of the West End ...........................................................6
Balance Sheet/Financing: On solid footing..............................................................................10
GPOR: Outlook and Forecasts ........................................................ 11
Looking for a 2010 bottoming.................................................................................................11
Initiating coverage with a Hold rating and 265p target............................................................13
DLN: Company Overview................................................................ 14
Portfolio: A slightly less conventional mix of submarkets .......................................................14
Balance Sheet/Financing: No immediate concerns.................................................................17
DLN: Outlook and Forecasts........................................................... 19
Looking for a 2010 bottoming.................................................................................................19
Initiating coverage with a Buy rating and 880p target.............................................................21
London Office Market Overview.................................................... 22
Both the City and the West End coming under pressure........................................................22
A grim economic backdrop.....................................................................................................24
283608.pdf
(598.83 KB, 需要: 500 个论坛币)
提升卡
置顶卡
沉默卡
变色卡
抢沙发
千斤顶
显身卡
京公网安备 11010802022788号
