WWW.BRITISHLAND.COM BRITISH LAND INVESTOR PRESENTATION SEPTEMBER/OCTOBER 2014
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 East • Well-placed to benefit from occupier demand and rental growth Department Stores 4% £0.6bn • Strong balance sheet and ability to raise new capital 2
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 – Replenishing development pipeline – Investing in attractive assets – Improving operating metrics • Delivering strong results – Our decisions and actions have driven performance – Recent benefit from strengthening markets 3
POSITIONING PORTFOLIO AROUND KEY TRENDS • Focused on creating “Places People Prefer” 1 Attractive • Well managed environments at our Office campuses and environments Retail destinations • Committed more capital to London and South East: increased London as a 2 weighting to over 60% of our portfolio leading global City • Increased exposure to West End and up and coming locations Importance of • Investment around transport hubs 3 transport • Over £3.0bn of our properties close to Crossrail stations infrastructure • Reshaping our Retail portfolio to focus on best retail locations Key role of high 4 • £2.3bn of gross UK investment activity in last 4 years quality physical retail • Sale of mature assets ahead of valuation • A fundamental driver of value 5 Profitable • Total estimated profits of £636m from 2010 programme development • Great progress replenishing pipeline; retain optionality 4
RESHAPING OUR UK PORTFOLIO TO DELIVER LONG-TERM PERFORMANCE Investments & Disposals over last 4 yrs* Development 10 Portman Square 5 Broadgate The Leadenhall Building £3.0bn Clarges Mayfair The Hempel 4&5 Kingdom St Development Marble Arch House 10-30 Brock Street 199 Bishopsgate Whiteley Shopping £1.6bn Shoreditch Acquisitions Disposals Acquisitions Ropemaker Place Drake Circus Residential units Virgin Active 18 Food stores 17 Retail Parks including HUT units Beehive Centre, Paddington Central St James Dumbarton 2 shopping centres SouthGate, Bath (Bon Accord, Aberdeen Ealing Broadway SC and Eastgate, Basildon) Eden Walk, Kingston INVESTMENTS DISPOSALS 9 leisure assets * As at May 2014 5
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 Property Returns 14.2% 9.5% 12.6% Total Property Returns vs IPD +60bps +180bps +220bps NAV growth 15.4% 6.7% 11.6% Dividend income return 4.6% 3.9% 3.9% Total Accounting Return 20.0% 10.6% 15.5% 6
MATERIAL IMPROVEMENT IN VALUATIONS Valuation Drivers £m TOTAL VALUATION MOVEMENT £22m £309m £639m £90m 640 560 480 400 320 240 160 80 0 -80 H1 2012/13 H2 2012/13 H1 2013/14 H2 2013/14 Asset Management Development Yield Movement Total Valuation 7
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% +6.3% Occupancy 98.5% 92.1% 96.1% LFL occupancy +100bps +190bps +130bps 8
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% Interest Cover 2.8x 3.2x 9
DIVERSE DEBT FUNDING PROFILE • £1.5bn of new financing Diverse Debt Profile (31 March 2014) arranged £0.6bn • £785m revolving credit facility 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 required for 4 years £0.4bn Unsecured bank debt Convertible Bonds Debentures & Loan Notes JV & funds secured debt US Private Placements Securitisations 10
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 pricing slowing but long-term dynamics good • Retail at an earlier stage in the cycle – Increased investor interest, yields starting to compress – Retailers increasingly confident about consumer spending and role of physical space – Retailers looking to take more space, but only in best locations 11
OUR PRIORITIES • Focused on driving rental growth • Progressing our new development programme • Continue to reshape our Retail portfolio • Invest in the portfolio 12
RETAIL & LEISURE 13
LEADING INDICATORS OF RETAIL RENTAL GROWTH IMPROVING Continued improvement in Strong forecasts for Improving retailer Consumer Confidence 1 Disposable Income Growth 2 performance 3 yoy Rental Disposable yoy Rental Share price Consumer yoy Rental Growth (%) Income (%yoy) Growth (%) Confidence Growth (%) 6.0 2,700 0 4.5 2,400 +34% -10 3.0 2,100 0% 0% 1.5 1,800 -20 0.0 0% 1,500 -30 -1.5 1,200 Year Year Year Forecast Prime rental growth Prime rental growth Prime rental growth Consumer Confidence Disposable Income Retail FTSE 350 Consumer Confidence from GfK NOP, as of 31 December 2013 – surveys c.2,000 consumers to measure level of optimism about the performance of the economy in the next year 1) 2) yoy% change from Bank of England real disposable income (does not include government services and subsidies), forecast from Goldman Sachs Economics 2013 3) FTSE 350: General retail historic performance by quarter to 31 December 2013 14
RETAIL INVESTMENT MARKET GAINING MOMENTUM • Increasing investor interest in retail Price Asset Purchaser (£m) NIY % property Bluewater (30%), Kent 1 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 6.75 Fosse Park, Leicester Gingko/Crown 346 5.3 • Demand from private equity, The Mall Fund (62%) Cap & Reg 213 6.7 opportunity funds, institutional and Trinity Walk, Wakefield Orion 160 6.50 sovereign wealth Overgate Centre, Dundee L&G 125 7.5 • Yields trending down, but tightened Cambridge Retail Park Standard Life 110 5.4 Eastgate Centre, Basildon HARK/IRCP 89 7.0 significantly post Bluewater Leamington Spa Shopping Park Ignis 72 4.4 transaction (NIY 4.1%) Middleton Grange, Hartlepool LaSalle IM 33 8.5 Four Seasons, Mansfield LaSalle IM 25 8.5 The Hart Centre, Fleet POLYTECH 23 10.0 Rhiw Shopping Centre, Bridgend POLYTECH 10 10.5 Source: CBRE 1 Price includes 110 acres of surrounding land, plus full asset management rights , source: company announcement 15
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 developments and extensions – Whiteley and Glasgow Fort trading ahead of expectations • Continued recycling to reshape our retail portfolio – £1.0bn gross investment activity over the last year (acquisitions, disposals, development) – Sale of £0.4m of mature assets 16
STRONGER RETAIL AND LEISURE PERFORMANCE • Annual total returns of 10.7%; capital returns 4.6% Retail Valuation Drivers £m TOTAL VALUATION MOVEMENT £96m £(63)m £(35)m £205m 240 160 80 0 -80 H1 2012/13 H2 2012/13 H1 2013/14 H2 2013/14 Asset Management & Development Yield Movement Total Valuation 17
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
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 +1% pa 110 100 - -3% pa 90 80 70 60 2010 2011 2012 2013 2014 British Land UK Market Source: Experian 19 19
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
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