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Derwent’s Returns Under John Burns Smashed Every Other Property Rival

John Burns in 1987

In 1984 the biggest selling U.K. record was Band Aid’s "Do They Know It’s Christmas," the highest grossing film in the world was "Beverly Hills Cop" and John Burns took over the Derwent Valley light railway company so he had a listed shell company he could use to buy London property assets. 

The company’s market capitalisation was about £4.5M in today’s money. In 2018, what is now Derwent London is a £3.3B market cap company. And on Friday John Burns departed the chief executive’s seat. He will serve two years as chairman, and property director Paul Williams will take over as CEO.

During his time in charge, Derwent has massively outperformed its listed rivals, and the wider market. Bisnow asked Green Street Advisors to run the numbers, and using Bloomberg data, the real estate research firm showed just how far above his rivals Burns was.

Comparable data only really goes back to February 1991. Since then, Derwent has made a cumulative total return of 1,660%, which equates to a compounded total return of 10.9% a year.

Not many listed property companies have been around as long in the U.K., but comparing with some of those that have, very few get anywhere near producing returns like these.

John Burns in 2018

Great Portland Estates comes closest, with a cumulative total return of 832%, which works out at an annualised total return of 8.4%.

The rest of the pack are miles behind. British Land made a cumulative total return of 527% and an annual return of 6.8%; Landsec made a cumulative return of 410% and an annual return of 6.1%; Segro made a cumulative return of 483% and an annual return of 6.6%; and Hammerson made a cumulative return of 190% and an annual return of 3.9%.

In terms of the wider stock market, over the same period the FTSE 100 posted a cumulative return  of 574% and an annual return of 7.1%. The FTSE 350 provided a cumulative return of 678% and an annual return of 7.7%.

So Derwent and Burns’ nearest rival has a cumulative return almost exactly half as high, and its annual return is 25% higher than its closest competitor.

The received wisdom is that no stock picker can beat the market over an extended period, that over time all performance reverts to the mean. Burns proved that wasn’t true in property. If you just bought Derwent shares under Burns you’d have beaten the market by some distance, and looked very wise indeed.