February 27, 2018 / 7:36 AM / 18 days ago

UPDATE 2-Resilient London prompts special payout from offices developer Derwent

* 2017 net asset value rises 4.6 pct to 3,716p

* 2017 rental growth “more likely” at top end guidance range - CEO

* Blue chip companies looking to rent in London - CEO

* Shares gain 3 pct, feature among top 10 FTSE midcap gainers (Adds CEO, analyst comments, details, shares)

By Esha Vaish

Feb 27 (Reuters) - Derwent London Plc, a central London office developer, proposed a special dividend of 75 pence on Tuesday, citing profits from property sales and better than expected growth in value of its buildings despite the shadow of Brexit.

The property market has been considered particularly vulnerable to Brexit, with concerns that values of London office buildings could be hit by uncertainty among potential tenants and some financial jobs relocating to continental Europe.

Derwent, which develops and owns properties in areas such as the popular West End business and commercial district, said net asset value - a gauge of the market value of a developer’s properties - stood at 3,716 pence at Dec. 31, a 4.6 percent jump from a year ago.

Chief Executive John Burns expressed confidence in Derwent’s ability to deliver this year again despite challenging markets, citing exposure of only around 4 percent to financial occupiers and strong demand from large clients in other sectors.

“We believe Derwent remains in a good position to continue to navigate market uncertainty, with low financial risk and an office portfolio less exposed to new supply and financial services occupier risk,” Liberum analyst David Brockton wrote in a client note.

Derwent’s estimated rental values (ERV) increased by 1.7 percent in 2017, in line with its improved if broad forecast range from August of between 2 percent higher and 3 percent lower.

The group repeated the same forecast range for 2018, but Burns said rental growth was “more likely to be at the top end rather than the bottom end”.

He said companies including American Express, Warner Music, Deloitte Digital, JLL, McCann, Adidas and Sony were looking to rent large amounts of space in London. Derwent currently has about 623,000 square feet of space under construction, but 45 percent of it has already been pre-let.

Burns, however, said that although prices remained firm, leasing incentives had increased in some instances and occupier deals were taking longer to complete.

“We expect this positive set of results to be well received and see the shares edging higher,” Stifel analysts wrote in a client note, but maintained their “hold” rating citing “continued uncertainty” in the market place.

They have a target price of 2,840 pence on the stock.

Derwent’s stock was up 3.2 percent at 3003 pence by 0940 GMT, making it one of the top ten percentage gainers on London’s midcap index. (Reporting by Esha Vaish in Bengaluru Editing by Vyas Mohan and Keith Weir)

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