British Land Company PLC · LSE:BLND
British Land — Investor Presentation (May 2007)
41 slides from British Land's investor presentation, May 2007
Slide 1: Investor Presentation
Investor Presentation We are real estate investors and create value by actively managing, financing and developing prime commercial property to provide the environment in which modern business can thrive. Year ended 31 March 2007
Slide 2: Contents
Contents Strategy & Positioning New Initiatives What We Are 1 Leadership in European Out of Town Retail 20 Our Principal Business Areas 2 Why we like European Out of Town Retail 21 Record of Value Creation 3 Rental Growth Guaranteed – A ‘tactical’ initiative 22 Activist Strategy, Focused on Deliveri
Slide 3: What We Are
British Land at a Glance What We Are Largest UK REIT by assets (£16.9bn) – Equity market capitalisation £8.0bn1 – Total assets under management £21.3bn Market leadership in Office & Retail Focus on growth sectors – London offices – Out of Town retail Pro-active management style – Driven by c
Slide 4: Our Principal Business Areas
British Land at a Glance Our Principal Business Areas Retail Offices £10.3bn1 Retail Portfolio – 80% Out of Town £7.6bn1 Office Portfolio – 97% London Fund Management Development Managing £4.4bn of Third Party Capital 9m+ sq ft of Committed and Prospective Projects Concentration on markets where we
Slide 5: Record of Value Creation
Delivering on Our Promises Record of Value Creation Earnings Growth1 Total Shareholder Return2 Total Return3 25% 60% 30% 1 50% 1 25% 2 20% 2 40% 20% 1 15% 30% 15% 1 2 10% 2 1 20% 10% 5% 10% 5% 0% 0% 0% 5 YRS 3 YRS 1 YR 5 YRS 3 YRS 1 YR 5 YRS 3 YRS 1 YR British Land Major Peers4 FTSE Real Estate Inde
Slide 6: Activist Strategy, Focused on Delivering Outperformance
Strategy & Positioning Activist Strategy, Focused on Delivering Outperformance Building the business around customer needs and so capturing superior, cash flow driven “total return” arising from high occupancy and rental growth Seeking to “add-value” at each level of the business – Sector and ma
Slide 7: Delivering on our Promises – 2006/7
Strategy & Positioning Delivering on our Promises – 2006/7 Intensified Portfolio Reshaping Management and Culture Renewal £3.4bn (gross) asset turnover Chris Gibson-Smith as Chairman - £1,473m disposals Six new Board members in place - £1,938m acquisitions (2 Executive and 4 Non-Executive)
Slide 8: Value Creation from £3.7bn of Capital Recycling
Portfolio Reshaping Value Creation from £3.7bn of Capital Recycling Disposals Acquisitions Development Net Disciplined asset reviews to improve risk adjusted growth prospects Spend Investment1 – Sharpen sectoral focus £m £m £m £m – Recycling capital within ‘advantaged’ sectors Out of Town Retail (
Slide 9: Value Creation from £4bn Development Programme
Development Value Creation from £4bn Development Programme A key differentiator Euston Station NEQ, Regent’s Place Excellent progress to date – Construction & costs on budget – Capturing customer demand as expected Pipeline filling up – 508,000 sq ft planning application at Regent’s Place (NEQ
Slide 10: Portfolio - Positioned for Rental Growth
Portfolio Positioning Portfolio - Positioned for Rental Growth 56%1 Retail: 41%1 Offices: UK Market Forecast Average PMA vs CE 80% Out of Town 97% Central London ERV Growth pa - Next 5 Years2 Individual Forecasts Retail Retail Warehouses 3.4 – 4.1 Central London Warehouses Offices 23% 27% Shopping C
Slide 11: £14.5bn - Leadership in Retail (BL Share £10.3bn)
Retail £14.5bn1 - Leadership in Retail (BL Share £10.3bn1) British Land Retail Assets1 Distinctive portfolio of over 30m sq ft with leadership positions in – Retail parks In Town – Superstores Retail – Department stores £2.1bn (20%) 80% of retail assets located Out of Town Out of Town Retail – 8
Slide 12: Retail Strategy & Activity
Retail Asset Management Retail Strategy & Activity Strategy based on 4 themes Customer led strategy – driving £2.6bn (gross) of asset turnover – Sale of over £1bn of assets with slower rental growth prospects, principally Concentration on supply/ demand imbalances In Town retail and bulky goods
Slide 13: Retail Outlook – Investment Market
Retail Market Outlook Outlook – Investment Market Investment market more aligned with Equivalents Yields by Retail Sub-market1 occupational market May 2007 % Trending Shops – Prime 4.00 Weaker Demand strong and pricing still robust for prime. Shops – Secondary 5.35 Weaker Signs of slowing for se
Slide 14: Retail Outlook – Occupier Market
Retail Market Outlook Outlook – Occupier Market Challenging environment Out of Town Spending Increases1 – Retailers margin focused, location selective 60% – Incentives rising 50% – Consumer spending positive, but not at growth 50% 42% % of Retail Sales 2 levels of last 5 years 40% 25% Non-store 20
Slide 15: £7.6bn - Leadership in London Offices
Offices £7.6bn1 - Leadership in London Offices British Land Office Assets1 11m sq ft London portfolio – 6.4m sq ft of prime London office investments – 3.4m sq ft developments – 0.8m sq ft ‘look-through’ in Canary Wharf (10.8%) London Offices Positive rental growth outlook £7.4bn (97%) £44 psf
Slide 16: Office Strategy & Activity
Office Asset Management Office Strategy & Activity Strategy based on 5 themes Reshaping portfolio – £374m sales at 27.7% above valuation, plus sales agreed on EBRD Concentration on supply/ and Blythe Valley demand imbalances – £264m purchases primarily West End offices, £256m development spend –
Slide 17: Good Progress with Development Lettings
London Office Development Good Progress with Development Lettings York House Ludgate West Broadgate Tower & 201 Bishopsgate Completed on time and within 88,000 sq ft under offer to Charles 201 – 124,000 sq ft pre-let to budget Russell LLP Henderson for 20.5 years and 33,700 sq ft let to GIC
Slide 18: Carefully Timed & Customer Focused Development
London Office Development Carefully Timed & Customer Focused Development The York The Willis 35 Basinghall Ludgate The Broadgate Ropemaker Regent’s The Regent’s Building Building & One West Tower & 201 (593,000 sq ft) Place - Leadenhall Place - (137,000 sq ft) (491,000 sq ft) Coleman (127,000 sq ft)
Slide 19: Prospective Unbooked Development Profits - Update
Development Prospective Unbooked Development Profits - Update Developments £m Illustrative sensitivity of potential development surpluses6 to yield shift and rental growth (£m) March 2007 Valuation1 1,037 Average valuation yield % Costs to Complete2 1,957 £m +25bp 5.27% -25bp -50bp Estimated headlin
Slide 20: Office Outlook – Investment Market
London Office Market Outlook Outlook – Investment Market London’s stature is growing F&BS London Employment Growth Strong1 – F&BS output forecast to outstrip GDP 350 1150 – F&BS employment to grow by 150,000 by 2010 Number '000s Number '000s 1050 325 Strong investment market (£4.2bn YTD) 950 300
Slide 21: Office Outlook – Occupier Market
London Office Market Outlook Outlook – Occupier Market Take-up of 12m sq ft in London over last Central London Vacancy Rates1 12 months, 6.8m sq ft in City 16 14 – 26% reduction in vacancy rates to 5.0%, Vacancy Rate % 12 Grade A 3.0% 10 – City 34% reduction to 6.1% 8 6 Rents have grown strongly
Slide 22: Leadership in European Out of Town Retail
New Initiatives Leadership in European Out of Town Retail Sq ft Value1 BL Average Average Average Assets now owned or Share1 Capital ERV Initial managed total €1.7bn1 Value Yield4 – Assets owned or committed ‘000 €m €m € psf € psf % in PREF €1,096m1,2 Spain 4,136 1,154 558 279 143 5.23 – €613m1 JV
Slide 23: Why we like European Out of Town Retail
New Initiatives Why we like European Out of Town Retail Logical extension of UK market leadership Retail Warehouse Parks Under-represented in Europe1 20 ShoppingCentres Shopping Centres Under provision of “out of town” shopping in <5% Retail RetailWarehouses Warehouses 15 58% <5% % of which Reta
Slide 24: Rental Growth Guaranteed – A 'tactical' initiative
New Initiatives Rental Growth Guaranteed – A ‘tactical’ initiative Portfolio with fixed or indexed rent Portfolio RPI-Linked/ Value increases now amounts to £1.6bn Fixed £m Attractive initial yields with security of income Debenhams Fixed 691 and good cash flow growth from fixed uplifts Tesco JV
Slide 25: Market Conditions
Market Conditions Investment Markets Occupier Markets 2006/7 a strong year as repricing of asset Outlook positive with economy strong class in relation to other financial assets – Service industry growth completed – Employment strong – Consumer spending positive 91% of BL asset sales at or abo
Slide 26: Property Return Prospects in “Fair Value” Zone
Market Fundamentals 1 Property Return Prospects in “Fair Value” Zone Return Prospects - Property Return Prospects – Indexed Gilts Return Prospects - UK Equities Market Equivalent Yield2 5.2% Market Rental Growth3 2.7% Yield5 1.5% Dividend Yield7 3.0% Asset Total 7.9% + gearing, development & ++ asse
Slide 27: REIT Opportunity
REITs REIT Opportunity Expect investors to re-look at: – Allocations to property, and quoted vs unquoted/direct holdings – Valuations relative to NAV, free of historic fiscal drag and with higher dividend payouts Opportunity to: – Buy/sell where previously inhibited by tax – Increase dividends w
Slide 28: Dividends
Financial Performance Dividends 1st full year REIT dividend Dividends now paid quarterly 35 to be at least 33p2 Q4 dividend 8.25p per share, 8.25p 1st REIT + >70% above payable in August. Total 2006/7 Gross Dividend (pence per share) 30 dividend (Q4 06/07) mandatory dividend dividend 20.35p, up
Slide 29: Well Placed for the “Post Yield Shift” Environment
Summary Well placed for the “Post Yield Shift” Environment Property Value Added Distinctive leadership in the two sectors most favoured for growth over next 5 Sector & market selection years – London Offices Asset selection & creation – Out of Town “Open A1” Retail Outstanding development pr
Slide 30: Appendix
Appendix Year ended 31 March 2007
Slide 31: Financial Highlights
Financial Highlights Financial Highlights 2007 2006 Change Underlying Profit before Tax1 £257m £228m 13% Underlying Diluted Earnings per Share1 43p 36p 22% Dividend per share 20.35p 17.0p 20% Net Assets2 (after REIT charges and refinancings) £8.9bn £7.8bn 14% NAV per share2 - After REIT charges and
Slide 32: Attractive Rental Growth
Financial Performance Attractive Rental Growth Gross rents 6% lower due to asset Gross rental income 2007 2006 sales % £m £m Properties owned throughout1 3.5% like for like rental income Retail +4.0% 325 312 growth: Offices +2.6% 219 213 – Retail uplift of 4.0% due to rent Other +5.6% 23 22 revi
Slide 33: Secure & Attractive Risk Profile
Finance and Capital Structure Secure & Attractive Risk Profile Prudent financial ratios, Key Financial Ratios2 especially given low income risk 2007 2006 – Leases average 14.7 yrs to first break LTV – Group 43%3 42% – Vacancy rate of 3.3% (1.6% underlying1) LTV – inc. share of Funds & JVs 47%3 46%
Slide 34: 5.2m sq ft of Committed Projects
Development Programme 5.2m sq ft of Committed Projects PC Sq ft March 2007 Costs to Notional Rent Sales ‘000 Value £m Complete £m Interest £m1 £m2 £m4 London Offices: The Broadgate Tower & Q3 2008 822 369 174 17 42.1 - 201 Bishopsgate The Leadenhall Building Q1 2011 612 114 368 46 36.9 - Ropemaker Q
Slide 35: Development Prospects
Development Programme Development Prospects Sq ft March 2007 Costs to Notional Rent Sales Sector Planning ‘000 Value £m Complete £m Interest £m1 £m2,3 £m4 West End Office, NE Quadrant 508 38 222 13 17.6 64 Submitted Residential Colmore Row Provincial Office 249 26 70 9 8.1 - Pending Outline/ Blythe
Slide 36: Broadgate 2020
Proactive Asset Management Broadgate 2020 Broadgate currently low rise and low Highest Redevelopment density Potential Moderate Redevelopment – Buildings range from 7-13 floors Potential Low Redevelopment – Gross plot ratio of 5:1 Potential Narrowing of view corridors will offer increased future
Slide 37: Sustainable Income: Long Leases & Low Vacancy
Portfolio Statistics Sustainable Income: Long Leases & Low Vacancy Average lease term to first break, Vacancy Rate % years March 2007 March 2006 Adj. March 20071 March 2007 March 2006 Total Portfolio 14.7 15.0 1.6 3.3 4.1 Retail Warehouses 13.4 14.4 0.8 2.2 3.0 Superstores 20.4 20.9 - - - Shopping C
Slide 38: Yield Profile
Portfolio Statistics Yield Profile Initial Initial Yield adding Reversionary Net Equivalent Yield1 % back rent frees1 % Yield2 % Yield3 % Retail Warehouses 3.8 3.9 4.6 4.3 Superstores 4.4 4.4 4.7 4.3 Shopping Centres 4.6 4.8 5.2 4.8 Department Stores 4.5 4.5 5.1 5.0 High Street 4.6 4.7 5.1 4.7 All R
Slide 39: London Office Market - Rental Growth Forecasts
London Office Market Outlook London Office Market - Rental Growth Forecasts Average Agents’ Consensus British Land Average Agents’ Consensus British Land City Rental Growth Forecasts Rent Reviews West End Rental Growth Forecasts Rent Reviews Rent Range Headline Sq ft for Rent Range Headline Sq ft fo
Slide 40: UK REITs
REITs UK REITs British Land became a REIT on 1 Jan 2007, with the largest UK property portfolio, and market cap within the world’s top 5 REITs – UK rental income & capital profits now largely tax free – Dividends to be paid quarterly – first full year REIT dividend will total at least 33p, 94% inc
Slide 41: Disclaimer
Disclaimer The information contained in this presentation has been extracted largely from the Preliminary Results Announcement for the year ended 31 March 2007. General property market data has been extracted from Jones Lang LaSalle, Knight Frank, PMA, Verdict and other agents’ reports (please note
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