London-focused real estate investment trust Derwent London saw its net asset value (NAV) increase in the first half, saying that it has achieved 'good momentum in London's Olympic year'.
Adjusted NAV per share rose 4.1% from 1,701p at December 31st 2011 to 1,770p, driven mainly by the estimated rental value (ERV) growth of 2.8% (the fifth successive half-year of growth) and developments and major refurbs which rose 6.1% in value.
NAV per share, up 9.2% year-on-year, was ahead of the Jefferies forecast of 1,729p.
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The property portfolio was valued at £2.7bn at June 30th, compared with £2.6bn at the start of the year. Over the first half, there was a valuation surplus of £77.6m, driven mainly by growth in the ERV.
Adjusted pre-tax profits were more or less flat at £26.5m, but reported pre-tax profits dropped from £173.3m to just £102.4m due to a higher revaluation surplus and profit on investment disposals the year before.
The firm raised its interim dividend per share by 5.3% from 9.45p to 9.95p, "at which level the dividend is comfortably covered".
"London has a number of characteristics that makes its real estate market particularly attractive. Investment and tenant demand remain strong and supply of good quality office space is restricted by the constraints of planning and the general limited availability of finance. Furthermore, the events of this year, the Diamond Jubilee celebrations and the Olympics, have enhanced London's global status as a premier capital city," said Chairman Robert Rayne.
Meanwhile, the company said that the ongoing Eurozone crisis means that the UK is enjoying a 'safe-haven' status, attracting "significant" investment activity in the first half.
"We remain confident that, if current market conditions persist in central London, the level of rental growth experienced in our portfolio in the first half will be sustained throughout the rest of the year. In addition we expect our valuation yields to remain firm in the months to come," the firm said.
Analyst Alan Carter from Investec said following the results: "Derwent London remains, in our view, one of the best companies in the sector, if not the best.
"We like the company, and remain convinced that London's West End is the strongest property market in Western Europe," he said.
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