British Land Company PLC · LSE:BLND
British Land — Non-Deal Roadshow (October 2014)
65 slides from British Land's roadshow presentation, October 2014
Slide 1: British Land Investor Presentation
WWW.BRITISHLAND.COM BRITISH LAND INVESTOR PRESENTATION SEPTEMBER/OCTOBER 2014
Slide 2: British Land at a Glance
BRITISH LAND AT A GLANCE Property Portfolio by Value (at March 2014) • A leading UK commercial property company and REIT LONDON • UK assets owned or managed of OFFICES UK £17.8bn – BL share £12.0bn RETAIL • Focused on high-quality UK retail and London offices – 60% of portfolio in London and South E
Slide 3: Introduction
INTRODUCTION • In 2010 we set out a clear plan – Substantial net investors in the market – Taking on more risk, mainly through development – Increase exposure to London and South East – Reshape our retail portfolio • Executing well against that plan – Delivering 2010 development programme – Replenis
Slide 4: Positioning Portfolio Around Key Trends
POSITIONING PORTFOLIO AROUND KEY TRENDS • Focused on creating “Places People Prefer” 1 Attractive environments • Well managed environments at our Office campuses and Retail destinations London as a • Committed more capital to London and South East: increased 2 leading global City weighting to over 6
Slide 5: Reshaping Our UK Portfolio to Deliver Long-Term Performance
RESHAPING OUR UK PORTFOLIO TO DELIVER LONG-TERM PERFORMANCE Development Investments & Disposals over last 4 yrs* 10 Portman Square 5 Broadgate The Leadenhall Building Clarges Mayfair The Hempel £3.0bn 4&5 Kingdom St Marble Arch House Development 10-30 Brock Street 199 Bishopsgate Whiteley Shopping S
Slide 6: Delivering Strong Performance
DELIVERING STRONG PERFORMANCE • Strong property performance versus IPD benchmark • 15.5% pa total accounting returns over 5 years; 20.0% total accounting returns in 2014 • Returned £1.2bn in dividends to shareholders over 5 years Annualised Annualised YE 31 March 2014 2011-2014 2009-2014 Total Prope
Slide 7: Material Improvement in Valuations
MATERIAL IMPROVEMENT IN VALUATIONS Valuation Drivers £m TOTAL VALUATION MOVEMENT 640 £22m £90m £309m £639m 560 480 400 320 240 160 80 0 -80 H1 2012/13 H2 2012/13 H1 2013/14 H2 2013/14 Asset Management Development Yield Movement Total Valuation 7
Slide 8: Strong Operational Performance
STRONG OPERATIONAL PERFORMANCE • Strong operational performance in improving markets • Continue to sign lettings/renewals ahead of ERV in Q1 with occupancy ahead FY to 31 March 2014 Retail Office Total Lettings and renewals (000 sq ft) 1,674 632 2,306 Investment lettings/renewals vs ERV +4.9% +8.4%
Slide 9: Strong Financing Metrics
STRONG FINANCING METRICS Proportionally Consolidated 31 Mar 2013 31 Mar 2014 Loan to Value (LTV) 40% 40% Average Interest Rate 4.6% 4.1% Interest Cover 2.3x 2.5x Average Maturity of Drawn Debt (years) 9.9 8.7 Group 31 Mar 2013 31 Mar 2014 Loan to Value (LTV) 24% 29% Average Interest Rate 4.4% 3.5% I
Slide 10: Diverse Debt Funding Profile
DIVERSE DEBT FUNDING PROFILE • £1.5bn of new financing Diverse Debt Profile (31 March 2014) arranged • £785m revolving credit facility £0.6bn with maturity of 5 years and an £1.6bn initial margin of 115bps £1.0bn • £1.9bn of undrawn facilities for more than 2 years £0.7bn £0.9bn • No BL financing re
Slide 11: Market Outlook
MARKET OUTLOOK • UK at early stages of an economic recovery – Differential between property bond yields historically wide • Positive about long-term prospects for London – Occupational demand picking up and supply remains constrained – Rental growth a key driver of performance – Prime residential pr
Slide 12: Our Priorities
OUR PRIORITIES • Focused on driving rental growth • Progressing our new development programme • Continue to reshape our Retail portfolio • Invest in the portfolio 12
Slide 13: Retail & Leisure
RETAIL & LEISURE 13
Slide 14: Leading Indicators of Retail Rental Growth Improving
LEADING INDICATORS OF RETAIL RENTAL GROWTH IMPROVING Continued improvement in Strong forecasts for Improving retailer Consumer Confidence1 Disposable Income Growth2 performance3 Disposable yoy Rental Share price yoy Rental Consumer yoy Rental Income (%yoy) Growth (%) Growth (%) Confidence Growth (%)
Slide 15: Retail Investment Market Gaining Momentum
RETAIL INVESTMENT MARKET GAINING MOMENTUM • Increasing investor interest in retail Price Asset Purchaser (£m) NIY % property Bluewater (30%), Kent1 Land Sec 696 4.1 • >£3bn of investment deals in Q2 Merry Hill (50%), Birmingham Intu 408 5.25 2014, +51% on Q1 2013 Westfield Centre, Derby Intu 390 6.7
Slide 16: Key Retail and Leisure Highlights
KEY RETAIL AND LEISURE HIGHLIGHTS • Continued improvement in our retail returns – Total returns of 10.7% in FY 2014; stronger second half • Strength of operational metrics – Occupancy ahead; consistent outperformance on rental growth and footfall – Continued improvement in Q1 • Successful developmen
Slide 17: Stronger Retail and Leisure Performance
STRONGER RETAIL AND LEISURE PERFORMANCE • Annual total returns of 10.7%; capital returns 4.6% Retail Valuation Drivers £m TOTAL VALUATION MOVEMENT 240 £(63)m £(35)m £96m £205m 160 80 0 -80 H1 2012/13 H2 2012/13 H1 2013/14 H2 2013/14 Asset Management & Development Yield Movement Total Valuation 17
Slide 18: Broader and Higher Quality Occupier Demand
BROADER AND HIGHER QUALITY OCCUPIER DEMAND Leveraging Retailers taking Increasing Significant existing strong out of town restaurant and demand from retailer stores leisure offer home relationships improvement operators 18
Slide 19: Outperforming on Footfall
OUTPERFORMING ON FOOTFALL • BL footfall +2.5% at Q1, outperforming benchmark (down 0.8%) British Land Footfall compared to Experian Market Benchmark Index Jan 2010 = 100 140 130 120 110 +1% pa 100 90 - -3% pa 80 70 60 2010 2011 2012 2013 2014 British Land UK Market Source: Experian 19 19
Slide 20: Outperforming on Rental Growth
OUTPERFORMING ON RENTAL GROWTH British Land Retail Rental Growth vs GDP Index 2001 = 100 130 120 110 100 90 80 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 BL Retail IPD Secondary Retail GDP 20 20
Slide 21: Development – Glasgow Fort Leisure Extension
UPGRADING OUR RETAIL PORTFOLIO THROUGH DEVELOPMENT – GLASGOW FORT LEISURE EXTENSION 46,000 sq ft cinema and restaurant extension Opened September 2013 Annual footfall up 8% to 12m Average peak dwell time up to 102 mins Catering spend increased more than 50% Average peak retail spend increased to £12
Slide 22: Development – Whiteley Shopping
UPGRADING OUR RETAIL PORTFOLIO THROUGH DEVELOPMENT – WHITELEY SHOPPING New 321,000 sq ft shopping destination Over 20% valuation uplift Annual footfall of 4.7m Estimated annual sales of £90m; £5.8m annual rent roll On On site with Phase II 58,000 sq ft cinema and restaurant extension. Increases food
Slide 23: Reshaping Our Retail Portfolio
RESHAPING OUR RETAIL PORTFOLIO RE-INVESTING IN PREFERRED DESTINATIONS Focus on well-located, high quality, preferred destinations SouthGate, Bath on a fully let NIY of 5.7% Increased share in HUT to 60% on an effective NIY of 6% 26% equity share in portfolio of Sainsbury’s superstores Reversionary y
Slide 24: Offices & Residential
OFFICES & RESIDENTIAL 24
Slide 25: Key Office and Residential Highlights
KEY OFFICE AND RESIDENTIAL HIGHLIGHTS • Strengthening leasing performance – Successful letting particularly across our recently completed West End developments • Successful completion of all our 2010 West End developments – Plus 605,000 sq ft Leadenhall Building in the City • Well timed acquisitions
Slide 26: London a Leading Global City
LONDON A LEADING GLOBAL CITY London to remain the top ranked global City Now In 10 Years • London is one of the most important cities 1 London globally 2 New York • Population forecast to grow c.1% per 3 Beijing annum over next 10 years 4 Shanghai • Office based employment expected to 5 Singapore in
Slide 27: Office Market Remains Attractive
OFFICE MARKET REMAINS ATTRACTIVE Central London Supply and Demand Central London Rental Growth Central London Development Completions % Prime London Office Rents m sq ft vacancy m sq ft 14 £ psf 12 140 West End 12 City 120 10 10 100 8 8 80 6 6 60 4 4 40 2 2 20 Actual Forecast 0 0 - 93 96 99 02 05 08
Slide 28: Strong Office and Residential Performance
STRONG OFFICE AND RESIDENTIAL PERFORMANCE • FY 2014 total returns of 19.4%; capital returns 15.5% Valuation Drivers £m TOTAL VALUATION MOVEMENT £85m £125m £213m £434m 400 320 240 160 80 0 -80 H1 2012/13 H2 2012/13 H1 2013/14 H2 2013/14 Asset Management Development Yield Movement Total Valuation 28
Slide 29: Demand from a Broader Range of Occupiers
DEMAND FROM A BROADER RANGE OF OCCUPIERS • Investment lettings/renewals Office Leasing Activity by Category in FY 2014 significantly ahead of ERV By rent – 8.4% in FY 2014; 5.6% in Q1 INSURANCE • Strong demand from TMT BANKING & FINANCE and insurance 15% 18% • Increasing interest from financial serv
Slide 30: Leasing Activity Across Our Office Portfolio
LEASING ACTIVITY ACROSS OUR OFFICE PORTFOLIO • Strengthening letting interest in recent months • Over 200,000 sq ft leasing activity completed/under offer in Q1 including at Leadenhall and 10 Portman Square • Further leasing successes since Q1 announcement, including at 10 Portman Square, Marble Arc
Slide 31: Regent's Place – Great Letting Success
REGENT’S PLACE – GREAT LETTING SUCCESS 15.5% valuation uplift in year Nearly 200,000 sq ft of lettings Increased occupancy to 98.3% New rental high of £71 psf Standing investment ERVs up 11.8% over last 3 years Increasingly reversionary with average office rent of £46 psf Further refurbishment oppor
Slide 32: Paddington – Great Progress
PADDINGTON – GREAT PROGRESS Campus already increased in value by 11.1% Almost 40% of vacant space let/under offer at rents ahead of ERV Average office rent of £50 psf attractively priced Significant opportunities to develop as major West End campus Transfer our experience from Regent’s Place 32
Slide 33: 2010 London Development Programme
2010 LONDON DEVELOPMENT PROGRAMME • £294m of additional profit generated in FY 2014; £45m to come • 73% let/under offer securing £54m pa of rent, 96% residential units sold/under offer £m £636m 45 £423m £359m 126 £257m 591 192 192 297 167 65 Mar 11 Mar 12 Mar 13 Mar 14 Profit Taken Profit to Come 33
Slide 34: Progressing Our New London Developments
PROGRESSING OUR NEW LONDON DEVELOPMENTS • Added 1.1m sq ft of new potential development • Estimated profit of c.£375m; of which c£290m to come • Expect to commit to 4 Kingdom Street later this year • Progressing 5 Kingdom Street and Shoreditch plans; retain optionality CLARGES THE ALDGATE YALDING 4
Slide 35: Broadgate – Implementing Our Long-Term Vision
BROADGATE – IMPLEMENTING OUR LONG-TERM VISION New long-term JV partner with GIC Evolving campus to broaden occupiers and uses Access enhanced by Crossrail in 2018 Development of 5 Broadgate and Broadgate Circle completing shortly Broadgate Circle creates a new food destination for Corporate the City
Slide 36: Financials
FINANCIALS 36
Slide 37: FY 2014 Highlights
FY 2014 HIGHLIGHTS FY to 31 March 2013 2014 Change Underlying Profit before Tax (£m) 274 297 8.4% Underlying Earnings per Share (p) 30.3 29.4 (3.0)% Dividend per Share (p) 26.4 27.0 2.3% Valuation Performance 1.0% 8.3% EPRA Net Asset Value per Share (p) 596 688 15.4% Total Accounting Return 4.6% 20.
Slide 38: Underlying Profit Bridge
UNDERLYING PROFIT BRIDGE £m 6 8 30 (18) (3) 297 274 FY 2013 Placing PC of 2010 Like for Like Prior Year Other FY 2014 Investments Developments Disposals 38
Slide 39: Net Rental Income Movement
NET RENTAL INCOME MOVEMENT £m 6 0 13 31 (26) (3) UK LikeLike for like for like UK Retail 3.0% 562 541 Offices 0.4% Total 2.2% FY 2013 Placing PC of 2010 Like for Retail Prior Year Other FY 2014 Investments Developments Like Recycling Disposals 39
Slide 40: Growth in EPRA Net Asset Value
GROWTH IN EPRA NET ASSET VALUE NAV (p) 29p 29p 36p (27p) (2p) 27p 688p 596p Mar 13 Developments Offices Retail Underlying Dividends Other Mar 14 Profit 40
Slide 41: Development Programme – Risk Management
DEVELOPMENT PROGRAMME – RISK MANAGEMENT • Current development commitment Development Commitment (at 31 March 2014) of £1.4bn £m • Residential commitment below 1,400 £500m limit, as previously set 1,200 • Development commitment limits: 1,000 – 15% of investment portfolio 800 600 – 10% on a speculativ
Slide 42: Future Income Growth
FUTURE INCOME GROWTH Cash Flow Basis Accounting Basis Annualised Gross Rents £m £m Current Passing Rent 557 Expiry of Rent-free Periods 51 584 Fixed, Minimum Uplifts 13 2010 Non-Completed Developments Pre-let 28 25 Recently Committed Developments Pre-let 7 5 Total Contracted 656 614 Developments – 2
Slide 43: Appendices
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Slide 44: BL UK Property Returns vs IPD – 1 Year
BL UK PROPERTY RETURNS VS IPD – 1 YEAR Year ended 31 March 2014 bps 250 240 200 150 140 100 50 80 60 60 40 - Retail Offices Total Capital Returns Total Returns 44
Slide 45: BL UK Property Returns vs IPD – 3 Years
BL UK PROPERTY RETURNS VS IPD – 3 YEARS 3 years ended 31 March 2014 bps pa 600 500 480 400 300 340 200 250 190 100 130 140 - Retail Offices Total Capital Returns Total Returns 45
Slide 46: 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 1992 1994 1995 1997 1998 2000 2001 2003 2004 2006 2007 2009 2010 2012 2014 Yield gap % 5 3 1 (1) (3) (5) 46
Slide 47: Major Property Holdings
MAJOR PROPERTY HOLDINGS As at 31 March 2014 BL Sq ft Rent Occupancy Lease (excl. developments under construction) Share % 000’s £m pa1 Rate % Length yrs3 2 1 Broadgate, London EC2 50 3,963 177 96.8 7.2 2 Regent's Place, London NW1 100 1,589 70 98.3 9.4 3 Meadowhall Shopping Centre, Sheffield 50 1,44
Slide 48: Top 20 Customers & Customer Split by Industry
TOP 20 CUSTOMERS & CUSTOMER SPLIT BY INDUSTRY As at 31 March 2014 % of Total Customer Split by Industry Contracted Rent Contracted Rent (%) Tesco plc 7.7 Sainsbury Group 6.0 2% 1% Debenhams 5.8 UBS AG 3.2 7% Home Retail Group 2.7 20% Kingfisher (B&Q) 2.7 8% HM Government 2.5 Next plc 2.4 13% Virgin
Slide 49: Portfolio Yield & ERV Movements
PORTFOLIO YIELD & ERV MOVEMENTS As at 31 March ERV NEY ERV Growth %1 NEY Yield Compression bps2 £m % H1 H2 FY H1 H2 FY Retail parks 165 5.7 1.0 0.0 1.0 7 18 25 Superstores 70 5.1 0.5 0.2 0.7 5 3 9 Shopping centres 112 5.5 0.0 2.3 2.4 5 6 11 Department stores 24 5.4 0.1 0.1 0.2 38 58 94 Leisure 21 7.
Slide 50: Portfolio Weighting
PORTFOLIO WEIGHTING As at 31 March 2013 2014 (Current) 2014 (Current) 2014 % % £m (Pro forma)¹ Retail parks 24.5 23.1 2,767 21.5 Superstores 12.6 11.1 1,321 10.1 Shopping centres 17.6 15.6 1,862 14.4 Department stores 4.6 4.7 564 4.3 Leisure 3.0 2.8 338 2.6 Retail 62.3 57.3 6,852 52.9 City 17.1 17.1
Slide 51: Portfolio Valuation by Sector
PORTFOLIO VALUATION BY SECTOR Total1 Change %2 As at 31 March 2014 £m H1 H2 FY Retail parks 2,767 1.1 2.7 3.7 Superstores 1,321 2.0 0.7 2.8 Shopping centres 1,862 0.3 1.8 2.1 Department stores 564 6.5 11.1 18.3 Leisure 338 2.0 8.4 10.5 Retail3 6,852 1.5 2.9 4.4 City 2,038 3.6 8.1 11.8 West End 2,720
Slide 52: Portfolio Net Yields
PORTFOLIO NET YIELDS1 As at 31 March 2014 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 5.3 5.6 5.7 5.6 5.7 Superstores 4.9 5.1 5.1 5.0 5.1 Shopping centres 5.3 5
Slide 53: Lease Length and Occupancy
LEASE LENGTH AND OCCUPANCY As at 31 March 2014 Average Lease Length (yrs) Occupancy Rate (%) (excl. developments) To Expiry To Break Occupancy Occupancy (underlying)1 Retail parks 9.1 8.2 96.8 98.3 Superstores 15.0 14.8 100.0 100.0 Shopping centres 9.1 8.1 95.6 97.3 Department stores 26.6 23.3 100.0
Slide 54: Annualised Rent & Estimated Rental Value (ERV)
ANNUALISED RENT & ESTIMATED RENTAL VALUE (ERV) As at 31 March 2014 Annualised Rents ERV £m Average Rent (£psf)2 (excl. Developments) (Valuation Basis) £m1 Total Total Contracted ERV Retail parks 157 165 24.5 24.6 Superstores 68 70 21.8 21.6 Shopping centres 104 112 30.2 31.9 Department stores 30 24
Slide 55: Debt Maturity – Group
DEBT MATURITY – GROUP £m 1,200 1,000 800 600 400 200 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 Year to 31 March BL Undrawn Facilities BL Drawn Facilities Convertible Bonds Private Placements Debentures & Loan Notes Briti
Slide 56: Debt Maturity – Joint Ventures and Funds
DEBT MATURITY – JOINT VENTURES AND FUNDS1 £m 1,200 1,000 800 600 400 200 0 2015 2016 2017 2018 2019 2020-2024 2025-2037 Year to 31 March JV – Bank drawn Funds – Bank drawn JV & Funds – Bank undrawn JV - Securitisations 1 At British Land share 56
Slide 57: 2010 Development Programme
2010 DEVELOPMENT PROGRAMME As at 31 March 2014 Sector BL Share Sq ft PC Current Cost to ERV Pre-let Resi End Calendar Value Complete Value % '000 Year £m £m1,6 £m2 £m £m3 10 - 30 Brock Street, Regent’s Place4 Mixed Use 100 505 Completed 402 3 20.5 19.1 118 10 Portman Square Offices 100 134 Completed
Slide 58: Recently Committed Development Programme
RECENTLY COMMITTED DEVELOPMENT PROGRAMME As at 31 March 2014 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 £m3 Milton Keynes, Kingston Centre Retail 50 21 Completed 5 - 0.3 0.3 - 6 Old Market, Hereford Retail 100 305 2014 66 1
Slide 59: Near-Term and Prospective Developments
NEAR-TERM AND PROSPECTIVE DEVELOPMENTS As at 31 March 2014 BL Share Sq ft Total Cost Status % '000 £m1 Near-term Pipeline Blossom Street, Shoreditch Mixed Use 100 322 164 Pre-submission 2 5 Kingdom Street Offices 100 240 162 Consented 4 Kingdom Street Offices 100 147 99 Consented Glasgow Fort (Resta
Slide 60: Residential Development Programme
RESIDENTIAL DEVELOPMENT PROGRAMME No. BL Mar 14 Cost Sales Sq Ft Market PC Date/ Share Value To come1 Total Exchanged As at 31 March 2014 '000 Units Status % £m £m £m £m Mixed-use: The Triton Building2 126 94 Completed 100% 22 1 23 102 Marble Arch House 11 10 Completed 100% 5 1 6 17 3 Clarges Mayfai
Slide 61: Clarges Mayfair
CLARGESMAYFARR 4 British Land
Slide 62: Regent's Place Campus
REGENT’S PLACE CAMPUS PLACES FOR EVERYONE DRUMMOND STREET , BROCK STREET 3 2 2 = 2 = REGENTS TRITON STREET Bee PLAZA Euston Station cee EUSTON TOWER and Euston Square —s> EUSTON ROAD Regent's — 77 TOIL Warren Undergrounel Pedeston crossings 9) Taxipick up and hop off routes NEQdewelopment Each dae c
Slide 63: Paddington Central Campus
PADDINGTON CENTRAL CAMPUS Key: BL ownership Non BL ownership Multi-let offices Multi-let offices 268,000 sq ft 143,000 sq ft Development sites 200 residential units (355,000 sq ft) + sold on long leases; Crossrail box below retail at ground floor (80,000 sq ft) FOUR KINGDOM STREET FIVE KINGDOM STREE
Slide 64: Broadgate Campus
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Slide 65: Disclaimer
DISCLAIMER The information contained in this presentation has been extracted largely from the Full Year Results Announcement for the year ended 31 March 2014. This presentation may contain certain “forward-looking” statements. By their nature, forward-looking statements involve risk and uncertainty