British Land Company PLC · LSE:BLND
British Land — H1 2002 Earnings Presentation
63 slides from British Land's earnings presentation, Nov 27, 2002
Slide 1: Results Presentation Six months ended 30 September 2002
Results Presentation Six months ended 30 September 2002 27 November 2002
Slide 2: Agenda
2 Agenda • Property Review Bob Bowden • Financial Review Graham Roberts • Outlook John Ritblat 1
Slide 3: Property Review
#4, British Land Property Review
Slide 4: Portfolio Valuation
4 Portfolio Valuation As at 30 Sept 2002 £m % Change % Offices: City 3,199 34.1 (3.6) West End 657 7.0 1.4 Business parks and Provincial 191 2.1 (0.8) All Offices 4,047 43.2 (2.7) Retail: Shopping Centres 1,746 18.6 0.9 Supermarkets 1,145 12.2 4.6 Retail Warehouses 998 10.7 4.8 Shops 377 4.0 4.7 All
Slide 5: Portfolio Analysis
5 Portfolio Analysis 46% : Retail 43% : Offices 37% : Out of Town 41% : Central London West End Offices Shopping Centres 7% 19% (Meadowhall 14%) City Offices 34% (Broadgate 29%) Supermarkets 12% Business Parks and Retail Warehouses Provincial Offices 11% Developments Shops 2% 4% 6% Industrial and Le
Slide 6: Sales and Purchases
6 Sales and Purchases Total BL Share Number of Six months ended 30 Sept 2002+ £m £m properties Sales* 350 186 69 Purchases 74 74 3 Net Sales 276 112 66 + Includes sales and purchases between the JVs accounts date and 30 Sept 2002 1 * Completed sales of £300m and exchanged contracts for the sale of a
Slide 7: Income Profile
7 Income Profile Sept 2002 £m March 2002 £m Current: Annualised net rents 526.0 524.6 Reversions+ 81.2 88.5 Total 607.2 613.1 Developments (BL’s Share): Committed projects ERV* 53.5 54.2 Development prospects ERV 100.7 102.0 Total 154.2 156.2 + Of the total, £75.7m is expected to be realised within
Slide 8: Current Reversions: Next 5 Years
8 Current Reversions: Next 5 Years As at 30 Sept 2002 Annualised Reversions Reversionary (excluding developments) net rents £m (5 yrs) £m net yield (5 yrs) Offices: City 194.1 20.0 6.7% West End 30.6 17.1 7.3% Business parks and Provincial 17.2 0.4 9.2% All Offices 241.9 37.5 6.9% Retail: Shopping C
Slide 9: Completed Developments (BL's Share)
9 Completed Developments (BL’s Share) Completed 0.5m sq ft at a cost of £19.9m and ERV of £3.2m pa Project Tenants Sq ft Construction ERV Contracted (100% net) Cost Rent Thatcham+ 100% BL Gazeley Scottish & Newcastle 355,900 £6.77m £1.42m £1.42m Colchester 100% Comet 14,500 £6.92m £0.64m £0.64m Tees
Slide 10: Committed Developments (BL's Share)
10 Committed Developments (BL’s Share) Sept 2002 March 2002 Net area (100%) 1,455,600 sq ft 1,590,000 sq ft Construction cost £394.7m £415.5m Cost to complete £269.8m £336.0m ERV £53.5m £54.2m Projects Prelettings Sq ft Construction ERV+ PC Date (by sq ft) (100% net) cost 1 Plantation Place 69% Acce
Slide 11: Further Income: Next 5 Years
11 Further Income: Next 5 Years Committed Not Committed Total £m £m £m Current annualised net rents 526.0 - 526.0 Reversions within 5 years 13.9 61.8 75.7 Committed developments 21.2 32.3 53.5 Total 561.1 94.1 655.2 1 As at 30 Sept 2002
Slide 12: Long Lease Profile
12 Long Lease Profile As at 30 Sept 2002 Weighted average lease term yrs Vacancy (excluding developments and residential+) To expiry To first break rate Offices: City 14.7 11.3 0.6% West End 12.4 10.3 9.7% Business parks and Provincial 13.1 8.8 0.3% All Offices 14.3 11.0 2.0% Retail: Shopping Centre
Slide 13: Strong Tenant Base
13 Strong Tenant Base Top 30 tenants represent c.60% of total rental income Top 30 tenants by rental income+ 1. J Sainsbury 11. Scottish & Newcastle 21. Allders 2. Tesco 12. A M P 22. Next 3. U B S 13. Somerfield 23. Ashurst Morris Crisp 4. Lehman Brothers 14. Credit Lyonnais 24. Legal & General 5.
Slide 14: Broadgate
14 Broadgate Sept 2002 March 2002 Valuation £2,747m £2,836m Equivalent yield 6.23% 6.23% Estimated rental value £psf £52.50 £55.00 Average office passing rent £psf £46.60 £45.40 Total passing rent pa £160.5m £155.9m Weighted average lease term: - to expiry 15.8yrs 16.3yrs - to first break 12.7yrs +
Slide 15: Broadgate Rent Reviews
15 Broadgate Rent Reviews • 5 reviews outstanding on 463,300 sq ft net office space with an average passing rent of £42.14 psf Building Tenant Review Date Sq ft 1 Finsbury Avenue UBS Sept 2002 262,400 2 Finsbury Avenue UBS Sept 2002 100,500 3 Finsbury Avenue Henderson June 2002 73,300 199 Bishopsgat
Slide 16: Broadgate Committed Income
16 Broadgate Committed Income % of income remaining (to first break) 100 99 98 97 97 84 84 73 71 71 67 61 54 54 54 44 % % % % % % % % % % % % % % % % 180 160 140 120 100 £m pa 80 60 40 20 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year ending 30 September Curre
Slide 17: Regent's Place
17 Regent’s Place Sept 2002 March 2002 Valuation £517m £504m Equivalent yield 6.52% 6.73% Estimated rental value £psf £28.00- £46.00 £24.50-£48.50 Average office passing rent £psf £26.80 £26.20 Total passing rent pa £18.3m £18.0m Total rent pa (after rent free periods expire) £26.3m + Weighted avera
Slide 18: Regent's Place, NW1
18 Regent’s Place, NW1 4.5 acres further development potential: North-east quadrant South-west corner (Crown Estates) Each with potential for between 500,000 – 800,000 sq ft In total between c. 1m – 1.6m sq ft 350 Euston Road (130,000 sq ft) 32,000 sq ft let to Elexon at £48.50 psf in Aug 2002 15,00
Slide 19: Meadowhall
19 Meadowhall Sept 2002 March 2002 Valuation £1,280m £1,280m Equivalent yield 5.64% 5.64% Total estimated rental value pa £74.7m £74.7m Total expected rent pa £68.5m £67.1m (on settlement of o/s rent reviews and lettings) Total passing rent pa £65.3m £62.4m Average passing rent £ psf £51.70 £49.37 W
Slide 20: Meadowhall Lettings
20 Meadowhall Lettings • 20 new lettings and strategic relocations which together increased rental income by c. £1.6m pa, including: Tenant Sq ft Rent pa Sports Soccer 34,000 £1,000,000 Zara+ 10,035 £870,000 USC 8,733 £850,000 Monserrat 3,200 £380,000 Schuh 6,164 £335,000 Quiksilver 3,400 £250,000 V
Slide 21: Meadowhall Customer Analysis
21 Meadowhall Customer Analysis Jan-Oct 2002 Jan–Oct 2001 Increase Customer numbers 18.96m 18.85m 0.58% June 2002 June 2001 Increase Average Group Spend: Off Peak Survey £101.92 £98.93 3.0% 1
Slide 22: Meadowhall Zone A Rents
22 Meadowhall Zone A Rents 30 27.0 25 % of rental income 20 15 11.0 11.6 10 8.0 9.2 7.1 6.3 6.9 5.7 5 3.6 3.6 0 < £100 £100 - £200 - £225 - £250 - £275 - £300 - £325 - £350 - £375 - > £400 £200 £225 £250 £275 £300 £325 £350 £375 £400 Zone A Rent psf 1 As at 30 Sept 2002
Slide 23: Supermarkets
23 Supermarkets Sept 2002 March 2002 Number of supermarkets 93 91 Valuation £1,145m £1,091m Initial yield 6.6% 7.0% Estimated rental value £ psf £7.60 - £22.00 + Average current rent £ psf £18.23 £18.29 Weighted average lease term: - to expiry 21.9yrs 22.4yrs - to first break 21.9yrs + 1 + New discl
Slide 24: Supermarkets
24 Supermarkets • 93 Supermarkets: Site area 411 acres; Floor area c. 4.9m sq ft • Since Sept 2002, rent review agreed at a record level: – £23.15 psf on rent review agreed at Sainburys Chiswick • Strong demand from major retailers to expand representation whilst supply of new sites is severely rest
Slide 25: Retail Warehouses
25 Retail Warehouses Sept 2002 March 2002 Number of retail warehouses 76 73 Valuation £998m £882m Initial yield 6.0% 6.0% Average estimated rental value £ psf £15.96 + Average current rent £ psf £13.90 £13.63 Weighted average lease term: - to expiry 17.8yrs 18.0yrs - to first break 17.6yrs + 1 + New
Slide 26: Development Prospects (BL's Share)
26 Development Prospects (BL’s Share) Sept 2002 March 2002 Net area (100%) 4,481,400 sq ft 6,705,000 sq ft Construction cost £671.3m £764.0m Cost to complete £618.1m £751.0m ERV £100.7m £102.0m Projects Planning Sector Sq ft 201 Bishopsgate, EC2 Detailed City office 736,900 51 Lime Street, EC3 Detai
Slide 27: Property Market Outlook
#4, British Land Property Market Outlook
Slide 28: City Market: Supply
28 City Market: Supply Quarter 3 2002 Sq ft Vacancy rate Total stock 83.1m Grade A 3.0m 3.6% Grade B and C 4.9m 5.9% Total available 7.9m 9.5% Highest vacancy rate March 1993: 15.6m 18.7% Average vacancy rate over last ten years: 9.8% 1 Source: Jones Lang LaSalle
Slide 29: City Market: Development
29 City Market: Development Speculative development (Under Construction) Q3 2002 4.0m sq ft Completion due Total sq ft 2002 0.6m 2003 2.9m 2004 0.5m 2005 - Total 4.0m 1
Slide 30: City Market: Take Up
30 City Market: Take Up Total sq ft Grade A sq ft Grade A as % of Total Q4 2001 0.56m 0.30m 54% Q1 2002 0.60m 0.36m 60% Q2 2002 0.71m 0.31m 44% Q3 2002 0.80m 0.53m 66% Year to Q3 2002 2.67m 1.50m 56% Year to Q4 2001 5.80m 3.90m 67% Average total take up pa over last 10 years: 5.25m sq ft 1
Slide 31: City Market: Demand
31 City Market: Demand Demand Q3 2002 Q2 2002 Q1 2002 Active 4.9m sq ft 5.3m sq ft 6.2m sq ft Potential 6.2m sq ft 6.5m sq ft 6.7m sq ft Total 11.1m sq ft 11.8m sq ft 12.9m sq ft 1 Source: Jones Lang LaSalle
Slide 32: City Market: Supply / Demand
32 City Market: Supply / Demand Total Supply sq ft Take up sq ft Average Vacancy rate Q3 2002 7.9m Q4 2002 New completions 0.6m Total vacancy 2002 8.5m Let 0.8m 9.35% Year 2003 Start 7.7m New completions 2.9m Estimated 2nd hand releases 0.5m Total vacancy 2003 11.1m Let 2.5m 11.3% Year 2004 Start 8.
Slide 33: West End Market: Overview
33 West End Market: Overview Sq ft Vacancy rate Supply Q3 2002 5.9m 5.8% Speculative development 2.1m Total (end 2004) 8.0m 7.9% Take Up Q1 – Q3 2002 2.0m Under offer end Q3 2002 0.5m Total 2.5m Demand Active 2.9m Potential 3.2m Total 6.1m 1
Slide 34: Central London: Investment
34 Central London: Investment Investment Quarter 3 2002 £2.4bn Year to date Q3 2002 £5.2bn Average pa since 1995 £5.4bn • Low interest rates underpinning yields and investor enthusiasm for properties let to strong covenants with long term income streams • Demand for riskier, shorter term income stre
Slide 35: Central London: Investment
35 Central London: Investment Principal transactions: Q2 and Q3 2002 Property Purchaser Rent psf Lease Price Yield expiry 50 Stratton Street BP Pension Fund £75.00 20 yrs £86m 5.65% 50 Berkeley Street National Bank Abu Dhabi £75.00 20 yrs £202m 6.00% 111 Old Broad Street Unilever £52.50 15 yrs £48m
Slide 36: Central London: Summary
36 Central London: Summary • London as a European and World Centre • Underlying economic case for a growing London economy is sound • London’s share of UK GDP continues to grow • Rents not high in real terms • Occupier released space predicted to peak in 2004 • Developer supply is at a relatively lo
Slide 37: Retail: Summary
37 Retail: Summary • Retail sales (by value) still strong: – 5.1% increase in the year to Oct 2002 – 4.3% higher for Aug to Oct 2002 compared to 2001 • Proportion of retail sales anticipated for out of town to grow to over 1/3rd of total retail sales by 2005 • 56% of food sales now come from out of
Slide 38: Financial Review
#4, British Land Financial Review
Slide 39: Profit and Loss Account
39 Profit and Loss Account Sept 2002 Sept 2001 Change £m £m % Net rental income 249.2 230.9 7.9 Profit on property trading and disposal 3.1 17.3 (82.1) of fixed assets Net interest payable (164.8) (157.4) 4.7 Profit before taxation 65.3 80.0 (18.4) Underlying profit before taxation 62.2 57.9 7.4 Dil
Slide 40: Net Rental Income
40 Net Rental Income Six months ended Sept 2002 £m Sept 2001 £m Change Group net rental income 200.1 187.5 6.7% Share of net rental income of JVs 49.1 43.4 13.1% Total 249.2 230.9 7.9% Group net rental income £m % Rent reviews, back rents and new lettings 18.3 9.8 Decrease due to sales (3.7) (2.0) O
Slide 41: Underlying Profit before Tax
41 Underlying Profit before Tax Sept 2002 Sept 2001 £m £m Profit before tax 65.3 80.0 Adjusted for: Profit on property trading - (6.3) Other income: Haslemere dividend - (4.8) Disposal of fixed assets (3.1) (11.0) Underlying profit before tax Up 7.4% 62.2 57.9 1
Slide 42: Tax Charge Reconciliation
42 Tax Charge Reconciliation Gross Tax Rate £m £m Tax on profit for the period at 30% 65.3 19.6 30.0% Losses (revenue and capital) (4.3) Capital allowances (2.5) Other (1.2) Corporation tax charge 11.6 17.8% Deferred tax charge 1.2 Tax charge for Sept 2002 12.8 19.6% Tax charge for Sept 2001 80.0 16
Slide 43: Security of Income
43 Security of Income To expiry: 82.3% of current rental income is remaining at Sept 2012 To first break: 69.6% of current rental income is remaining at Sept 2012 Security of income of total portfolio % of income remaining at: (from 30 Sept 2002) expiry first break 1 year 98.6 97.2 2 years 97.7 95.0
Slide 44: Income Growth Potential
44 Income Growth Potential Sept 2002 % increase on annualised net rents £m pa Annualised net rents 526.0 Reversionary income+ 81.2 15.4% Total rents from existing leases 607.2 Committed developments ERV* 53.5 10.2% Development prospects ERV 100.7 19.2% Total 761.4 44.8% + Of the total, £75.7m is exp
Slide 45: Long-Term Income Profile
45 Long-Term Income Profile £81m of reversions to current market levels £154m of total prospective ERV from developments 900 800 700 600 £ Million 500 400 300 200 100 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Year Ending 30 September Curren
Slide 46: Total Return on Diluted Net Assets
46 Total Return on Diluted Net Assets Six months ended 30 Sept 2002 Total £m Operating profit 227.0 Net interest payable (164.8) Income return 62.2 Disposal of fixed assets 3.1 Revaluation surpluses 10.1 Capital return 13.2 Taxation (including movement on FRS 19 add back) (12.0) Capital management 6
Slide 47: Balance Sheet
47 Balance Sheet Sept 2002 March 2002 Change % Total properties (pre UITF 28) £9,376m £9,300m 0.8 Net assets (adjusted) £4,362m £4,321m 1.0 Fully diluted NAV per share (adjusted) 822p 803p 2.4 Mortgage ratio (Group) 46% 46% Gearing (Group) 91% 89% Operational gearing (Group and JVs+) 108% 107% 1 + T
Slide 48: Net Debt
48 Net Debt Group Sept 2002 March 2002 Net Debt £3,967m £3,840m Weighted average debt maturity 19.9yrs 19.8yrs Weighted average interest rate 6.5% 6.6% % of net debt at fixed / capped rates of interest 91% 95% % of debt ringfenced with no recourse 71% 69% to other group companies / assets 1
Slide 49: Capital Management
49 Capital Management No. of Shares £m Redemption of 6.5% Convertible Bonds due 2007 48.1 323 Share buy-backs 0.6 3 Total 48.7 326 Buybacks of £326m increased diluted NAV per share by 12p > 8% of diluted share capital 1
Slide 50: Dividend: Progressive Growth
50 Dividend: Progressive Growth % increase Sept 2002 (interim) 7.9% March 2002 7.8% March 2001 5.5% March 2000 5.8% March 1999 5.1% March 1998+ 8.9% March 1997 5.3% March 1996 5.3% March 1995 7.8% March 1994 7.6% 1 + Enhanced dividend to take account of the delayed payment date arising from the Adva
Slide 51: Financial Summary
51 Financial Summary • Committed, recurring long-term income from leases: – 70% is remaining after 10 years assuming first break exercised – – 82% is remaining after 10 years calculated to expiry of lease • Matched by long-term finance at 6.5% with debt maturity on average at 19.9yrs • Income growth
Slide 52: Outlook
£ British Land
Slide 53: Summary
53 Summary • Long-term business model delivering secure income growth – Net rents up 7.9%: all sectors contribute – Annualised net rents now £526m – Reversions / committed developments to add £129m, 25% over 5 yrs • Active portfolio management: £350m sales; £74m purchases • Development programme tai
Slide 54: Appendix
#4, British Land Appendix
Slide 55: Sales and Purchases
55 Sales and Purchases Main Sales £m Sector BL Rank Portfolio: 13 leisure properties 109 Leisure BL Universal and BL: 26 retail units 53 High street retail BLT: 2 distribution units 37 Distribution London & Henley and BL: residential units 36 Residential BL Davidson: 3 retail parks 43 Retail Main Pu
Slide 56: Development Summary (BL's Share)
56 Development Summary (BL’s Share) Net Area Construction Cost to ERV As at 30 Sept 2002 (100%) Cost £m complete £m £m Completed projects 0.5m sq ft 19.9 - 3.2 Committed projects 1.4m sq ft 394.7 269.8 53.5 Development prospects 4.5m sq ft 671.3 618.1 100.7 Total 5.9m sq ft 1,066.0 887.9 154.2 1
Slide 57: Strong Tenant Covenants
57 Strong Tenant Covenants As at 30 Sept 2002 British Land TICCS+ Benchmark Dun & Bradstreet Stress Score % % Rental income rated: Negligible, low and low / medium risk 84.5 76.2 Medium / high risk 10.2 16.0 High risk 2.3 4.1 Unmatched 3.0 3.7 Total 100.0 100.0 1 + Tenant Income Credit rating Covena
Slide 58: Broadgate, EC2
58 Broadgate, EC2 • 32 acre office, retail and leisure estate • Adjoins Liverpool Street Station • 3.8m sq ft flexible accommodation • 0.9m sq ft additional development potential • Strong covenants • 15.8 years average lease length 12.7 years to first break clauses • Comprehensive estate management
Slide 59: Meadowhall Shopping Centre
59 Meadowhall Shopping Centre • One of only six super regional centres • 1.41m sq ft gross lettable area on 167 acres: 284 retail and leisure units • Adjacent to M1 motorway with own public transport and 12,600 free car spaces • > 18 years weighted average lease length • Catchment area: 8.2m people
Slide 60: Diluted NAV Reconciliation
60 Diluted NAV Reconciliation Pence per share At 31 March 2002 803.1 Profit after taxation 9.6 Proposed interim dividend (3.9) Revaluation surplus 1.8 Effect of redemption of 6.5% Convertible Bond 11.5 Purchase and cancellation of own shares 0.4 Shares issued in period (0.3) Movement on FRS 19 add b
Slide 61: Awards 2002
61 Awards 2002 Accounts BDO Stoy Hayward Property Accounts Award Shortlisted for European Property and Real Estate Association (EPRA) Award Investor Relations Award Best Board Communications (for FTSE 100 companies) Most Progress in Investor Relations (for FTSE 100 companies) Best Investor Relations
Slide 62: Long-term Income Profile
62 Long-term Income Profile Key Assumptions: • Annualised net rents of £526.0m as provided by our valuers’ at 30 September 2002, which is assumed to erode based upon lease expiries, assuming all break clauses are exercised. Leases are assumed to be re-let at the passing rent. • Current reversions of
Slide 63: Source
63 Source The information has been extracted largely from the Interim Announcement for the six months ended 30 September 2002. General property market data has been extracted from Jones Lang LaSalle and other agents reports. Figures include our share of joint ventures, unless otherwise stated. Adjus