Land Securities Group Plc · LSE:LAND
Land Securities — Landsec — Investor Day (October 2020)
66 slides from Land Securities's investor day presentation, October 2020
Slide 1: Landsec Capital Markets Day
Note: Photographic content has been commissioned post-impact of Covid-19
Slide 2: Landsec
Landsec
Slide 3: Positioning Landsec for growth
Positioning Landsec for growth
Slide 4: Agenda
Landsec – Strategy review 2020 4 Overview Mark Allan Our strategic priorities Mark Allan Marcus Geddes Colette O’Shea David Heaford Culture, capability and organisation Mark Allan Financial implications Martin Greenslade Summary Mark Allan
Slide 5: Six key findings that inform our strategy
Landsec – Strategy review 2020 5 Six key findings that inform our strategy Our strategic review identified six conclusions which shaped the development of our strategy London portfolio Talent Balance sheet Very high-quality Significant capability We have a strong London portfolio and expertise balan
Slide 6: Six key findings that inform our strategy
Landsec – Strategy review 2020 6 Six key findings that inform our strategy Our strategic review identified six conclusions which shaped the development of our strategy Retail Portfolio mix Covid-19 Not all retail is the same Some elements of the Long-term implications of portfolio are subscale with
Slide 7: Our approach to strategy
Landsec – Strategy review 2020 7 Our approach to strategy Combining the best of Landsec with fresh thinking Operational risk = opportunity Customers are the top priority Culture is as important as strategy Positioning Landsec Supported by long-term macro trends for growth A clear, authentic purpose
Slide 8: Six Global Forces of Change
Landsec – Strategy review 2020 8 Six ‘Global Forces of Change’ will impact our business over the next 10+ years Macro trends shaping our future markets, customers and competitors Demographic and Technologically Climate change and Borderless Shifts in global Rapid urbanisation social change advanced
Slide 9: We have a clear, authentic purpose
Landsec – Strategy review 2020 9 We have a clear, authentic purpose Our purpose articulates Our purpose is… what we want to achieve, how we will do Sustainable places. To create places that make a lasting positive contribution to our it and the benefits this Connecting communities and our planet. wi
Slide 10: Landsec's six key areas of competitive advantage
Landsec – Strategy review 2020 10 Landsec’s six key areas of competitive advantage The quality of Our track record, reputation and Our scale our portfolio relationships Our ESG Our development Our people leadership expertise
Slide 11: Four strategic priorities
Landsec – Strategy review 2020 11 Four strategic priorities Our strategy Our central Our retail business Capital from subscale Through urban opportunities will comprise London business (shopping centres and outlets) sectors four priority — London will remain a — Structural shifts are putting — Our p
Slide 12: How do we think about risk and return?
Landsec – Strategy review 2020 12 How do we think about risk and return? Positioning the business for growth with an appropriate level of risk Total Generating The Leverage return “alpha” cycle We intend to focus on A greater focus on Our tolerance for We operate in a total return through the value
Slide 13: Optimise our central London business
Optimise our central London business
Slide 14: Our central London portfolio
Landsec – Strategy review 2020 1 2 3 4 14 Other 5% Our central London portfolio Retail 11% £8.2bn 83% Office portfolio High-quality portfolio 83% office sector in central London weighting Like-for-like office High liquidity Southwark and other 11% WAULT 8.1 years1 in core markets Mid-town 21% 5.6m s
Slide 15: Growth potential
Landsec – Strategy review 2020 1 2 3 4 Strong defensive characteristics Central London portfolio High-quality customers Growth potential Stable and secure income Bubble size reflects total asset value Income quality Low capex requirements City Victoria Southwark and other West End Mid-town
Slide 16: Delivering growth
Landsec – Strategy review 2020 1 2 3 4 16 Delivering growth Myo, 123 Victoria Street, SW1 Targeted submarket and sector exposure Judicious development across a diverse pipeline CGI of Portland House, SW1 Southwark Customer-led products responding to changing needs CGI of Lavington Street, SE1
Slide 17: London will continue to be a magnet for global capital, talent and tourism
Landsec – Strategy review 2020 1 2 3 4 17 London will continue to be a magnet for global capital, talent and tourism Top 15 global business districts (as per EY and Urban Land Institute index score) 59 London Other Europe Non-Europe 58 55 52 52 49 46 46 46 46 43 43 40 40 38 London New York Tokyo Par
Slide 18: Investment volumes
Landsec – Strategy review 2020 1 2 3 4 18 Investment volumes Covid constrained, but set for strong end to the year £bn 20 15 10 5 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Q1 Q2 Q3 Q4 10-year average Source: CBRE Research
Slide 19: Five occupier themes
Landsec – Strategy review 2020 1 2 3 4 19 Five occupier themes Tech remains Deferred Strong pre-let Grey space Hybrid of active decision- momentum pushing up physical making vacancy rate and digital 1 2 3 4 5
Slide 20: Partnering with customers
Landsec – Strategy review 2020 1 2 3 4 20 Partnering with customers — Creating Covid secure workplaces — Qualitative and quantitative research from existing and prospective customers — 82% maintaining or increasing space — 81% believe office-based work boosts productivity — Supporting the ground flo
Slide 21: Office customer proposition
Landsec – Strategy review 2020 1 2 3 4 21 Office customer proposition We form partnerships We offer great experiences We create healthy and with customers for clients and employees sustainable spaces
Slide 22: Blank Canvas, Customised, Myo
Landsec – Strategy review 2020 1 2 3 4 22 Blank Canvas Customised Myo Self contained offices completed Self contained offices fitted and Private serviced offices with to a Cat A or Shell condition with managed by Landsec ‘on-demand’ communal facilities and traditional pricing fitout delivery dedicat
Slide 23: Proposition backed up by customer-led products
Landsec – Strategy review 2020 1 2 3 4 23 Proposition backed up by customer-led products Level Area (sq ft) Product Availability 17 LET 16 9,006 Blank Canvas Q4 2020 15 9,005 Blank Canvas Q1 2021 14 9,007 Blank Canvas Q1 2021 13 LET 12 8,871 Blank Canvas Q1 2021 11 8,872 Blank Canvas Q3 2021 10 8,87
Slide 24: Maintain resilience, recycle for growth
Landsec – Strategy review 2020 1 2 3 4 24 Maintain resilience, recycle for growth — Between 2010 and 2017 sold £3.5bn London assets —Delivered 3m sq ft in a £1.7bn speculative office pipeline — £0.5bn into 20+ acquisitions —Actively tracking stock across diverse geographies 20 Fenchurch Street, EC3
Slide 25: Optionality in our development programme
Landsec – Strategy review 2020 1 2 3 4 25 Optionality in our development programme CGI of 21 Moorfields, EC2 — 2m sq ft on site or near-term — All speculative schemes have CGI of Lucent, W1 optionality and flexibility over delivery —Site assembly, design, planning and ground works continue — Build o
Slide 26: Optimising for growth
Landsec – Strategy review 2020 1 2 3 4 26 Optimising for growth 80 Victoria Street, SW1 — Both London and our portfolio provide a resilient platform for growth — Increased churn and development optionality — Customer-led proposition promoting healthy and sustainable spaces 123 Victoria Street, SW1 u
Slide 27: Landsec
Landsec
Slide 28: Reimagine our retail business – introduction
Landsec – Strategy review 2020 1 2 3 4 28 Reimagine our retail business – introduction — £4.3bn of retail assets with different characteristics — Central London retail is heavily linked to the Retail parks 10% London economy Central London 22% retail — Suburban London retail is supported by regenera
Slide 29: We need to reimagine our portfolio and customer relationships
Landsec – Strategy review 2020 1 2 3 4 29 We need to reimagine our portfolio and our Offers more than relationships with customers 12m products – including Amazon marketplace, the figure increases to 350m —Online choice has fundamentally changed the role of bricks and mortar — Covid-19 accelerated w
Slide 30: Reimagine portfolio
Landsec – Strategy review 2020 1 2 3 4 30 Reimagine portfolio Subscale sectors Central London portfolio Retail parks Central London 10% retail Outlets 22% 22% 37% Shopping centres £2.4bn £4.3bn Suburban 10% Urban 63% Shopping portfolio 10% London 38% opportunities centres retail 20% Outlets March 20
Slide 31: Growth potential
Landsec – Strategy review 2020 1 2 3 4 31 Reimagine portfolio is made up of some of the most attractive retail in the UK Growth potential — Focus on regional shopping centres and outlets — August BRC national benchmark footfall down 42% year-on-year —Landsec shopping centres down 34% — Landsec outle
Slide 32: Reimagine portfolio – we have five objectives
Landsec – Strategy review 2020 1 2 3 4 32 Reimagine portfolio – we have five objectives Determine Elevate the Create Maximise Repurpose sustainable consumer operational our vibrant space to reduce rents experience excellence and outlets the retail footprint new leasing and enhance models the mix 1 2
Slide 33: Changing the conversations with our customers
Landsec – Strategy review 2020 1 2 3 4 33 Changing the conversations with our customers Three themes emerged from research —Role for the physical store, but it needs to work much harder in the omni channel world —Strong willingness to collaborate to find solutions — No one solution to fit all needs
Slide 34: Determine sustainable rents
Landsec – Strategy review 2020 1 2 3 4 34 Determine sustainable rents — Sustainable rents could be 20-25% Store level sales projections below March ERVs Actual/ Commercial estimated — This moves occupancy costs balance retailer operating for our shopping centres profit margin Actual/ Determine to ar
Slide 35: Elevate the consumer experience: the pull
Landsec – Strategy review 2020 1 2 3 4 35 Elevate the consumer experience Creating the pull and push The “pull” The mix needs to —Be relevant and supported by catchment demographics — Be made up of sectors growing, not declining — Be curated as part of enhancing the consumer experience — Bring back
Slide 36: Elevate the consumer experience: the pull
Landsec – Strategy review 2020 1 2 3 4 36 Elevate the consumer experience Creating the pull and push The “pull” The journey through a shopping centre needs to be frictionless — Physical changes to aid the customer journey and increase efficiency — Quality environment and facilities — Easy parking —
Slide 37: Elevate the consumer experience: the push
Landsec – Strategy review 2020 1 2 3 4 37 Elevate the consumer experience Creating the pull and push The “push” — Marketing based on large imaginative concepts involving collaboration across the centre — Campaigns rolled out across centres — Synergies between our marketing spend and that of our cust
Slide 38: Operational excellence
Landsec – Strategy review 2020 1 2 3 4 38 Operational excellence Service charge — Reduced our annual costs by 3% this year, targeting a further 3% reduction by April 2021 — In response to Covid-19 reduced this year’s costs by a further 10% New leasing models — No “one size fits all” solution —Need g
Slide 39: Maximise our vibrant outlets
Landsec – Strategy review 2020 1 2 3 4 39 Maximise our vibrant outlets — Our outlets have performed well — Sales tracking at 91% of last years’ levels —Continue to offer income stability — Relatively shielded from online competition — Often most profitable channel for retailers — £14m planned enhanc
Slide 40: Repurposing space
Landsec – Strategy review 2020 1 2 3 4 41 Repurposing space — Looking at opportunities to reduce the amount of retail space — Introducing new uses to reinforce the ecosystem — Published a report ‘Reimagining empty Working with local authorities Repurposing space retail space’ — Actively looking at o
Slide 41: Our reimagine portfolio will look and feel different
Landsec – Strategy review 2020 1 2 3 4 42 Our “reimagine” portfolio will look and feel different — Sustainable rents will give us a realistic Gunwharf Quays, Portsmouth basis for decision making Trinity Leeds — A more collaborative approach to enhancing the consumer experience — Customer segmentatio
Slide 42: Landsec
Landsec
Slide 43: We will realise proceeds from the disposal of subscale sectors
Landsec – Strategy review 2020 1 2 3 4 45 We will realise proceeds from the disposal of subscale sectors Our strategy review identified three segments of the portfolio as subscale Xscape, Milton Keynes Novotel, Hammersmith The Bishop Centre, Taplow Leisure Hotels Retail parks 18 assets 23 assets 10
Slide 44: Grow through urban opportunities
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Slide 45: Our growth opportunities are underpinned by global trends
Landsec – Strategy review 2020 1 2 3 4 47 Our growth opportunities are underpinned by global trends Macro trends shaping our future markets, customers and competitors Demographic and Technologically Rapid urbanisation social change advanced living
Slide 46: Our growth opportunities are underpinned by global trends
Landsec – Strategy review 2020 1 2 3 4 48 Our growth opportunities are underpinned by global trends Macro trends shaping our future markets, customers and competitors Demographic and Technologically Rapid urbanisation social change advanced living Climate change and Borderless Shifts in global resou
Slide 47: Urban opportunities: principal considerations
Landsec – Strategy review 2020 1 2 3 4 49 Urban opportunities Principal considerations Cities need Mixed-use Residential Growth Lasting sense to continue focus potential of place to evolve 1 2 3 4 5 Co-ordination Local demand Likely to play London and We are experts of local will drive mix of a sign
Slide 48: New investment
Landsec – Strategy review 2020 1 2 3 4 50 New investment — Short-term capital investment recycled O2 shopping centre, Finchley Road from elsewhere in the portfolio — Targeting — Near-term returns — Mixed-use potential — London and regional cities — Variety of potential investment methods W12 shoppin
Slide 49: Experts in large-scale transformation
Landsec – Strategy review 2020 1 2 3 4 51 Experts in large-scale transformation Post-investment Victoria Pre-investment Victoria
Slide 50: Experts in large scale transformation – Nova
Landsec – Strategy review 2020 1 2 3 4 52 Experts in large scale transformation – Nova — Delivered mixed-use regeneration of a 5-acre site in Victoria — 700,000 sq ft across office, residential, convenience retail and leisure — Latest of a long line of complex developments successfully delivered Nov
Slide 51: Urban opportunities in our existing portfolio
Landsec – Strategy review 2020 1 2 3 4 53 Urban opportunities in our existing portfolio — Over 50 acres of land with 1.6m sq ft of existing use space —Potential to densify by a 5 times multiple, up to 8m sq ft — Includes up to c.7,000 new homes —Vibrant local communities — Well connected to existing
Slide 52: Landsec
Landsec
Slide 53: Landsec's strategy – what does it mean for our organisation and culture?
Landsec – Strategy review 2020 56 Landsec’s strategy – what does it mean for our organisation Hallmarks of our desired culture and culture? Building on the strengths of our people Lean and agile Striving for continuous — The expertise and capability of Landsec’s Greater levels of improvement empower
Slide 54: Five key performance drivers across the business
Landsec – Strategy review 2020 57 Five key performance drivers which apply across all aspects of the business Central to how we deliver our plan and sustain competitive advantage Development — Our expertise lends itself to large, complex, long-term projects that can focus on the needs of multiple cu
Slide 55: Landsec – Strategy review 2020
Landsec – Strategy review 2020
Slide 56: Reminder of our approach to risk and return
Landsec – Strategy review 2020 59 Reminder of our approach to risk and return Positioning the business for growth with an appropriate level of risk Total Generating The Leverage return “alpha” cycle We intend to focus on A greater focus on Our tolerance for We operate in a total return through value
Slide 57: Broad shape of our capital management over the next six years
Landsec – Strategy review 2020 60 Broad shape of our capital management over the next six years Estimated investment/divestment FY21 – FY26 Investment 2020 2021 2022 2023 2024 2025 2026 Divestment — As we implement our strategy, capital rotation will increase, starting with an initial phase of disin
Slide 58: Implications for leverage
Landsec – Strategy review 2020 61 Previous guidance on LTV range Implications for leverage — Our strategy is set against a backdrop of Normal gearing range of 35-45% increasing operational gearing from changes in +/- 10pp at the extremes of the cycle leasing structures and reducing lease lengths — O
Slide 59: Boosting total returns and delivering a sustainable dividend
Landsec – Strategy review 2020 62 Boosting total returns and delivering a sustainable dividend Short-term impact of Covid-19 and capital recycling followed by recovery — Asset recycling and positioning the business towards growth sectors will boost total returns over time — In the short-term, earnin
Slide 60: Summary
Landsec – Strategy review 2020 63 Summary — Our focus is on total return with a greater emphasis on generating alpha through higher operating leverage — Financial leverage will be lower to compensate — Short-term earnings will be impacted by Covid-19 and disposals — Overall impact of the revised str
Slide 61: Landsec
Landsec
Slide 62: What could the portfolio look like in 2026?
Landsec – Strategy review 2020 65 What could the portfolio look like in 2026? A more focused portfolio with greater growth potential March 2026 March 2020 Central London Regional retail Subscale sectors Urban opportunities
Slide 63: Our strategy: Repositioning Landsec for growth
Landsec – Strategy review 2020 66 Our strategy Repositioning Landsec for growth Our competitive advantage Our purpose Global forces of change Strategic priorities 1 2 3 4 Our central London Our retail business Capital from Through business (shopping centres and outlets) subscale sectors urban opport
Slide 64: Competitive advantage
Landsec – Strategy review 2020 67 Competitive advantage Best-in-class London portfolio Improved Positioning total returns and Landsec Strong track record significant value for growth for all stakeholders Urban regeneration potential Realistic reimagining for shopping centres
Slide 65: Expectations over the next 12 months
Landsec – Strategy review 2020 68 Expectations over the next 12 months — Reinstated dividend — Capital recycling in central London portfolio to realise significant value creation — Balanced progress on central London developments — Increasing range of office propositions — Clear progress towards a n
Slide 66: Note: Photographic content has been commissioned post-impact of Covid-19
Note: Photographic content has been commissioned post-impact of Covid-19