British Land Company PLC · LSE:BLND
British Land — Investor Presentation (March 2014)
56 slides from British Land's investor presentation, March 2014
Slide 1: Investor Presentation March 2014
WWW.BRITISHLAND.COM INVESTOR PRESENTATION MARCH 2014
Slide 2: Introduction – A Leading UK REIT
INTRODUCTION – A LEADING UK REIT £17.1bn owned and managed portfolio • £17.1bn owned and managed portfolio • Focused on UK Retail and LONDON OFFICES London Offices 17% 23% • Delivering superior total returns by Creating Places People 12% 22% Prefer 17% 4% 5% UK RETAIL City of London West End Other D
Slide 3: Key Points
KEY POINTS Strongly • Strong recent results 1 performing business • Continued outperformance Executing • Successfully deployed equity placing proceeds 2 smartly, according to plan • Delivering 2010 developments and replenishing the pipeline • Repositioning Retail portfolio Positive • Increased econo
Slide 4: Consistently Outperforming the Market
CONSISTENTLY OUTPERFORMING THE MARKET • Significant outperformance vs IPD, +9.2% since September 2010 (+260bps pa) • Outperformed IPD on a 5 year (+230bps pa) and 10 year basis (+70bps pa) HY to 30 September 2011 2012 2013 H1 2014 Total Accounting Return 17.7% 9.5% 4.6% 6.8% Total Property Return 13
Slide 5: Strongly Improving Operating Performance in Both Offices and Retail
STRONGLY IMPROVING OPERATING PERFORMANCE IN BOTH OFFICES AND RETAIL • Good first half results, business performing well • Continued improvement in Q3 – Like-for-like occupancy +30 bps to 97.1% – Investment lettings/renewals +5.3% Vs ERV (Retail +3.3%, Office +6.8%) HY to 30 September Change UK Valua
Slide 6: Positive Performance Driven By…
POSITIVE PERFORMANCE DRIVEN BY… • Strong position in retail large and high quality retail portfolio • Increasing focus on London/South East >60% of portfolio in South East • Successful asset management good leasing volumes; ahead of ERV • £1.2bn development programme started in 2010 IRRs >30% • Flex
Slide 7: Valuation Performance
VALUATION PERFORMANCE UK Valuation Drivers £m TOTAL VALUATION MOVEMENT 320 £22m £90m £309m 220 120 20 -80 H1 2012/13 H2 2012/13 H1 2013/14 Asset Management Development Yield Movement Total Valuation 6
Slide 8: Strongly Performing Business: Retail
STRONGLY PERFORMING BUSINESS: RETAIL Marked improvement in Retail: strengthening capital returns • Occupancy up to 98.4%; rents in admin low at 0.2% (0.9% in March 2013) • Lettings ahead of ERV (3.3% in Q3, 3.8% in H1) • Continue to outperform on footfall: flat in Q3 vs decline of 3% in broader mark
Slide 9: Continued Retail Polarisation
CONTINUED RETAIL POLARISATION Retail ERV Growth Retail Occupancy Indexed March 2010 = 100 % 105 97.4 98.0 100 94.7 95.3 95 88.3 88.9 90 85 Mar Sep Mar Sep Mar Sep Mar Sep Mar 13 Sep 13 10 10 11 11 12 12 13 13 BL All Retail IPD All Retail IPD Secondary BL All Retail IPD All Retail IPD Secondary 8
Slide 10: Strongly Performing Business: Offices
STRONGLY PERFORMING BUSINESS: OFFICES Step up in letting activity across investment and developments • Encouraging interest from a broad range of new and existing occupiers • 579,000 sq ft of lettings/extensions year to date; 7.9% ahead of ERV • 30 Brock St, Regent’s Place fully let 3 months after p
Slide 11: Executing Smartly and According to Plan: Equity Placing
EXECUTING SMARTLY AND ACCORDING TO PLAN: EQUITY PLACING • Raised £493m of equity in March 2013 at 550p per share • Fully deployed ahead of schedule • £790m acquisition spend including £100m of development opportunities • NIY of 5.7% on £690m of income producing investments • £230m of prospective dev
Slide 12: Deployment of Equity Placing: Paddington Central
DEPLOYMENT OF EQUITY PLACING: PADDINGTON CENTRAL Acquired in July for £470m Fully let yield of 6.2% Significant opportunity to create value from asset management and development Third of vacant office space already let at terms ahead of ERV on acquisition 2.3% valuation increase by September 2013 In
Slide 13: Delivering Rental Growth at Regent's Place
DELIVERING RENTAL GROWTH AT REGENT’S PLACE 2009/10 2010/11 2011/12 2012/13 2013/14 10/20 Triton St 20 Triton St 10/30 Brock Street £ Debenhams Manchester City FC PSF 70psf 70 65 60 55 50 45 42.50psf 12
Slide 14: Completing 2010 London Developments
COMPLETING 2010 LONDON DEVELOPMENTS • 817,000 sq ft completed and 309,000 sq ft pre-lets agreed/under offer this year; now 70% pre-let • Good demand for Residential; pre-sales secured above valuation; now over 80% pre-sold 199 BISHIOPSGATE EC2 10 PORTMAN SQUARE, W1 10-30 BROCK STREET, NW1 MARBLE ARC
Slide 15: Delivering Strong Returns from 2010 Office Development Programme
DELIVERING STRONG RETURNS FROM 2010 OFFICE DEVELOPMENT PROGRAMME • Profit on cost over 40%; IRRs of c30% £m £490m £423m 90 £391m £359m £321m 126 £257m 175 192 188 400 192 297 216 133 167 65 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Profit Taken Profit to Come 14
Slide 16: Replenishing London Development Pipeline
REPLENISHING LONDON DEVELOPMENT PIPELINE • 2.1m sq ft next phase London and retail development (recently committed and near-term) • £1.1bn total development cost • Estimated profit to come of around £275m Clarges The Aldgate Yalding 4 Kingdom Shoreditch 5 Kingdom Estate Hempel Phase 1 House Street E
Slide 17: Continuing to Reposition Retail Portfolio
CONTINUING TO REPOSITION RETAIL PORTFOLIO • £304m of UK retail assets sold; Basildon Eastgate sold recently for £89m, ahead of valuation • £385m bought year to date; SouthGate, Bath and HUT units • £200m of disposals under offer/in the market Retail Asset Sales (Year to Date) No of Assets Sale Price
Slide 18: Investing in the Right Retail Locations: SouthGate, Bath
INVESTING IN THE RIGHT RETAIL LOCATIONS: SOUTHGATE, BATH 50% acquired for £101m 430,000sq ft Top 10 Bath as a UK Tourist Destination 18m Visitors pa 17
Slide 19: Well Placed and Positive About the Future
WELL PLACED AND POSITIVE ABOUT THE FUTURE • Improving sentiment across key markets – London to remain strong – Higher rents in offices – Decent read through for development and residential – Improving confidence in retail – Improving outlook for right type of retail assets • Expect to continue to be
Slide 20: Financial Position a Core Strength of British Land
FINANCIAL POSITION A CORE STRENGTH OF BRITISH LAND • Average interest rate of 4.2% Diverse Debt Profile (30 September 2013) £0.6bn • 75% fixed over 5 years £0.9bn • Average maturity of 9 years • £1.3bn of facilities in place for more than two years £1.7bn £1.7bn • £710m of new financing arranged yea
Slide 21: Clear Priorities
CLEAR PRIORITIES Driving • Focusing on leasing and asset management 1 growth from standing investments • Bedding down new assets such as Ealing Broadway and Southgate, Bath • Completing and letting up our 2010 programme Delivering • Starting on site on recently committed developments 2 returns from
Slide 22: Appendices
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Slide 23: Major Holdings
MAJOR HOLDINGS As at 30 September 2013 BL Share Sq ft Rent Occupancy Lease Length (excl. developments under construction) % 000’s £m pa1 Rate %2 yrs3 1 Broadgate, London EC2 50 3,963 177 97.0 7.6 2 Regent's Place, London NW1 100 1,589 67 97.6 9.6 3 Meadowhall Shopping Centre, Sheffield 50 1,374 82 9
Slide 24: UK Portfolio Weighting
UK PORTFOLIO WEIGHTING As at 30 September 2013 (%) 2012 2013 (Current) 2013 (Pro forma)¹ Retail parks 24.5 22.9 20.8 Superstores 12.6 11.7 10.9 Shopping centres 17.6 17.3 15.7 Department stores 4.6 4.6 4.1 Leisure 3.0 2.8 2.6 UK Retail 62.3 59.3 54.1 City 17.1 16.5 17.3 West End 18.4 22.0 25.3 Provi
Slide 25: Top Customers & Customer Split by Industry
TOP 20 CUSTOMERS & CUSTOMER SPLIT BY INDUSTRY As at 30 September 2013 % of Total Rent Customer Split by Industry (%) Tesco plc 7.3 Sainsbury Group 5.9 2% Debenhams 5.7 6% UBS AG 3.2 15% Home Retail Group 2.7 11% Kingfisher (B&Q) 2.6 HM Government 2.5 18% Arcadia Group 2.1 14% Next plc 2.1 Virgin Act
Slide 26: UK Portfolio Valuation by Sector
UK PORTFOLIO VALUATION BY SECTOR Group JVs & Funds Total Change %2 As at 30 September 2013 £m £m1 £m H1 Retail parks 1,755 814 2,569 1.1 Superstores 118 1,188 1,306 2.0 Shopping centres 756 1,181 1,937 0.3 Department stores 512 1 513 6.5 Leisure 308 3 311 2.0 UK Retail 3,449 3,187 6,636 1.5 City 57
Slide 27: UK Portfolio Net Yields
UK PORTFOLIO NET YIELDS1 As at 30 September 2013 EPRA Net Initial EPRA Topped- Overall Topped- Net Net (excl. developments) Yield % Up Net Initial Up Net Initial Reversionary Equivalent 2 Yield % Yield%3 Yield % Yield % Retail parks 5.5 5.7 5.8 5.8 5.9 Superstores 5.1 5.1 5.1 5.1 5.1 Shopping centre
Slide 28: UK Lease Length and Occupancy
UK LEASE LENGTH AND OCCUPANCY As at 30 September 2013 Average Lease Length (yrs) Occupancy Rate (%) Occupancy To Expiry To Break Occupancy (underlying)1 Retail parks 9.5 8.6 95.7 97.4 Superstores 15.0 15.0 100.0 100.0 Shopping centres 9.6 8.8 95.6 97.0 Department stores 27.4 24.1 99.5 99.5 Leisure 2
Slide 29: UK Annualised Rent & Estimated Rental Value (ERV)
UK ANNUALISED RENT & ESTIMATED VALUE (ERV) As at 30 September 2013 Annualised Rents (Valuation Basis) £m1 ERV £m Average Rent (£psf)2 (excl. Developments) Group JVs & Funds Total Total Contracted ERV Retail parks 103 46 149 159 23.2 23.8 Superstores 7 63 70 70 21.8 21.7 Shopping centres 50 66 116 12
Slide 30: UK Rent Subject to Open Market Rent Review
UK RENT SUBJECT TO OPEN MARKET RENT REVIEW 12 months to 30 September (£m) 2014 2015 2016 2017 2018 2014-16 2014-18 Retail parks 18 17 22 16 21 57 94 Superstores 8 23 13 4 4 44 52 Shopping centres 14 17 14 14 12 45 71 Department stores - - 5 - 1 5 6 Leisure - - - - - - - UK Retail 40 57 54 34 38 151
Slide 31: UK Rent Subject to Lease Break or Expiry
UK RENT SUBJECT TO LEASE BREAK OR EXPIRY As at 30 September (£m) 2014 2015 2016 2017 2018 2014-16 2014-18 Retail parks 4 7 7 9 13 18 40 Superstores - - - - - - - Shopping centres 10 7 12 11 6 29 46 Department stores - - - - - - - Leisure - - - - - - - UK Retail 14 14 19 20 19 47 86 City 1 1 19 - 8 2
Slide 32: ERV Resetting to Market
ERV RESETTING TO MARKET Annualised at 30 September (£m pa) 2014 2015 2016 2017 2018 2014-16 2014-18 ERV Expiring – existing portfolio1 20 19 39 33 34 78 145 Speculative developments – City 10 1 - - - 11 11 Speculative developments – West End 9 - 6 - - 15 15 Speculative developments – Retail 3 1 - -
Slide 33: UK Contracted Rental Increases (Cash Flow Basis)
UK CONTRACTED RENTAL INCREASES (CASH FLOW BASIS) Annualised at 30 September (£m pa) 2014 2015 2016 2017 2018 2014-16 2014-18 Expiry of rent free periods – standing portfolio 38 9 9 1 - 56 57 Expiry of rent free periods – development pre-lets - 3 21 5 3 24 32 Fixed uplifts (EPRA basis) 1 1 - - 1 2 3
Slide 34: Development Programme Driving Future Performance
DEVELOPMENT PROGRAMME DRIVING FUTURE PERFORMANCE • 2010 committed office programme already 68% pre-let, well ahead of plan • Recently committed programme; profit on cost 25% • Total pipeline of 3m sq ft Sq ft ‘000 Current Dev. Cost £m 2010 Committed Development Programme 2,666 1,335 Recently Committ
Slide 35: 2010 Development Programme
2010 DEVELOPMENT PROGRAMME 12 months to 30 September (£m) Sector BL Share Sq ft PC Current Cost to ERV Pre-let Resi End Calendar Value Complete Value3 % '000 Year £m £m1,6 £m2 £m £m 4 10 - 30 Brock St, Regents Place Mixed Use 100 505 Completed 360 6 20.1 17.1 115 5 Broadgate Offices 50 710 2015 195
Slide 36: Recently Committed Development Programme
RECENTLY COMMITTED DEVELOPMENT PROGRAMME 12 months to 30 September (£m) Sector BL Share Sq ft PC Current Cost to ERV Pre-let Resi End Calendar Value Complete Value % '000 Year £m £m1,4 £m2 £m £m 3 The Clarges Estate Mixed Use 100 193 2017 170 179 5.6 - 388 Hereford Retail 100 310 2014 35 40 5.5 2.8
Slide 37: Near-Term and Prospective Developments
NEAR-TERM AND PROSPECTIVE DEVELOPMENTS As at 30 September 2013 (£m) BL Share Sq ft Total Cost Status % '000 £m1 Near-term Pipeline The Shoreditch Estate Offices 100 322 165 Pre-submission 2 5 Kingdom Street Offices 100 240 154 Consented 4 Kingdom Street Offices 100 145 93 Consented Surrey Quays (Ext
Slide 38: Estimated Future Development Rental Income (Accounting Basis)
ESTIMATED FUTURE DEVELOPMENT RENTAL INCOME (ACCOUNTING BASIS) PC Gross Rental Income (Accounting Basis)1 £m – 12 mths As at 30 September 2013 Calendar Year Sep 14 Sep 15 Sep 16 Sep 17 Sep 18 Committed Developments 5 Broadgate Q1 2015 Contracted - 9 18 18 18 The Leadenhall Building Q2 2014 Contracted
Slide 39: Estimated Future Development Spend and Capitalised Interest
ESTIMATED FUTURE DEVELOPMENT SPEND AND CAPITALISED INTEREST PC Prelet ERV Cost to complete £m (excluding notional interest) – 6 mths As at 30 September 2013 Calendar Year £m Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 5 Broadgate 2015 19.2 34 25 28 The Leadenhall Building 2014 8.6 19 11 13 Marble Arch
Slide 40: Shortage of Quality Space
SHORTAGE OF QUALITY SPACE Central London Development Completions m sq ft 16 14 12 10 8 6 4 2 - 90 91 92 93 94 95 96 97 98 99 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Completions U/C pre-let U/C speculative 10 yr average Grade A take-up Source: CBRE 39
Slide 41: Office Market Rental Outlook
OFFICE MARKET RENTAL OUTLOOK Rental Growth Driven by Imbalance between Supply and Demand £ psf 140 120 100 80 60 40 20 Actual Forecast - 1990 1991 1993 1994 1996 1997 1999 2000 2002 2003 2005 2006 2008 2009 2011 2012 2014 2015 2017 West End City Source: CBRE (historic) and Average Agents' Consensus
Slide 42: Delivering Future Growth – Focus on London and the South East
DELIVERING FUTURE GROWTH – FOCUS ON LONDON AND THE SOUTH EAST Regents Place Paddington Aldgate Central Shoreditch Leadenhall Broadgate Ealing Broadway Marble Arch Clarges Surrey Quays & Paddington Central Harmsworth Recent acquisitions Quays BL assets/concentration Eden Walk Continue to move West Tr
Slide 43: Clarges Estate, Mayfair
CLARGES ESTATE, MAYFAIR fv, British Land 4 42
Slide 44: Regent's Place
REGENT’S PLACE [Regent's Place Management Offic ED Sainsbury's Local Pret a Manger =O tax 10 Brock Street Starbucks € Pod Regent's Park Wasabi vn Tri 7,1 Street E Eat Triton Triton Squarel 13 14 _ Square NatWest Union Bar and Gri Giovanni Rana Regent's Park ‘UNDERGROURD: BARERLOO UNE New Diorama The
Slide 45: Paddington Central
PADDINGTON CENTRAL Key: BL ownership Non BL ownership Multi-let offices Multi-let offices 268,000 sq ft 143,000 sq ft 200 residential units Development sites sold on long leases; (355,000 sq ft) + retail at ground floor Crossrail box below (80,000 sq ft) FOUR KINGDOM STREET New Hammersmith & FIVE KI
Slide 46: Broadgate
BROADGATE BROADGATE ‘SHOREDITCH ig aera © EARL Steerer spratrietps > onus SET ie) uvEnpoot sTHEE EON eu €moorcare or Lo Raatoss orn in = or = io] ~ o 2 Oho Ray, 45 @ TOILET (Q) DISABLED ACCESS LONDON UNDERGROUND STATION MAIN LINE STATION BUS STOP BARCLAYS CYCLE HIRE CYCLE RACK TAXI RANK CAR PARKING
Slide 47: Income Statement
INCOME STATEMENT HY to 30 September H1 2012/13 H1 2013/14 Change Net Rental Income (£m) 272 275 1.1% Fees & Other Income (£m) 8 7 Administrative Expenses (£m) (39) (38) Net Finance Costs (£m) (104) (98) Underlying PBT (£m) 137 146 +6.6% Underlying EPS (p) 15.2p 14.5p (4.6)% 46
Slide 48: UK Gross Rental Income – Sectoral
UK GROSS RENTAL INCOME1 – SECTORAL HY to 30 Sep 2013 Annualised as at 30 Sep 2013 (Accounting Basis) £m Group JVs & Funds Total Group JVs & Funds Total Retail parks 52 21 73 102 45 147 Superstores 5 32 37 7 63 71 Shopping centres 27 30 57 50 64 114 Department stores 16 - 16 34 - 34 Leisure 14 - 14 2
Slide 49: A Platform for Future Income Growth
A PLATFORM FOR FUTURE INCOME GROWTH Cash Flow Basis Accounting Basis Annualised Gross Rents £m £m Current Passing Rent 5495 Expiry of Rent-free Periods 571 5731 Fixed, Minimum Uplifts 13 2010 Non-Completed Developments Pre-let 28 24 Recently Committed Developments Pre-let 4 4 Total Contracted 651 60
Slide 50: Reconciliation of EPRA NAV & NNNAV
RECONCILIATION OF EPRA NAV & NNNAV As at 31 Mar 13 30 Sep 13 £m Pence £m Pence Balance Sheet (IFRS) Net Assets 5,687 568 6,106 604 Deferred tax arising on revaluation movements 14 1 5 - Mark to market on effective cash flow hedges and related debt 198 20 138 14 adjustments Adjust to fully diluted on
Slide 51: Strength of Balance Sheet Metrics
STRENGTH OF BALANCE SHEET METRICS Proportionally Consolidated 31 Mar 2013 30 Sep 2013 Loan to Value (LTV) 40.2% 42.3% Average Interest Rate 4.6% 4.2% Interest Cover 2.3x 2.5x Average Maturity of Drawn Debt (years) 9.9 8.9* Group 31 Mar 2013 30 Sep 2013 Loan to Value (LTV) 24.2% 28.5% Average Interes
Slide 52: Debt Maturity – Group
DEBT MATURITY – GROUP1 £m 1,000 800 600 400 200 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Year to 30 September Debentures & Loan Notes Private Placements Convertible Bonds 1 Pro forma for the drawdown of the £200m 2014 U
Slide 53: Debt Maturity – Joint Ventures and Funds
DEBT MATURITY – JOINT VENTURES AND FUNDS1 £m 1,000 800 600 400 200 0 2014 2015 2016 2017 2018 2019-2023 2024-2036 Year to 30 September JVs - Securitisations JVs - Bank Drawn Funds - Bank Drawn JVs - Bank Undrawn Funds - Bank Undrawn 1 At British Land share 52
Slide 54: Gross and Net Debt Reconciliation
GROSS AND NET DEBT RECONCILIATION As at 30 September 2013 (£m) Group JVs & Funds Total Gross debt (principal value) 2,687 2,507 5,194 IFRS Adjustments: Issue costs and premia (7) (11) (18) Fair value hedges 61 - 61 Other items 20 - 20 Gross Debt (IFRS basis) 2,761 2,496 5,257 Market value of derivat
Slide 55: UK Property Market – Yield Gap vs 10 Year Gilts
UK PROPERTY MARKET- YIELD GAP VS 10 YEAR GILTS % 12 UK 10 Year Gilt Yield IPD All Property Net Initial Yield 10 8 6 4 2 0 1990 1998 2005 2012 Yield gap % 5 3 1 (1) (3) (5) 54
Slide 56: Number of Shares
NUMBER OF SHARES Number of shares (m) Mar 13 Sep 13 Basic Weighted Average 895 993 Period End 986 999 Diluted Weighted Average 901 997 Period End 1,001 1,011 55