half year results presentation - british land/media/files/b/british-land...38 strength of debt...
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Half Year Results Presentation6 months to 30 September 2015
@BritishLandPLC
www.britishland.com
#BLHY2015 $BLND
Results Overview
Chris Grigg
Chief Executive
3
Highlights
• Strong set of results
• Strengthening ERV in London
• Positive momentum in Retail
• Driving income growth
• Positive leading indicators
4
Creating great environments
Growing in London and
the South East
Investing around
infrastructure
Internet resilient retail
Focused investment activity
Profitable development
Understanding our customers
5
Gross investment
-1,600
-1,200
-800
-400
0
400
800
1,200
Broadly balanced investment activity
Investment Activity
£m
Disposals Acquisitions & Development (ex retail capex) Net Spend
£343m £395m (£19m) £626m (£315m)Net Spend
2011 2012 2013 2014 2015 YTD 2016
(£2m)
£860m
6
Financial highlights
HY to 30 September 2015 Change
NAV per Share 891p +7.5%
Valuation £14.4bn +4.7%
Total Property Return 6.9%
Underlying Profit Before Tax £171m +10.3%
Dividend per Share 14.2p +2.5%
Total Accounting Return 9.1%
6 months total accounting return
9%
7
Yield movement DevelopmentAsset management
Valuation performance
• Valuation ahead in both sectors
– +8.2% in Offices & Residential
– +1.8% in Retail & Leisure
• Asset management and development contributed nearly 40% of uplift
• Yield shift was an important driver
• Continuing to outperform market
– Total returns 10bps ahead
Contribution to valuation uplift
Increase in valuation
4.7%
8
Driving rental growth
• Positive occupational markets
• Signing new space at attractive terms vs ERV
• Feeding through to rent reviews and underlying income
• LFL income growth strong in Offices (7.4%); positive in Retail (1.1%)
HY to 30 September 2015 Retail Offices Total Lettings/renewals (000 sq ft) 365 208 573Lettings/renewals under offer (000 sq ft) 327 41 368Investment lettings/renewals vs ERV 6.6% 5.0% 5.7%Rent reviews vs passing rent 4.0% 4.8% 4.3%Occupancy 98.6% 98.1% 98.4%ERV growth 0.9%* 4.5% 2.3%
Investment lettings/ renewals vs ERV
5.7%
* 1.4% on the multi-let portfolio
9
48%
27%
9%
6%
10%
Banks & Financial ServicesBusiness/Professional ServicesFood & BeverageIndustrialOther
Lettings/renewals ahead of ERV
Offices – leasing well
• Portfolio virtually full
• Over 200,000 sq ft of lettings/renewals
• 160,000 sq ft at the Leadenhall Building, breaking £90 psf
• 41,500 sq ft under offer, 12% ahead of ERV
• Focus on driving rental growth
• 720,000 sq ft of rent reviews in the next 18 months
5.0%
10
• Stronger ERV performance
• Yield shift continuing to make a strong contribution
• Outperformed IPD capital returns by 110 bps
Offices & Residential valuation performance
Offices & Residential valuation growth
8.2%
HY to 30 September 2015 Valuation uplift ERV growthCity 8.5% 5.1%West End 8.1% 4.1%Total (including Residential) 8.2% 4.5%
11
Transforming Broadgate into a world-class central London destinationTech CityStart-up
ShoreditchCreative sector
SpitalfieldsModern markets
The CityFinancial Centre
BarbicanCultural hub
150m
Footfall at Liverpool Street
Average retail rent vs. nearly £600 psffor Oxford Street
£121 psf
1
5
2
3
4
BROADGATE
12
2-3 Finsbury AvenueAdvancing plans
1 Finsbury AvenueResolution to grantplanning consent received
Broadgate development pipeline
100 Liverpool StreetPlanning consent received3
190,000 sq ft(existing space)
1
2
300,000 sq ft
517,000 sq ft
13
Paddington Central – improving the public realm
Games room
Library
Woodland garden
1 Kingdom Street
2 Kingdom Street
4 Kingdom Street
Kitchengarden
14
5 Kingdom Street
Paddington Central – progressing development
Progressing plans for 5 Kingdom Street
4 Kingdom Street
Core at 4 Kingdom Street now complete
15
Regent’s Place – future opportunities
375,000 sq ft
£49 passing rent psf
10-20 Triton Street
115,000 sq ft
£41 passing rent psf
338 Euston Road
220,000 sq ft
£45 passing rent psf
1 Triton Square
Rent reviews RefurbishmentRefurbishment/ redevelopment
16
Retail operational metrics remain strong
Retailer same store sales
+3.3%; to £5.6bn
Click & collect 50%
ahead of national average
Source: British Land, Springboard
Source: BL Consumer Surveys, CACI
Average rent to sales less than 10%
Occupancy remaining
high at 98.6%
Source: British LandSource: British Land
Source: Springboard and Experian
Footfall +1.9%ahead of market by
300bps
Source: Springboard and Experian
Footfall +5.5%across shopping parks
17
Retail – good demand from high quality occupiers
Lettings and renewals by sector by rent Taking space out of town
31%
22%16%
12%
9%
3%7%
Fashion & Footwear Health and Beauty
General Retail DIY
Food & Beverage Electrical & Mobile Phone
Other
18
Lettings/renewals ahead of ERV
Retail – leasing at attractive rates
Glasgow Fort £83 per sq ft
Stockton
Ealing Broadway
£50A3per sq ft
6.6%
£60per sq ft
Peak rent Recent signings
1,200 sq ft
2,000 sq ft
3,000 sq ft
19
Continued ERV growth in Retail
Rental growth on multi-let assets
Portfolio rental growth vs IPD
1.4%
Source: IPD, 2015; BL Portfolio data
80
85
90
95
100
105
110
Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15
Index Mar-10 =100
BL ERV (All Retail) IPD ERV (All Retail) IPD ERV (Secondary Retail)
20
Retail & Leisure valuation performance
2.2%Uplift on multi-let assets
• Performance driven by multi-let portfolio
• Capital returns in line with IPD
• Multi-let portfolio capital returns 30 bps ahead of IPD
HY to 30 September 2015 Valuation uplift ERV growthMulti-let 2.2% 1.4%Superstores (1.6)% (0.9)%Other 2.4% 0.2%Total 1.8% 0.9%
21
• Oldham• Swindon• Broughton Chester• Tollgate Colchester
• Glasgow Fort• Whiteley Leisure
Extensions & developments
£10 million
Investing in HUT
£95 million(Taking share to 75%)
Small scale capex
£40 million
£260 million asset disposals Superstores
Non-strategic retail parks
£145 million investment
Continued evolution of the Retail portfolio
• £1.5bn shopping park portfolio
22
Driving preference at New Mersey Shopping Park, Speke
36%Visitors use click
& collect
10mAnnual footfall
11 minAverage drive
time
Proposed leisure extension
New Mersey Shopping Park today
3rdLargest
shopping park in the UK
Park LaneRefurbishment helped convert target retailers
Investment driving performance – Meadowhall
RefurbishmentOn site with a £55mrefurbishment
Attracting new occupiers
New additions
Investment driving performance – Meadowhall
25
Growing our London campuses through development
1 million sq ft 390,000 sq ft 220,000 sq ft c. 5.5 million sq ft
Broadgate Paddington Central
Regent’s Place Canada Water
• 100 Liverpool Street
• 1 Finsbury Avenue
• 2-3 Finsbury Avenue
• 4 Kingdom Street
• 5 Kingdom Street
• 338 Euston Road
• 1 Triton Square
• Mixed use, including retail, offices and residential
26
Leisure extensions230,000 sq ft
Retail development
Eden Walk560,000 sq ft
(inc. residential)
Meadowhall330,000 sq ft
New Mersey, Speke
Canada Water 46 acre development opportunity in zone 2
Canada Water
Financial Review
Lucinda Bell
Chief Financial Officer
29
Highlights
Period to H1 2015 H1 2016 Change
Underlying Profit before Tax (£m) 155 171 10.3%
Underlying Earnings per Share (p) 15.3 16.0 4.6%
Dividend per Share (p) 13.84 14.18 2.5%
As at H2 2015 H1 2016 Change
Valuation Performance 5.2% 4.7%
EPRA Net Asset Value per Share (p) 829 891 7.5%
LTV 35% 34%
H1 Total Accounting Return 13.7% 9.1%
30
Underlying profit bridge
155
11 8
6 (6)(3)
H1 2015 Financingactivities
Development Like-for-Likerental growth
Administrationexpenses
Other H1 2016
171
£m
31
292
12 6
22 (23)
H1 2015 Developments Like-for-Likerental growth
Acquisitions Disposals H1 2016
309
Net rental income movement
1.1%7.4%3.3%
RetailOfficesTotal
£m
32
Reducing financing costs
(103)
11
(5) 5 (4)
H1 2015 Financing activities Acquisitions Disposals Developments H1 2016
(96)
£m
33
Income statement
HY to 30 September H1 2015 H1 2016 Change
Net Rental Income (£m) 292 309 5.8%
Fees & Other Income (£m) 7 5
Administrative Expenses (£m) (41) (47)
Net Finance Costs (£m) (103) (96)
Underlying PBT (£m) 155 171 10.3%
Underlying Earnings per Share (p) 15.3 16.0 4.6%
34
Continued valuation performance
HY to September 2015
Valuation £bn
Uplift£m
Uplift%
Yield Compression
bps
ERV Growth
%
NEY%
Weighting%
London/SE Weighting
%
Retail & Leisure 7.6 139 1.8 8 0.9 5.0 51
Offices & Residential 6.8 523 8.2 49
– Of which Offices 6.5 506 8.3 20 4.5 4.4 46
Total 14.4 662 4.7 13 2.3 4.7 100 65
– Of which Standing Investments
13.7 602 4.5
– Of which Development 0.7 60 8.5
35
Valuation growth drivers – Retail & Leisure
HY to September 2015 Valuation £bn
Uplift£m
Uplift%
Yield Compressionbps
ERV Growth%
Shopping parks 3.3 36 1.1 5 0.9
Shopping centres 2.3 86 3.9 14 1.9
Superstores 0.9 (15) (1.6) (5) (0.9)
Department stores 0.6 17 2.9 12 -
Leisure 0.5 15 2.8 22 0.3
Retail & Leisure 7.6 139 1.8 8 0.9
Of which Multi-let 5.4 121 2.2 9 1.4
36
Valuation growth drivers – Offices & Residential
HY to September 2015 Valuation £bn
Uplift£m
Uplift%
Yield Compressionbps
ERV Growth%
West End 3.7 285 8.1 24 4.1
City 2.8 221 8.5 16 5.1
Offices 6.5 506 8.3 20 4.5
Residential 0.3 17 6.5
Offices & Residential 6.8 523 8.2
37
829p
47p13p
16p (13p) (1p)
Mar 15 Offices &Residential
Retail & Leisure UnderlyingProfit
Dividends Other Sep 15
Growth in diluted EPRA net asset value
NAV per share (p)
891p
38
Strength of debt metrics
Proportionally Consolidated 31 Mar 2015 30 Sep 2015
Loan to Value (LTV) 35% 34%
Loan to Value pro-forma for 2012 bond conversion 32% 31%
Weighted Average Interest Rate 3.8% 3.6%
Interest Cover 2.6x 2.8x
Average Maturity of Drawn Debt (years) 8.7 8.2
Group 31 Mar 2015 30 Sep 2015
Loan to Value (LTV) 28% 26%
Available undrawn facilities £1.2bn £1.4bn
Weighted Average Interest Rate 3.3% 3.1%
Interest Cover 3.0x 3.0x
39
Offices To Let
Residential To Sell
Pre sold/Pre let
Offices
ResidentialRetail
0
200
400
600
800
1000
1200
1400
1600
Development programmeCommitted & Near-Term£m
• Current speculative commitment £0.6bn, 100% of costs fixed
• Near-term pipeline 2.0m sq ft, 1 Triton Square & 1 Finsbury Avenue added
• Near-term includes 1.8m sq ft in London
• Development commitment limit 10% on a speculative basis
• Medium-term opportunity at Canada Water
Committed
Near-TermPipeline
40
Future income growth
Annualised Gross Rents Cash Flow Basis £m
Accounting Basis £m
Current Passing Rent1 598
634Expiry of Rent-free Periods 76
Fixed, Minimum Uplifts 12
Total Contracted 686 634
Developments – Under Construction 17 14
Investments – Reversions2 12 12
Investments – Letting of Expiries and Vacancies 22 17
Developments – Near-term to let 63 49
Potential Rent in 5 Years 800 726
Increase 34% 15%1 Valuation rent, includes assumptions on outstanding rent review settlements2 RPI-linked leases assumed at 2.5% per annum and uplift at rent review based on ERVs determined by the Group’s valuers
Outlook
Chris Grigg
Chief Executive
42
Outlook
• Outlook for occupational markets positive
• UK economy continuing to perform well
• Occupiers generally more confident
• But capital markets more volatile
• We continue to focus on our strategic themes
43
Creating great environments
Growing in London and
the South East
Investing around
infrastructure
Internet resilient retail
Focused investment activity
Profitable development
Understanding our customers
Appendices
46
Gross investment
-1,600
-1,200
-800
-400
0
400
800
1,200
Broadly balanced investment activity
Investment Activity
£m
Disposals Acquisitions & Development (ex retail capex) Net Spend
£343m £395m (£19m) £626m (£315m)Net Spend
2011 2012 2013 2014 2015 YTD 2016
(£2m)
£860m
Note: £210 million acquisition of One Sheldon Square was accounted for in 2015 in the full year results presentation, when the net investment activity amount was (£105m)
47
BL property outperformance vs IPD – 5 years
120
470
250
130
350
190
050
100150200250300350400450500
Retail Offices Total
5 years ended 30 September 2015Outperformance bps pa
Capital Returns Total Returns
48
BL property outperformance vs IPD – 3 years
70
370
180
80
240
110
0
50
100
150
200
250
300
350
400
Retail Offices Total
3 years ended 30 September 2015Outperformance bps pa
Capital Returns Total Returns
49
80
85
90
95
100
105
110
Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15
Strong operational performance
Outperformance BL footfall performance vs Experian benchmark
Mar-10 = 100
+300bps
UK Market (Experian Index) British Land
50
Adjusted net debt – proportionally consolidated (£bn)
4.9 4.9 0.3 0.2 (0.4)
(0.1)
Mar 15Net Debt
Acquisitions Development& Capex
Disposals Other Sep 15Net Debt
LTV 35%
LTV 34%
51
Reconciliation of underlying profit before tax
HY to 30 Sep (£m) H1 2015 H1 2016
IFRS Profit before tax attributable to shareholders of the Company 1,000 809
Net valuation movement (849) (614)
Profit on disposal of investment and trading properties (12) (36)
Deferred and current taxation of joint ventures & funds 1 -
Capital financing costs (20) 6
Add non-controlling interests in capital & other 35 6
Underlying Profit Before Tax 155 171
Dilution adjustment 3 3
EPRA Earnings Before Tax 158 174
52
Gross rental income1
Accounting Basis £m
6 mths to 30 September 2015 Annualised as at 30 September 2015
Group JVs & Funds2 Total Group JVs & Funds2 TotalShopping parks 59 31 90 114 55 169Shopping centres 34 27 61 63 51 114Superstores 6 19 25 12 38 50Department stores 14 - 14 29 - 29Leisure 16 - 16 31 - 31Retail & Leisure 129 77 206 249 144 393Of which Multi-let 83 57 140 158 107 265
West End 60 - 60 117 - 117City 2 54 56 4 113 117Offices 62 54 116 121 113 234Residential3 3 - 3 3 - 3Offices & Residential 65 54 119 124 113 237
Total 194 131 325 373 257 630Table shows UK total, and includes completed developments. 1 Gross rental income will differ from annualised rents due to accounting adjustments for fixed & minimum contracted rental uplifts and lease incentives2 Group’s share of properties in joint ventures and funds including HUT at share3 Stand-alone residential
53
Operating costs metric
HY to 30 Sep (£m) H1 2015 H1 2016
Property outgoings 17 17
Administrative expenses 41 47
Fees and other income (7) (5)
Ground rent costs (2) (1)
EPRA Costs (including direct vacancy costs) 49 58
Gross rental income 309 326
Ground rent costs (2) (1)
Gross Rental Income (EPRA basis) 307 325
EPRA Cost Ratio (including direct vacancy costs) 16.0% 17.8%Table shows figures on a proportionately consolidated basis which includes the Group's shareof joint ventures and funds and excludes non-controlling interests in the Group's subsidiaries.
54
Reconciliation of EPRA NAV & NNNAV
31 Mar 15 30 Sep 15£m pence £m pence
Balance Sheet (IFRS) Net Assets 8,565 830 9,253 845
Deferred tax arising on revaluation movements 13 12
Mark to market on effective cash flow hedges and related debt adjustments 257 234
Adjust to fully diluted on exercise of share options 37 43
Adjust to dilute for 2012 convertible bond 400 400
Surplus on trading properties 96 97
Less non-controlling interests (333) (284)
EPRA NAV 9,035 829 9,755 891
Deferred tax arising on revaluation movements (13) (12)
Mark to market of debt and derivatives (663) (523)
EPRA NNNAV 8,359 767 9,220 842
55
EPRA balance sheet (proportional consolidation)
£m 31 March 15 GroupJVs & Funds 30 Sep 15
Total properties 13,677 9,569 4,858 14,427
Adjusted net debt (4,918) (3,450) (1,458) (4,908)
Other net liabilities (124) (45) (119) (164)
EPRA Net Assets (undiluted) 8,635 6,074 3,281 9,355
Dilution impact of 2012 convertible bond 400 400 - 400
EPRA Net Assets (diluted) 9,035 6,474 3,281 9,755
Loan to Value (LTV)1 35% 26% 34%
Average interest rate 3.8% 3.1% 3.6%
Interest cover 2.6x 3.0x 2.8x
Average maturity of drawn debt (years) 8.7 7.3 8.21 Group LTV based on Group Properties and net investment in JV & Funds, and Group net debt
56
Debt maturity – group (£m)
Debenture & loan notes (Secured) Bank Term Loan (Secured) US Private Placements (Unsecured)
Convertible Bond (Unsecured) Bank RCF Drawn (Unsecured) Bank RCF Undrawn (Unsecured)
0
200
400
600
800
1,000
1,200
1,400
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
Year to March
57
0
200
400
600
800
1,000
1,200
1,400
2016 2017 2018 2019 2020 2021 - 2025 2026-2036
Debt maturity – joint ventures and funds1 (£m)
1 At British Land share (including share of HUT)
JVs – Securitisations Funds – Bank drawn Funds – Bank undrawn
JVs – Bank undrawn JVs – Bank drawn
Year to March
58
Debt Financing – Diverse profile
Debentures & loan notes (Secured)
Bank RCFs Drawn (Unsecured)
US Private Placements (Unsecured)
Bank Term Loan (Secured)
JVs Securitisations
JV & Funds Term Loans (Secured)2
1 Proportionally Consolidated2 HUT’s debt shown at our share (£0.4 billion) within JV & Funds
Convertible Bonds (Unsecured)
Diverse Debt Profile1 (30 September 15)
£0.7bn
£0.8bn
£0.3bn£0.9bn
£0.5bn
£1.5bn
£0.5bn• Over £650 million of debt finance
rearranged since 31 March 2015• WAIR improved in H1 to 3.6%
from 3.8%
British Land• £350m 0% unsecured convertible
bonds due 2020 (issued June 2015)– Flexible settlement options– Competitive terms, further diversifying
sources of financing
• Extended and reduced pricing on a bilateral bank RCF
JV & Funds • Extended and reduced pricing
on Gibraltar debt• Raised £50m additional short term
HUT RCF
59
At 30 September 2015Group
£m
JVs & Funds
£mLess NCI
£m £mGross Debt (principal value) 3,710 1,688 (144) 5,254
IFRS adjustments:Issue costs and premia (20) (3) 1 (22)Fair value hedges 145 - - 145Other Items 93 - - 93IFRS gross debt 3,928 1,685 (143) 5,470Market value of derivatives - 43 (2) 41Cash (188) (213) 32 (369)IFRS net debt 3,740 1,515 (113) 5,142
Adjustments:Remove market value of derivatives (41)Remove fair value hedges (145)Other adjustments (48)Adjusted net debt 4,908
Gross and net debt reconciliation
60
Number of shares
Number of shares (m) 31 Mar 15 30 Sep 15
IFRS Basic
Weighted Average 1,016 1,022
Underlying and IFRS Diluted
Weighted Average 1,022 1,086
EPRA Diluted1
Weighted Average 1,080 1,086
Period End 1,090 1,0951 Including convertible dilution
61
Superstores
Stand-alone Superstores1 In Shopping Centres & Shopping Parks2
Total Exposure1,2,3
Store Size‘000 sq ft
Numberof
Stores
Valuation (BL
share)
Capital Value
psf
WALLto FB
yrs
Number of
Stores
Valuation (BL
share)
Capital Value
psf
WALLto FB
yrs
Number of
Stores
Valuation (BL
share)
Capital Value
psf
WALLto FB
yrs
£m £m £m
>100 8 179 345 12.9 5 367 552 13.5 13 546 461 13.3
75-100 14 286 457 18.2 1 41 483 12.4 15 327 460 17.5
50-75 17 294 440 12.7 1 13 198 11.6 18 307 419 12.7
25-50 9 63 239 8.9 3 31 433 15.0 12 94 280 10.8
0-25 4 13 190 10.7 17 78 418 11.4 21 91 356 11.3
Sept 2015 52 835 389 14.2 27 530 494 13.1 79 1,365 424 13.8
March 2015 57 924 395 14.5 29 529 491 13.9 86 1,453 426 14.4
Geographical Spread Annualised gross rent (BL Share) Lease Structure
London & South 58% Tesco £37m RPI and Fixed 7%
Rest of UK 42% Sainsbury’s £32m OMRR 93%
Other £6m
1 Excludes £12m non-foodstore occupiers in superstore led assets, and Tesco Bursledon, sold post period end2 Excludes non food-format stores e.g. Asda Living3 Excludes £102m of investments held for trading comprising freehold reversions in a pool of Sainsbury’s Superstores
62
Major property holdings
At 30 September 2015(excl. developments under construction)
BL Share
%
Sq ft000’s
Rent£m pa1
OccupancyRate %2
Lease Length yrs3
1 Broadgate, London EC2 50 4,721 225 99.3 8.3
2 Regent's Place, London NW1 100 1,590 73 98.8 8.2
3 Meadowhall Shopping Centre, Sheffield 50 1,393 82 97.2 7.2
4 Paddington Central 100 808 33 99.8 8.2
5 Sainsbury's Superstores4 50 2,526 59 100.0 14.2
6 The Leadenhall Building5 50 602 35 86.7 12.0
7 Debenhams, Oxford Street 100 363 11 100.0 23.5
8 Tesco Superstores4 65 1,243 27 100.0 14.3
9 Teeside Shopping Park, Stockton-on-Tees 100 478 15 95.7 6.5
10 Drake Circus Shopping Centre, Plymouth 100 412 16 99.6 5.9
1 Annualised EPRA contracted rent including 100% of Joint Ventures & Funds2 Includes accommodation under offer or subject to asset management at 30 September 20153 Weighted average to first break4 Comprises stand-alone assets/properties5 90.8% occupancy rate including post period end activity
63
Top 20 customers & customer split by industry
At 30 September 2015 % of Contracted Rent
Tesco plc 6.1%
UBS AG1 5.7%
Debenhams 5.4%
J Sainsbury plc 4.8%
Kingfisher (B&Q) 2.6%
Home Retail Group 2.4%
Next plc 2.3%
HM Government 2.2%
Virgin Active 1.8%
Spirit Group 1.6%
Alliance Boots 1.5%
Dixons Carphone 1.4%
Visa Inc 1.4%
Marks & Spencer plc 1.4%
Arcadia Group 1.3%
Aegis Group 1.3%
Herbert Smith 1.2%
Royal Bank of Scotland 1.1%
TJX Cos Inc (TK Maxx) 0.9%
Facebook 0.9%
Customer Split by Industry (%)
General Retail 16%
Fashion & Beauty 16%
Banks & Financial services 17%1
Supermarket 12%
Professional& Corporate
9%
Food/Leisure 10%
DIY 7%
Government 2%
TMT 8%
Manufacturing 2%Other Business 1%
1 Rent contracted on both 5 Broadgate and run off on 1-3 Finsbury Avenue/100 Liverpool Street lease run off whilst UBS move
64
Portfolio weighting
At 30 September 2014%
2015 (current)%
2015 (current)£m
2015 (pro-forma1)%
Shopping parks 23.4 23.0 3,315 22.4 Shopping centres 15.5 15.9 2,282 15.4
Superstores 10.1 6.3 906 5.7
Department stores 4.7 4.2 610 4.1
Leisure 2.8 3.7 530 3.6
Retail & Leisure 56.5 53.1 7,643 51.2 Of which Multi-let 36.0 37.2 5,355 36.0
West End 23.1 25.5 3,669 27.2
City 17.8 19.6 2,813 19.0
Provincial 0.7 - 3 -
All Offices 41.6 45.1 6,485 46.2 Residential 1.9 1.8 256 2.6
All Offices & Residential 43.5 46.9 6,741 48.8 Total 100.0 100.0 14,384 100.0 Table shows UK total, excluding assets held in Europe.1 Pro forma for developments under construction at estimated end value (as determined by the Group’s external valuers) and post period end transactions 2 Stand-alone residential
65
Portfolio valuation by sector
At 30 September 2015Group JVs & Funds1 Total1 Change %2
£m £m £m % £mShopping parks 2,213 1,102 3,315 1.1 36
Shopping centres 1,157 1,125 2,282 3.9 86
Superstores 221 685 906 (1.6) (15)
Department stores 609 1 610 2.9 17
Leisure 527 3 530 2.8 15
Retail & Leisure3 4,727 2,916 7,643 1.8 139 Of which Multi-let 3,119 2,236 5,355 2.2 121
West End 3,669 - 3,669 8.1 285
City 104 2,709 2,813 8.5 221
Provincial 3 - 3 2.6 -
All Offices 3,776 2,709 6,485 8.3 506 Residential4 210 46 256 6.5 17
All Offices & Residential3 3,986 2,755 6,741 8.2 523 Total 8,713 5,671 14,384 4.7 662
Standing Investments 8,050 5,618 13,668 4.5 602 Developments 663 53 716 8.5 60
Table shows UK total, excluding assets held in Europe. Total portfolio valuation including Europe of £14.4bn at year end, +4.7% valuation movement.1 Group’s share of properties in joint ventures and funds including HUT at ownership share2 Valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments
(classified by end use), purchases and sales3 Including committed developments4 Stand-alone residential
66
Portfolio yield & ERV movements1,2
At 30 September 2015
EPRA net initial
yield %
EPRA topped up net initial
yield %3
Overall topped up net initial
yield %4
Net equivalent
yield %
Net equivalent yield
compression5
Net reversionary
yield %
ERV Growth
%5,6
Shopping parks 4.7 5.0 5.1 5.1 5 5.1 0.9
Shopping centres 4.5 4.7 4.8 4.9 14 5.0 1.9
Superstores 5.3 5.3 5.3 5.2 (5) 5.2 (0.9)
Department stores 4.0 4.0 5.9 4.4 12 3.7 0.0
Leisure 4.9 4.9 6.1 5.3 22 4.0 0.3
Retail & Leisure 4.7 4.9 5.1 5.0 8 4.9 0.9
Of which Multi-let 4.5 4.8 4.8 4.9 9 5.0 1.4
West End 3.3 4.0 4.0 4.4 24 4.6 4.1
City 3.2 4.5 4.5 4.4 16 5.2 5.1
Offices 3.3 4.2 4.3 4.4 20 4.9 4.5
Total 4.1 4.6 4.8 4.7 13 4.9 2.3
Table shows UK total, excluding assets held in Europe.1 Including notional purchaser’s costs2 Excluding developments under construction and assets held for development3 Including rent contracted from expiry of rent-free periods and contracted uplifts not in lieu of growth4 Including fixed/minimum uplifts (excluded from EPRA definition)5 6 months to 30 September 20156 As calculated by IPD
67
Lease length and occupancy1
At 30 September 2015 Average Lease Length (yrs) Occupancy Rate (%)
To Expiry To Break Occupancy Occupancy (underlying)2
Shopping parks 8.7 7.7 97.3 98.1
Shopping centres 8.7 7.7 96.9 98.2
Superstores 14.3 14.0 100.0 100.0
Department stores 21.0 20.9 100.0 100.0
Leisure 18.3 18.3 100.0 100.0
Retail & Leisure 10.9 10.1 97.8 98.6
Of which Multi-let 8.6 7.5 97.0 98.1
West End 10.0 8.2 96.1 98.5
City 10.6 8.8 97.7 97.7
Offices 10.3 8.5 96.9 98.1
Total 10.6 9.4 97.4 98.4
Table shows UK total, excluding assets held in Europe. 1 Excluding developments under construction and assets held for development 2 Including accommodation under offer or subject to asset management
68
Annualised rent & estimated rental value (ERV)1
At 30 September 2015 Annualised Rents (Valuation Basis) £m2 ERV £m Average Rent (£psf)Group JVs & Funds Total Total Contracted3, 4 ERV3
Shopping parks 115 54 169 181 25.5 25.9
Shopping centres 64 52 116 128 29.5 31.4
Superstores 12 38 50 49 21.6 21.2
Department stores 25 - 25 24 15.1 14.0
Leisure 27 - 27 23 14.4 11.9
Retail & Leisure 243 144 387 405 23.7 23.8
Of which Multi-let 158 108 266 293 27.6 28.8
West End 113 - 113 155 50.9 57.0
City 4 90 94 155 50.5 57.7
Offices 117 90 207 310 50.6 57.2
Residential5 4 - 4 3
Offices & Residential 121 90 211 313
Total 364 234 598 718 29.2 31.2
Table shows UK total, excluding assets held in Europe. 1 Excluding developments under construction and assets held for development 2 Gross rents plus, where rent reviews are outstanding, any increases to ERV (as determined by the Group’s external valuers), less any ground rents payable under head leases, excludes contracted rent subject to rent free and future uplift 3 Office average rent & ERV £psf is based on office space only 4 Annualised rent, plus rent subject to rent free5 Stand-alone residential
69
Rent subject to open market rent review1
Table shows UK total, excluding assets held in Europe.1 Excluding developments under construction and assets held for development
At 30 September 2015 2016 2017 2018 2019 2020 2016-18 2016-20For period to 31 March £m £m £m £m £m £m £mShopping parks 12 14 22 24 16 48 88
Shopping centres 4 12 15 14 8 31 53
Superstores 7 5 4 9 15 16 40
Department stores - - - - - - -
Leisure - - 2 - - 2 2
Retail & Leisure 23 31 43 47 39 97 183 Of which Multi-let 11 26 38 38 23 75 136
West End 3 8 19 20 14 30 64
City 11 1 6 14 14 18 46
Offices 14 9 25 34 28 48 110 Total 37 40 68 81 67 145 293 Potential uplift at current ERV 1 - 1 3 1 2 6
70
Rent subject to lease break or expiry1
Table shows UK total, excluding assets held in Europe. 1 Excluding developments under construction2 Based on office space only3 As determined by the Group’s valuers
At 30 September 2015 2016 2017 2018 2019 2020 2016-18 2016-20For period to 31 March £m £m £m £m £m £m £mShopping parks 8 6 10 12 15 24 51
Shopping centres 7 9 9 6 10 25 41
Superstores - - - - - - -
Department stores - - 1 - - 1 1
Leisure - - - - - - -
Retail & Leisure 15 15 20 18 25 50 93 Of which Multi-let 14 15 19 17 25 48 90
West End 1 8 9 10 4 18 32
City - 19 - 17 13 19 49
Offices2 1 27 9 27 17 37 81 Total 16 42 29 45 42 87 174 % of contracted rent 2.4% 6.1% 4.1% 6.6% 6.2% 12.6% 25.4%Potential uplift at current ERV3 1 9 1 7 3 11 21
71
ERV resetting to market
At 30 September 2015 2016 2017 2018 2019 2020 2016-18 2016-20
For period to 31 March £m £m £m £m £m £m £m
ERV expiring – existing portfolio1 18 24 29 52 46 71 169
Under construction developments – Offices 2 6 9 - - 17 17
Under construction developments – Retail - - - - - - -
Near Term developments - 1 2 34 50 3 87
Total Rent Resetting to Market 20 31 40 86 96 91 273
ERV of current vacancies2,3 18 18
Vacant & Income Expiring 109 291 1 Rent is based on ERV, reflecting current valuation, expiries to first break, excludes developments under construction and assets held for development2 Including space under offer of £5m and space subject to asset management of £2m3 Including £5m of vacant space at recently completed developments
72
Contracted rental increases (cash flow basis)
At 30 September 2015 2016 2017 2018 2019 2020 2016-18 2016-20
For period to 31 March £m £m £m £m £m £m £m
Expiry of rent free periods 23 40 9 3 - 72 75
Fixed uplifts (EPRA basis) - - 1 1 - 1 2
Fixed & minimum uplifts in lieu of rental growth 1 5 1 1 1 8 10
Total 24 45 11 5 1 81 87
73
Acquisitions
From 1 April 2015Price
(Gross)Price
(BL Share)
Annual Passing
Rent
Area £m £m £m2
Completed1 Sheldon Square Offices London 210 210 10
Hercules Unit Trust unit purchase1 Retail Various 95 95 5
19-33 Liverpool Street Offices London 22 22 1
Teesside Leisure Park Retail North East 2 2 -
Total 329 329 161 Units purchased over the course of the period. £95m represents purchased GAV 2 BL share of net rent topped up for rent frees
74
Disposals
From 1 April 2015Price
(Gross)Price
(BL Share)
Annual Passing
Rent
Area £m £m £m1
Completed
Parkgate Shopping Park, Rotherham Retail Yorkshire 170 120 6
39 Victoria Street Offices London 139 139 5
Birstall Shopping Park, Leeds Retail Yorkshire 107 31 2
Hatters Way, Luton & Hylton Riverside, Sunderland
Retail Various 44 33 2
The Hempel Collection Residential London 16 16 -
Superstore disposals Retail Various 14 14 1
Bedford Street Residential London 4 4 -
Exchanged
Tesco, Bursledon Retail South 60 60 3
Aldgate Place Residential London 16 8 -
The Hempel Collection Residential London 6 6 -
Total 576 431 191 BL share of net rent topped up for rent frees
75
Under Construction/completed in period developmentsAt 30 September 2015 Sector BL
ShareSq ft PC
CalendarYear
CurrentValue
Cost toComplete
ERV Let & Under Offer
Resi End
Value
% '000 £m £m1 £m2 £m £m3
5 Broadgate Offices 50 710 Completed 453 16 19.2 19.2 -
Whiteley Leisure, Fareham Retail 50 58 Completed 12 1 0.6 0.6 -
Glasgow Fort, M&S & Retail Terrace Retail 75 112 Completed 33 3 1.9 1.7 -
Total Completed in Period 880 498 20 21.7 21.5 -
Yalding House Offices 100 29 Q4 2015 32 3 1.7 - -
4 Kingdom Street Offices 100 147 Q2 2017 57 76 8.9 - -
Clarges Mayfair Mixed Use 100 192 Q3 2017 360 138 6.0 - 463
Glasgow Fort (MSCP & Additional retail/leisure units) Retail 75 12 Q3 2016 1 7 0.4 - -
The Hempel Phase 1 Residential 100 25 Q1 2016 32 1 - - 51
The Hempel Phase 24 Residential 100 32 Q2 2016 48 13 - - 74
Aldgate Place, Phase 15 Residential 50 221 Q2 2016 30 27 - - 81
Total Under Construction 658 560 265 17.0 - 669
Retail Capex6 80
Data includes Group's share of properties in Joint Ventures & Funds (except area which is shown at 100%)1 From 1 October 20152 Estimated headline rental value net of rent payable under head leases (excluding tenant incentives)3 Residential development of which £332m completed or exchanged and a further £10m under offer4 Now excludes 17 Craven Hill Garden – sold separately5 End value excludes sale of hotel site, receipts of £6m (BL Share). Sale now completed6 Capex committed and underway within our investment portfolio relating to leasing & asset enhancement
Near-term and medium-term developments At 30 September 2015 Sector BL Share Sq ft Start On Site Total Cost1 Status
% '000 £m
Near-term Pipeline5 Kingdom Street2 Offices 100 240 2016 209 Consented100 Liverpool Street3 Offices 50 509 2017 260 Consented1 Finsbury Avenue Offices 50 303 2017 150 Consented4
1 Triton Square Offices 100 217 2017 340 Pre-submissionBlossom Street, Shoreditch Mixed Use 100 347 2016 242 SubmittedPlymouth Leisure Retail 100 102 2016 39 ConsentedNew Mersey Shopping Park, Speke - Leisure Retail 65 66 2016 17 ConsentedForster Retail Park, Bradford, Phase 3 Retail 100 63 2016 18 Pre-submissionAldgate Place, Phase 2 Residential 50 145 2016 58 Consented54 The Broadway, Ealing Residential 100 34 2016 18 ConsentedTotal Near-Term 2,026 1,351 Retail Capex5 110
Medium-term PipelineEden Walk Shopping Centre, Kingston Mixed Use 50 562 SubmittedCanada Water Masterplan6 Mixed Use 100 5,500 Pre-submission2 - 3 Finsbury Avenue7 Offices 50 189 Pre-submissionMeadowhall Leisure Retail 50 330 Pre-submissionPutney High Street Mixed Use 100 110 ConsentedTotal Medium-Term 6,691
1 Total cost including site value. Excludes notional interest as interest is capitalised individually on each development at our capitalisation rate2 210,000 sq ft of which is consented3 Planning granted for 517,000 sq ft, but currently considering options to enhance design and mix4 Resolution to grant planning consent5 Forecast capital commitments within our investment portfolio over the next 2 years relating to leasing & asset enhancement6 Assumed net area based on gross area of up to 7m sq ft7 Existing net areas, scheme in early design stages
76
77
Residential development programme
At 30 September 2015 Sq Ft No.Market
Units
PC Date/Status
BL Share Current Value1
Cost To complete2
EndValue
Sales Exchanged &
Completed3
'000 % £m £m £m £m
Clarges Mayfair4 103 34 Q3 2017 100 265 107 463 259
Mixed use 103 34 265 107 463 259
The Hempel Phase 1 25 15 Q1 2016 100 32 1 51 26
The Hempel Phase 2 32 19 Q2 2016 100 48 13 74 -
Aldgate Place Phase 1 221 154 Q2 2016 50 30 27 81 47
Residential-led 278 188 110 41 206 73
Aldgate Place Phase 2 145 Consented 50
Ealing, Crystal House 34 Submitted 100
Near Term prospective 179
Total Committed Residential 381 222 375 148 669 332
Data includes Group's share of properties in Joint Ventures & Funds (except area which is shown at 100%)1 Excluding completed sales2 From 1 October 2015. Cost to complete excludes notional interest as interest is capitalised individually on each development at our capitalisation rate3 Of which £16m completed at The Hempel Phase 1. Excludes completed sale of hotel site at Aldgate Place for £6m (BL Share) 4 Includes 9,500 sq ft of affordable housing (11 units)
78
1 Financing costs are capitalised on qualifying expenditure for committed and near term developments at 4%
Estimated future development spend and capitalised interest
At 30 September 2015 PC Pre-let ERV Cost to complete £m (excluding notional interest) - 6 mths
Calendar Year £m Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18
Yalding House Q4 2015 - 3
4 Kingdom Street Q2 2017 - 28 25 14 3 4 1
Clarges Mayfair Q3 2017 - 58 37 25 10 3 3
Glasgow Fort (MSCP & Additional retail/leisure units)
Q3 2016 - 6
The Hempel Phase 1 Q1 2016 - 1
The Hempel Phase 2 Q2 2016 - 10 1 1 1
Aldgate Place, Phase 1 Q2 2016 - 8 11 4 1 3
Total - 113 75 44 15 7 7
Total Near-Term 25 51 132 152 184 152
Indicative Interest Capitalised on above at attributable rates1 6 9 13 12 10 14
79
Estimated future development rental income(accounting basis) At 30 September 2015 PC Gross Rental Income (Accounting basis) £m
For period to 31 March Calendar Year 2016 2017 2018 2019 2020
Yalding House Q4 2015 Non-contracted - 1 2 2 2
4 Kingdom Street Q2 2017 Non-contracted - - - 7 7
Clarges Estate Q3 2017 Non-contracted - - 5 5 5
Total Offices Contracted - - - - -
Non-contracted - 1 7 14 14
Other Retail Developments Contracted - 1 1 1 1
Non-contracted - - - - -
Total Retail Contracted - 1 1 1 1
Non-contracted - - - - -
Total Committed Contracted - 1 1 1 1
Non-contracted - 1 7 14 14
80
0.0
2.0
4.0
6.0
8.0
10.0
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Central London pipeline
m sq ft
Q3 2015
Completed Pipeline Pre-let Potential Speculative
U/C Pre-let U/C - Speculative
10 year average new/refurb take-up
10 year average dev completions
Source: Knight Frank, British Land
81
West End development pipeline
m sq ft
Q3 2015
0.0
0.5
1.0
1.5
2.0
2.5
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Completed Pipeline Pre-let Potential Speculative
U/C Pre-let U/C - Speculative
10 year average new/refurb take-up
10 year average dev completions
Source: Knight Frank, British Land
82
City development pipeline
m sq ft
Q3 2015
0.0
1.0
2.0
3.0
4.0
5.0
6.0
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Completed Pipeline Pre-let Potential Speculative
U/C Pre-let U/C - Speculative
10 year average new/refurb take-up
10 year average dev completions
Source: Knight Frank, British Land
83
0
2
4
6
8
10
12
14
16
18
1985 1990 1995 2000 2005 2010 Q3 2015
Vacancy Central London
West End & City Vacancy Rates
West End Void Rate (Period end) City Void Rate (Period end)Source: CBRE
%
84
London office market rental outlook
Prime London Office Rents
0
20
40
60
80
100
120
140
1992
1991
1990
2000
1999
1998
1997
1996
1995
1994
1993
2013
2007
2005
2009
2015
2011
2017
2019
2016
2002
2008
2003
2014
2018
2012
2004
2001
2006
2010
Rental Growth Driven by Imbalance Between Supply and Demand
£ psf
Source: CBRE (historic) and Average Agents' Consensus (including PMA) for forecasts
Actual Forecast
West End City
85
Property Yields and interest rate yield gap
-1.0
1.0
3.0
1990 1996 1998 2000 2003 2004 2007 2009 2010 2013 2015
Source: IPD/Bloomberg
Source: IPD
Gap
as
mul
tiple
of g
ilt y
ield
2.0
4.0
6.0
8.0
10.0
All Retail Central London Offices
Retail and London Office Yields
Property Yield vs 10 Year Gilt Yields
NIY
%
85
86
Regent’s Place Campus
87
Paddington Central Campus
88
Broadgate Campus
89
Disclaimer
The information contained in this presentation has been extracted largely from the Half Year Results Announcement for the period ended30 September 2015.
This presentation may contain certain “forward-looking” statements. By their nature, forward-looking statements involve risk and uncertainty because they relate tofuture events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-lookingstatements. Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made and no representation or warranty is given inrelation to them, including as to their completeness or accuracy or the basis on which they were prepared. British Land does not undertake to update forward-lookingstatements to reflect any changes in British Land’s expectations with regard thereto or any changes in events, conditions or circumstances on which any suchstatement is based.
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