102
www.britishland.com FULL YEAR RESULTS PRESENTATION FULL YEAR ENDED 31 MARCH 2012
www.britishland.com
FULL YEAR RESULTS PRESENTATION FULL YEAR ENDED 31 MARCH 2012
Chief Executive
CHRIS GRIGG
Introduction
Good set of results
• Profits: +5.1%
• NAV: +4.9%
• Q4 Valuation: +0.3%
• Total Returns: 8.3%
2
To Build the Best REIT in Europe
Our Vision
3
To Deliver Superior Returns Over Time
Asset Level Outperformance
VISION
DELIVERY
High Return on Capital
1. Sustainable and growing income
2. Assets which protect and grow capital value
3. Creating incremental value
4. Controlling costs
5. Exploiting our scale and financial strength
Five Key Priorities
4
To Drive Superior Performance
Our Strategic Priorities
5
Guiding our Long-Term Decisions and Short-term Actions
Key Priorities
Long-Term Decisions
Short-Term Actions
Not just about asset management
To drive returns
Overall and in key sectors
Retail and London Offices
Our Long-Term Decisions
6
Translating Priorities
Sector Choice
Scale
Efficient Capital Structure
Adding Value
£100m of sales
Lease extensions Improving ERVs
Our Short-Term Actions
7
Translating Priorities into Actions
Sharpen Focus on Income
Leading the market in pre-lets Capitalised on Development Decisions
Drake Circus Maidenhead Accretive Acquisitions
Increased Pace of Recycling
£2bn raised Successful Financings
Today’s Agenda
8
Chris Grigg Chief Executive
Lucinda Bell Finance Director
Charlie Maudsley Head of Retail
Tim Roberts Head of Offices
Chris Grigg Chief Executive
Results Overview
Financial Review
Retail Review
Offices Review
Conclusion
Good Progress in More Challenging Markets
Financial Highlights
• Announced 1.5% increase in the quarterly dividend to 6.6p
9
Y/E 31 March FY 2011 FY 2012 Change
Net Rental Income £518m £546m +5.4%
Underlying PBT £256m £269m +5.1%
Dividend per share 26.0p 26.1p -
Valuation £10.3bn +2.6%
NAV per share 567p 595p +4.9%
Total Accounting Return 17.7% 9.5% n/a
Significant Outperformance at the Asset Level
Property Level Performance in 2011/12
10
Y/E 31 March BL IPD Performance vs IPD
Rental Values (ERVs) +2.1% +0.5% +160 bps
Capital Returns 3.0% 0.5% +250 bps
Total Property Returns 8.3% 6.3% +200 bps
Drivers of Property Level Performance
• Sector and asset selection key to outperformance – Retail and offices outperformed
sector benchmarks • Our actions drove capital value uplift
– Over 40% from asset management – One third from development – A quarter from yield compression
Longer-Term Decisions and Recent Actions
Contribution to Valuation Uplift
11
+250bps
+310bps
+180bps +200bps
+270bps
+140bps
0
50
100
150
200
250
300
350
12 Months 3yr 5yr
Capital Return Total Return
Property Level Outperformance – The Long-Term Record
12
Consistent Strong Outperformance at the Asset Level
British Land Portfolio Returns Relative to IPD Bps
Growing Income Through Acquisition
Sharpened Focus on Income
• £882 million of acquisitions over last 2 years
• Adding £36 million of new rental income in the year
13
Drake Circus Mayflower Maidenhead Virgin Active
Securing Income Through Asset Management
Sharpened Focus on Income
• 1 million sq ft of retail lettings and renewals – 6.9% ahead of ERV
• 1 million sq ft of office lettings/lease extensions in investment portfolio – 3.3% ahead of ERV
• Total Lettings and renewals at 6% ahead of ERV
• £10.0m of new annual rent
14
Well-timed Developments
15
Pre-lets Secure Annual Income of £34m: 20 Year Average Term
The Leadenhall Building 10, Brock Street, NEQ 5 Broadgate
Portfolio Purchased from “Motivated” Seller
Incremental Value – The Virgin Active Example
• Exploit our deal skills – Quality leisure operation – Strong asset backing – Attractive income (NIY of 7.3%) – Long leases (25 years)
• Early recycling – 5 clubs sold to institutions – 18% premium to purchase price
16
Virgin Active
Refinancing and Reducing Cost of Debt
Successful, Well-timed Financings
• £2bn of unsecured and secured refinancing
• Few property companies with comparable access to debt markets
• Taking advantage of our size and strength
17
LUCINDA BELL Finance Director
Confidence in the Portfolio for the Future
Key Themes
• Strengthened the quality and longevity of our cash flows
• Raised £2bn of finance by leveraging our scale
• Increase in dividend
19
Highlights
20
Growth in Both Income and Capital
FY to 31 March 2011 2012 Change
Net Rental Income £518m £546m +5.4%
Underlying PBT £256m £269m +5.1%
Underlying EPS 28.5p 29.7p +4.2%
Dividend per share 26.0p 26.1p
Net Asset Value per share 567p 595p +4.9%
Total Accounting Return 17.7% 9.5%
Growth in Underlying Profit of 5.1% (£13m)
21
Investment and Asset Management Driving Growth in Profits
£256m £269m
+£24m +£7m
£(8)m £(8)m
£(2)m
2011 Netinvestment
Like-for-like Developments Admincosts
Other 2012
Like for like net rental growth +1.5% • Retail +0.8% • Offices +2.5%
Efficient and Competitive Operating Cost Ratio of 15%
Income Statement
• Net rents increased by £28m
• Limited impact from tenant failures – Occupiers in administration
represent 0.6% of total rent
• Cost base continues to be competitive
22
FY to 31 March 2011
£m 2012
£m Growth
%
Net Rental Income 518 546 5.4%
Fees & Other Income 18 17
Administrative Expenses (68) (76)
Net Finance Costs (212) (218)
Underlying PBT 256 269 5.1%
Management Action Drives 2.6% Valuation Uplift
23
NAV up 4.9% to 595p
FY to 31 March 2012 Valuation
£m Uplift
% ERV growth1
% EPRA Topped-up NIY2
%
UK Retail 6,046 0.4 1.4 5.5
Office Investments 2,948 5.3 3.7 6.0
Office Developments 614 17.8 n/a n/a
Other (inc. Europe) 729 (0.4) 0.0 7.5
Total 10,337 2.6 2.1 5.8
1 Like for like (as calculated by IPD) excluding Europe 2 Including purchaser’s costs rent contracted from expiry of rent fees and contracted uplifts not in lieu of growth
£2bn Financings Raised on Competitive Terms
• Exploiting the benefits of our scale
• Diverse range of lenders
• £850m of new debt for HUT
24
Amount £m
Term yrs
Unsecured bank 760 5
Unsecured US Private Placement 300 11
Sub Total (BL) 1,060
Secured bank (Funds) 775 5
Secured insurer (Funds) 125 5
Sub Total (JVs & Funds) 900
Total 1,960 6
Total (BL share) 1,412 6
Average Margin to British Land of 160bps
Key Financing Highlights
25
Sound Balance Sheet Metrics
Proportionally consolidated 2011 2012 EPRA Net Debt £4,317m £4,690m Loan to Value (LTV) 44.7% 45.3% Interest Cover 2.2x 2.2x Average Interest Rate 4.9% 4.6% Average maturity of drawn debt 10.1 years 9.3 years
Group 2011 2012
Loan to Value (LTV) 24.3% 29.1%
Interest Cover 3.0x 3.0x
Average Interest Rate 4.7% 4.2%
Diversified Sources and Well Spread Debt Maturities
26
Improved Average Maturity of our Total Resources
Group Maturity £m
0
200
400
600
800
1,000
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
Undrawn FacilitiesPrivate PlacementsDebentures & Loan NotesDrawn Facilities
Year to 31 March
Well Managed Refinancing Risk
Good Liquidity
• Well spread, well phased debt portfolio
• Cash resources - £337m of cash and liquid investments
• Total facilities available in 2 years time are £1.7bn
• £480m of net development spend over next 3 years
• No immediate debt refinancing requirements
27
Loan To Value
• LTV at 45.3% - within 40-50% target range
• Strength of financing structure
• Strong operational fundamentals – 98% occupancy – Long lease length 11.3 years – 24% of leases fixed or RPI uplifts – 96% of rent collected within 7 days
• Total letting risk significantly lower than IPD
28
LTV Range Reflects Asset Quality and Balance Sheet Strength
Significant Rental Growth Potential
29
£194m of Prospective Rental Growth; £108m Contracted
Annualised Rent Valuation Basis3 £m
Current annualised cash rent 534 Expiry of rent free periods1 51 Fixed, minimum uplifts1 17 Developments – pre-let 40 Total contracted 642 Letting of developments 49 RPI uplifts1,2 7 Uplift from rent reviews, expiries and vacancies1 30 Total 728
1 Over next 5 years 2 Illustrative impact based on growth in RPI of 2.5%pa 3 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
1.5% Increase in Quarterly Dividend to 6.6p
Increase in Dividend
• Increase in Q4 dividend to 6.6p – 26.1p for the full year
• Quarterly dividend to continue at this level for FY12/13 – total of 26.4p
• Reflecting strength of contracted cash flows (including pre-lets)
30
Confidence in the Portfolio for the Future
Summary
• Strengthened the quality and longevity of our cash flows
• Raised £2bn of finance by leveraging our scale
• Confidence in future: quality of portfolio and our actions
31
Head of Retail
Charles Maudsley
Against Challenging Market Backdrop
Robust Retail Performance
• Outperformed the retail market
• ERV growth 180 bps ahead of market; outperforming each subsector
• 340 lettings/renewals 6.9% above ERV
• 6.1% BL UK Retail Total Return - outperformed IPD All Retail by 110 bps
33
Defensively Positioned Today; Well Positioned to Outperform in Future
Key Messages
• A portfolio suitable for the modern retail environment – Meeting consumer needs – Attracting retailers – Delivering for investors
• The right approach – Quality team, asset management and driving total returns
34
Drivers of Our Performance
35
Performance Driven by Right Assets and Doing the Right Things
• Strength and diversity of our retail portfolio
• Strong asset management initiatives
• Focus on creating the right retail environment
£9.5bn1 UK Retail Assets Under Management
1 BL Share UK Retail £6.0bn
45%
23%
12%
13%
7%
Department Stores
Shopping centres
Retail Market Summary
• Difficult year for retailers, particularly in second half
• Rising number of retailer casualties
• Polarisation increasingly marked – Retailer trading performance – Occupational market
36
Retail Landscape Continues to Change
Polarisation Accelerating
Retail Occupational Market
• Retailers aggressively repositioning portfolios
• Exercising lease breaks in secondary locations
37
0%
4%
8%
12%
16%
2013 2014 2015 2016 2017
British LandIPD All RetailIPD Secondary Retail
Retail Lease Expiries % of income
Source: IPD
Retail Occupational Market
38
British Land Benefiting from Polarisation
90
92
94
96
98
100
102
104
Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12
British Land
IPD All Retail
IPD Secondary Retail
ERV Growth Indexed March 2010 = 100
Source: IPD
0.9
(0.4)
0.4 0.4
(1.2) (0.8) (1.3)
(5.0) (6.3)
-8
-6
-4
-2
0
2
British Land Retail IPD All Retail IPD Secondary Retail
Investment Market
39
Capital Values Reflecting Weaker Sentiment: Prime More Resilient
Capital Returns %
H1 H2 FY
Source: IPD
Reflects Strength and Diversity of Portfolio
Our Performance – Capital Returns
• Outperformed IPD capital returns by 120 bps: all sub-sectors outperformed
• Continued outperformance: over 3 years by 210 bps pa
40
Capital Return H1% H2% FY%
Retail Parks 1.0 (0.7) 0.2
Superstores 1.2 (0.1) 1.1
Shopping Centres 0.6 (0.5) 0.0
Department Stores 0.1 0.8 0.8
BL UK Retail 0.9 (0.4) 0.4
IPD UK Retail 0.4 (1.2) (0.8)
Our Performance – Rental Growth
• Outperformed IPD ERV growth by 180 bps: all sub-sectors positive
Significant Outperformance – Providing the Right Space
ERV Growth H1% H2% FY%
Retail Parks 0.7 0.3 1.0
Superstores 0.3 1.9 2.2
Shopping Centres 0.5 0.3 0.8
Department Stores 0.0 5.1 5.1
BL UK Retail 0.5 0.9 1.4
IPD UK Retail (0.3) (0.1) (0.4)
41
H1 H2 FY
Lettings/Renewals Sq ft ‘000s 527 568 1,095
vs ERV % 5.4 9.0 6.9
Rent Reviews Sq ft ‘000s 996 1,671 2,667
vs Previous Rent % 6.4 4.4 5.2
Asset Management Initiatives
• UK occupancy robust at 98.3%
• Admin exposure only 0.9%1 of retail rent
• 526 income initiatives across 3.8m sq ft
• Lettings / renewals 6.9% ahead of ERV
Driving Rental Growth Outperformance 42
1 As at 31 March 2012. Including recent Clinton Cards administration post year end 1.6% of retail rent
Leasing Activity
43
Attracting Broad Spread of Retail Demand
39%
14%
22%
8%
6%
1% 10%
Homeware
Electrical
Grocery
Leasing Activity
44
Lettings/Renewals Ahead of ERV in all Subsectors
Lettings/Renewals Sq ft ‘000
Annual Rent £m
Increase in rent £m
Vs ERV %
Retail Parks 625 9.2 3.3 5.2
Shopping Centres 287 8.4 2.8 9.3
Developments 87 1.0 0.6 n/a
Other 96 1.1 0.5 7.9
Total 1,095 19.7 7.2 6.9
Leasing Activity – Leveraging Relationships
45
Continued Demand from Existing Retailers
109,000 sq ft (plus 63,000 sq ft of mezzanine)
Top rent £55 psf
29,000 sq ft (plus 24,500 sq ft of mezzanine)
Top rent £40 psf
65,000 sq ft (plus 33,000 sq ft of mezzanine)
Top rent £50 psf
60,000 sq ft (including 30,000 sq ft of mezzanine)
Rent £20 psf
Attracting New Retailers to our Retail Parks
Leasing Activity – Retail Parks
• Swarovski at Glasgow
• Jack & Jones at Glasgow
• Whole Foods at Cheltenham
• Simply Be in Teesside Park
• Boots drive through in Northampton
• First ever UK Retail Park formats
First Retail Park Swarovski in Glasgow Fort
46
Future Proofing our Assets to Attract Retailers and Consumers
Evolving the Retailing Environment
• Obtained 62 planning consents covering 850,000 sq ft
• 142 capital projects underway
• Signed 39 food and beverage lettings – Upgrade of Oasis food court
at Meadowhall
• Under offer with 3 cinema pre-lets
• Investing in digital media including WiFi
47
Retail Footfall
48
Attracting the Consumer: Footfall Outperforming the Market
Region BL
FY % Experian
FY % Performance vs
Experian
Midlands 0.8 (2.6) +340 bps North East (0.1) 0.2 -30 bps North West (0.8) (4.1) +330 bps Scotland 1.9 (1.7) +360 bps South East (0.3) (2.1) +180 bps South West 0.0 (0.6) +60 bps Wales (0.3) (0.6) +30 bps Yorkshire 0.8 (0.3) +110 bps All Regions 0.3 (2.0) +230 bps
Retail Parks 0.7
Shopping Centres 0.1
Resilient Operational Performance
49
Retail Defensively Positioned in Today’s Challenging Environment
At 31 March 2012 British Land IPD
UK Occupancy Rate 98.3% 95.7%
Rents - Index Linked/fixed Uplifts 24.3% n/a
Lease Length 12.1 years 11.5 years
Income Expiring (Mar 2012-15) 7.5% 16.1%
Rent Collection within 2 weeks of due date 97% n/a
Occupiers in Administration1 0.9% n/a
Temporary Lettings 0.3% n/a
1 As at 31 March 2012. Including recent Clinton Cards administration post year end 1.6% of retail rent
Shortage of the Right Space
UK Retail Market Development Pipeline
• Continued demand – 440,000 sq ft under offer on our portfolio
• Little new stock in the pipeline
Source: PMA
UK Retail Development Completions m sq ft
0
4
8
12
2001 2003 2005 2007 2009 2011 2013 2015
Retail Parks Town Centre
50
Developing the Next Generation of Retail Space
Our Retail Development Pipeline
• 100,000 sq ft extension to Surrey Quays
• 302,000 sq ft development of Whiteley Shopping Centre, near Southampton – Strong demand from high quality retailers – 68% pre-let/under offer
• 1m sq ft of Potential New Space Across Portfolio
51
Defensively Positioned Today: Well Positioned to Outperform in Future
Retail Outlook
• Market environment will remain challenging
• Key challenge over next 12/24 months is growing income
• Short-term variability in performance, reflecting sentiment
• Prime will be more resilient, but not immune to market sentiment
• Shortage of high quality space
• Confidence about our relative prospects given our portfolio and active asset management
52
Tim Roberts Head of Offices
Strategy Continues to Deliver Good Performance
Key Messages
• Strong performance over year – 7.8% capital return – 12.1% total return
• Strategy and actions delivering outperformance: – Focus on London – £1.2bn development commitment – 1m sq ft of lettings/re-gears securing £26m pa – 1.1m sq ft of pre-lets securing £34m pa
54
Office Value by Subsector1
Balancing City and West End
1 Proforma for committed development
57%
43%
Outperformance Driven by London Focus and Our Actions
Strong Office Performance
• Outperformed IPD at sector and subsector level, and on capital and total return basis
• Developments showed 24.9% capital return
• Continued ERV growth 3.7%
55
Capital Return BL % IPD % Performance vs IPD
City 6.3 5.0 +130bps
West End 10.4 8.3 +210bps
All Offices 7.8 2.6 +520bps
Office Performance Drivers
56
Contribution to Valuation Uplift Full Year
• Good capital returns throughout the year – H1 +5.6% – H2 +2.1%
• H1 boosted by yield
• H2 no yield impact
Over Two-Thirds of Valuation Uplift Driven by Our Actions
Strong and Secure Income Flow
• 2.1m sq ft of pre-lets/lettings and lease extensions in year, securing £60m pa of rent
• British Land accounts for one fifth of London take-up over last 2 years
57
BL IPD Central London Occupancy rate 98.0% 89.9%
Lease length 8.8 yrs 8.0 yrs
Income expiring: Mar 2012-15 4.9% 30.8%
Capturing Occupier Demand for Best Quality Buildings
Revitalising Broadgate
• Nearly 50% of Estate recently developed, refurbished or under construction
• UBS retained as anchor occupier at 5 Broadgate – Also 755k sq ft of lease extensions
• In addition re-geared and let c. 130,000 sq ft, totalling £3.2m pa
• Improved 3 year lease expiry from 15.3% to 4.6% of rent
• Occupancy high at 97%
58
Reinforcing Broadgate as Premier Business Destination
Enhancing Broadgate – Broadgate Circle
59
Significant Asset Management Opportunities
Significant Asset Management Opportunities
Enhancing Broadgate – 100 Liverpool Street
• Existing building 380,000 sq ft
• Lease break extended from 2013 to 2016
• Capital value net of dilapidations, break penalty and income of c.£345 psf
• Crossrail station due to open in 2018
60
Transformed into a Vibrant 2.0m sq ft Mixed Use Estate
Transforming Regent’s Place
• Estate will grow to 2.0m sq ft
• Development of NEQ (500,000 sq ft) completing in June 2013
• Debenhams pre-let of 174,500 sq ft – 25 year lease term – Including further 30,000 sq ft at £56 psf
• 62,000 sq ft of lease extensions securing £3m pa
61
199 Bishopsgate 142,000 sq ft
Leadenhall 610,000 sq ft
5 Broadgate 700,000 sq ft
Marble Arch Hse 86,000 sq ft
10 Portman Sq 159,000 sq ft
NEQ 500,000 sq ft
Achieved Major Development Milestones
• Tendered 74 construction contracts totalling £500m
• Secured final planning consent on over 900,000 sq ft
• Entered 47 third party legal agreements
• Unconditional pre-lets for lease on 1.1m sq ft, ahead of investment case
Developments Showed Capital Return of 24.9%
39 Victoria St 92,000 sq ft
62
Attractive Development Pre-lets
63
Secured 1.1m sq ft Pre-lets - 50% of Committed Programme
Sq ft £m pa
(BL Share) £ psf Term
yrs Rent Free
mths
700,000 19.1 54.50 18.2 18
191,000 5.6 56.60 19.0 33
174,500 9.4 53.90 25.0 32
Total 1,065,500 34.1 54.70 20.2 24
Profitable Development Programme On Track
• Valuers’ expected £192m profit to come: £167m already recognised
• Over £40m still provided within cost as a contingency
64
Further Profits to Come
Sq ft ‘000s
End Value £m
Income £m
% Pre-let
% costs placed
Development Yield %
City 1,452 671 41.2 62 76 7.0
West End 837 733 36.3 26 90 8.2
Total 2,289 1,404 77.5 50 83 7.6
Residential
• Increased investment in London residential
• Over £600m owned or under management – £330m BL development portfolio (end value) – £300m standing investment portfolio managed
on behalf of a Fund
• Develop and sell approach for our £330m development portfolio – £140m in the context of mixed-use
developments – £190m in residential-led schemes
65
Exploiting London’s Growing Status
Market Outlook – London Development Pipeline
66
Expected Completions Below Historical Average, Leaving Limited Choice
City and West End Development Completions
m sq ft
Source: Drivers Jonas Deloitte
0
1
2
3
4
5
6
7
8
9
1990 1995 2000 2005 2010 2015
Committed Pre-let Completed
Average Grade A Take up
Market Outlook – Occupational Demand
67
Market Demand Underpinned by Structural Factors Source: Jones Lang LaSalle
• Active demand picked up
• 18.7m sq ft of lease breaks or expiries between 2013 and 2015
• West End requirements driven by TMT sector
0
2
4
6
8
10
12
Mar 10 Sep 10 Mar 11 Sep 11 Mar 12
City Active DemandWest End Active Demand
London Active Demand
m sq ft
Agents’ Consensus Rental Growth Forecast Rental Index 2011 = 100
Market Outlook – Positive Rental Outlook
68
Imbalance Between Demand and Supply
Source: Average Agents’ Consensus
100
110
120
130
2011 2012 2013 2014 2015 2016
City West End + 4.1% pa
+ 3.7% pa
Positive About Outlook for London Offices
Confident About Our Future Prospects
• High quality portfolio with growth opportunities
• Profitable development programme well on track
• Focus on London, well balanced between City and West End
69
Chief Executive
CHRIS GRIGG
Outlook
71
Building the Best REIT in Europe
• Strong results – Driven by decisions – Driven by actions
• Management team
“Defensively positioned today with growth tomorrow”
Building the Best REIT in Europe
Summary
72
APPENDICES
Reconciliation of Underlying Profit Before Tax
74
Year Ended 2011
£m 2012
£m
IFRS Profit before tax 830 479
Net valuation movement (includes disposals) (591) (215)
Deferred and current taxation of joint ventures & funds 6 -
Amortisation of intangible assets 10 -
Capital financing costs 1 2
Non-recurring items - 3
Underlying profit before tax 256 269
EPRA adjustments 4 (6)
EPRA earnings before tax 260 263
Gross Rental Income1 – Sectoral Analysis
75
(Accounting Basis) £m 12 months to 31 March 2012 Annualised as at 31 March 2012
Group JVs & Funds Total Group JVs & Funds Total Retail parks 104 43 147 107 44 151 Superstores 8 64 72 8 65 73 Shopping centres 36 60 96 34 60 94 Department stores 33 - 33 33 - 33 UK Retail 181 167 348 182 169 351 Europe - 23 23 - 17 17 All Retail 181 190 371 182 186 368 City 26 82 108 25 82 107 West End 56 - 56 53 - 53 Provincial 5 - 5 6 - 6 All Offices 87 82 169 84 82 166 Other 32 - 32 33 - 33 Total 300 272 572 299 268 567
1 Gross rental income will differ from annualised rents due to accounting adjustments for fixed & minimum contracted rental uplifts and lease incentives
Growth in Rental Income
76
FY Reported Net Rental Income
£m
Annualised Gross Rental Income
£m
31 March 2011 518 546
Like-for-like 7 5
Acquisitions 36 25
Disposals (7) (6)
Development (6) (4)
Other (2) 1
31 March 2012 546 567
Operating Costs Metric
• Our measure of efficiency:
• Controlling costs a strategic priority
• Metric introduced 2011
• Net operating costs: 14.9% of Gross Rental Income
• No BL staff costs/overheads capitalised
• It remains a key competitive advantage
77
FY to 31 March 2011
£m 2012
£m Property Outgoings 23 26
Administrative Expenses;
Property related 68
46
Corporate expenses 30
Income generated from property management (18) (17)
Net Operating Costs 73 85
As % of Gross Rental Income 13.5 14.9
- Group 53 67
- JVs & Funds 20 18
EPRA Balance Sheet (Proportional Consolidation)
78
£m Group JVs & Funds March 2012 March 2011
Total properties 5,414 4,923 10,337 9,572
Net debt (2,229) (2,461) (4,690) (4,317)
Other net liabilities (113) (153) (266) (154)
EPRA Net Assets 3,072 2,309 5,381 5,101
EPRA Diluted NAV per share 595p 567p
Loan to Value – inc. share of JVs & Funds 45.3% 44.7%
Loan to Value – Group 29.1% 24.3%
Reconciliation of EPRA NAV & NNNAV
79
As at 31 March 2011
£m 2011
Pence 2012
£m 2012
Pence
Balance sheet (IFRS) net assets 4,930 548 5,104 565
Deferred tax arising on revaluation movements 37 4 31 3
Mark to market on effective cash flow hedges and related debt adjustments 89 10 189 21
Adjust to fully diluted on exercise of share options 45 5 57 6
EPRA NAV 5,101 567 5,381 595
Deferred tax arising on revaluation movements (37) (4) (31) (3)
Mark to market of debt and derivatives 53 6 (202) (23)
EPRA NNNAV 5,117 569 5,148 569
Growth in EPRA Net Asset Value
80
567p 595p
+23p +1p
(26)p
+29p +1p
2011 OfficeRevaluation
Retail/OtherRevaluation
UnderlyingProfit
Dividends Other 2012
Net Debt
81
As at 31 March 2012 Group
£m JVs & Funds
£m Total
£m
Gross debt 2,621 2,601 5,222
Market value of derivatives 19 121 140
Cash & liquid investments (337) (146) (483)
EPRA adjustments1 (74) (115) (189)
Net debt (EPRA basis) 2,229 2,461 4,690
Average interest rate 4.2% 4.6%
Interest cover2 3.0x 2.2x
1 Excludes mark to market on effective cash flow hedges and related debt adjustments 2 Underlying profit before interest and tax (UPBIT)/net interest
Diverse Funding Profile
82
£1.1bn £1.1bn
£0.5bn £0.5bn
£1.0bn £1.0bn
£1.8bn
£0.8bn
£0bn
£1bn
£2bn
£3bn
£4bn
£5bn
Group (LTV: 29.1%) Prop. Consol. (LTV: 45.3%)
Other JV & Funds debt
Securitisations
Debentures & loan notes
US Private Placements
Unsecured debt
Debt Maturity – Joint Ventures and Funds
83
0
200
400
600
800
1,000
1,200
2013 2014 2015 2016 2017 2018 2019-2023 2024-2036
JVs - securitisationsJVs - bank debtFunds - bank debt
Year to 31 March 1 Pro forma for financings completed since year end
BL Share £m1
Movement in Cash Flow
84
FY to 31 March 2012 Group
£m JVs & Funds
£m Total
£m
Net cash from operations 206 33 239
Investment acquisitions (382) - (382)
Other purchases (22) 11 (11)
Disposals 71 11 82
Development and other capital expenditure (106) (101) (207)
Investment in and loans to JVs & Funds (110) 110 -
Dividend paid (212) - (212)
Other / non cash movements (34) 57 23
Net (increase) / decrease in net debt (589) 121 (468)
Major Assets
85
As at 31 March 2012 (excluding developments) BL
Share % Sq ft ‘000
Rent £m pa1
Occupancy rate %2
Lease length yrs3
1 Broadgate, EC2 50 4,009 173 97.3 7.5
2 Regents Place, NW1 100 1,210 51 98.4 8.8
3 Meadowhall Shopping Centre 50 1,374 82 97.4 9.3
4 Ropemaker Place, EC2 100 594 27 100.0 14.3
5 Teesside Shopping Park 100 457 14 100.0 8.6
6 Drake Circus Shopping Centre 100 570 15 94.7 7.6
7 Debenhams, Oxford Street 100 367 16 100.0 27.0
8 York House, W1 100 132 5 100.0 5.7
9 Glasgow Fort Shopping Centre 41 393 17 97.5 7.3
10 St Stephens Shopping Centre 100 410 8 99.2 8.4
11 Tesco Superstores 50 2,741 62 100.0 15.6
12 Sainsbury’s Superstores 50 2,908 68 100.0 16.7 1 annualised contracted rent including 100% of Joint Ventures & Funds 2 includes accommodation under offer or subject to asset management 3 to first break
Top 20 Customers
86
At 31st March 2012 % of total rent
Tesco 7.2
Sainsbury’s 6.2
Debenhams 4.3
UBS AG 3.6
Home Retail Group 3.0
HM Government 2.3
Kingfisher (B&Q) 2.2
Virgin Active 2.1
Next 2.0
Arcadia Group 1.9
% of total rent
Spirit Group 1.7
Bank of Tokyo-Mitsubishi UFJ 1.6
Macquarie Group 1.5
DSG International 1.4
Herbert Smith 1.4
Asda Group (inc. Asda Living) 1.3
Alliance Boots 1.3
RBS 1.2
Hutchison 3G 1.1
Marks and Spencer 1.1
Portfolio Valuation by Sector
87
Group JVs & Funds Total Change%2
At at 31 March 2012 £m £m1 £m H1 H2 FY
Retail parks 1,879 839 2,718 1.0 (0.7) 0.2 Superstores 142 1,223 1,365 1.2 (0.1) 1.1 Shopping centres 474 1,038 1,512 0.6 (0.6) 0.0 Department stores 451 - 451 0.1 0.8 0.8 UK Retail 2,946 3,100 6,046 0.9 (0.5) 0.4 Europe Retail - 272 272 (2.0) (4.4) (5.7) All Retail3 2,946 3,372 6,318 0.7 (0.6) 0.1 City 526 1,538 2,064 5.0 1.4 6.1 West End 1,402 - 1,402 6.4 3.0 9.3 Provincial 89 7 96 (1.9) 6.0 3.8 All Offices4 2,017 1,545 3,562 5.3 2.1 7.3 Other 451 6 457 1.4 1.5 2.8 Total 5,414 4,923 10,337 2.2 0.4 2.6
1 group’s share of properties in Joint Ventures & Funds 2 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 sales 3 including committed and prospective developments of £87 million, down 8.0% for the 12 months 4 including committed and prospective developments of £614 million, up 17.8% for the 12 months
Portfolio Net Yields1
88
1 Including rent contracted from expiry of rent free periods and fixed uplifts not in lieu of growth 2 Including fixed/minimum uplifts (excluded from EPRA definition)
At 31st March 2012 (excluding developments)
EPRA initial yield %
EPRA topped-up initial yield %1
Overall topped-up initial yield%2
Reversionary yield %
Equivalent yield %
Retail parks 5.4 5.6 5.7 5.7 5.8 Superstores 5.1 5.1 5.1 5.0 5.1 Shopping centres 5.5 5.7 5.8 6.0 5.8 Department stores 5.9 5.9 8.8 4.8 6.5 UK Retail 5.4 5.5 5.8 5.6 5.7 Europe Retail 7.1 7.1 7.1 7.5 8.0 All Retail 5.5 5.6 5.8 5.6 5.8 City 4.6 6.2 6.2 6.0 5.7 West End 4.0 5.5 5.9 5.8 5.6 Provincial 7.1 7.1 7.1 5.8 6.5 All Offices 4.4 6.0 6.1 5.9 5.7 Other 7.6 7.6 9.6 6.3 8.4 Total 5.2 5.8 6.1 5.7 5.8
Lease Length and Occupancy
89
At 31st March 2012 (excluding developments)
Average lease length (yrs) Occupancy rate (%) To expiry To break Occupancy Occupancy (overall)1
Retail parks 10.6 9.7 98.2 98.8 Superstores 15.9 15.9 100.0 100.0 Shopping centres 9.9 9.1 94.7 95.9 Department stores 28.6 25.2 100.0 100.0 UK Retail 13.0 12.1 97.7 98.3 Europe Retail 11.3 5.0 89.7 89.7 All Retail 12.9 11.7 97.3 97.9 City 10.9 9.0 97.4 97.5 West End 10.6 8.4 98.6 98.6 Provincial 10.7 10.5 100.0 100.0 All Offices 10.8 8.8 97.9 98.0 Other 22.1 22.0 99.0 99.0 Total 12.6 11.3 97.6 98.0
1Including accommodation under offer subject to asset management
Annualised Rent & Estimated Rental Value (ERV)
90
1 gross rents on a cash basis 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
2 based on office space only
At 31st March 2012 (excluding Developments)
Annualised rents (valuation basis) £m1 ERV £m Average rent (£psf)
Group JVs & Funds Total Total Contracted ERV
Retail parks 108 46 154 162 22.5 23.0 Superstores 8 65 73 73 21.5 21.4 Shopping centres 35 58 93 99 27.5 28.7 Department stores 28 - 28 23 12.3 10.0 UK Retail 179 169 348 357 21.9 22.3 Europe Retail - 18 18 19 9.0 9.4 All Retail 179 187 366 376 20.5 20.6 City 5 83 88 114 46.22 44.42 West End 45 - 45 65 43.72 43.82 Provincial 6 - 6 5 20.7 16.8 All Offices 56 83 139 184 43.6 42.2 Other 29 - 29 22 12.1 10.0 Total 264 270 534 582 23.5 23.3
Significant Rental Growth Potential
91
1 Over next 5 years 2 Illustrative impact based on growth in RPI of 2.5%pa 3 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 4 Including notional purchaser’s costs, and annualised property outgoings (as per EPRA definition)
Accounting Gross Rent
£m
Annualised Rent Valuation Basis3
£m EPRA Net Yield
%4
Current annualised cash rent 567
534 5.2 Expiry of rent free periods1 51 - Fixed and minimum uplifts1 17 - Developments – pre-let 35 40 - Total contracted 602 642 5.8 Letting of developments 40 49 RPI uplifts1,2 7 7 Uplift from rent reviews, expiries and vacancies1 28 30 Total 677 728
Contracted Rental Increases (Cash Flow Basis)
92
Year to 31 March (£m pa) Excluding developments 2013 2014 2015 2016 2017 2013-15 2013-17
Expiry of rent free periods 20 28 1 1 - 49 50
Fixed uplifts (EPRA basis) 1 1 3 1 - 5 6
Fixed & minimum uplifts in lieu of rental growth 1 1 1 1 6 3 10
Total 22 30 5 3 6 57 66
Rent Subject to Open Market Rent Review
93
12 months to 31 March (£m) 2013 2014 2015 2016 2017 2013-15 2013-17 Retail parks 27 23 21 22 18 71 111 Superstores 2 9 17 19 5 28 52 Shopping centres 16 9 5 15 13 30 58 Department stores - - - 5 - - 5 UK Retail 45 41 43 61 36 129 226 Europe Retail - - - - - - - All Retail 45 41 43 61 36 129 226 City 19 31 30 17 2 80 99 West End 7 3 1 16 5 11 32 Provincial - - - 6 - - 6 All Offices 26 34 31 39 7 91 137 Other - - - 1 - - 1 Total 71 75 74 101 43 220 364 Potential uplift at current ERV 3 3 4 3 1 10 14
Rent Subject to Lease Break or Expiry
94
At 31 March (£m) 2013 2014 2015 2016 2017 2013-15 2013-17 Retail parks 4 5 4 8 8 13 29 Superstores - - - - - - - Shopping centres 5 6 3 6 8 14 28 Department stores - - - - - - - UK Retail 9 11 7 14 16 27 57 Europe Retail 3 3 2 2 2 8 12 All Retail 12 14 9 16 18 35 69 City 1 2 1 2 22 4 28 West End 3 1 2 3 6 6 15 Provincial - - - - - - - All Offices 4 3 3 5 28 10 43 Other - 1 1 - - 2 2 Total 16 18 13 21 46 47 114 % of contracted rent 2.5% 3.0% 2.1% 3.4% 7.6% 7.6% 18.6% Potential uplift at current ERV 1 1 1 1 (1) 3 3
Rent Resetting to Market
95
Year to 31 March (£m pa) 2013 2014 2015 2016 2017 2013-15 2013-17
Income expiring – existing portfolio1 16 18 13 21 46 47 114
Speculative developments – City 3 - 13 - - 16 16
Speculative developments – West End - 27 - - - 27 27
Speculative developments – Retail - 4 1 - - 5 5
Total 19 49 27 21 46 95 162
Rent Resetting to Market
96
9%
27% 7%
0%
5%
10%
15%
20%
25%
30%
British Land IPD (exc. development)
Vacant & Income Expiring Developments (Speculative)
Total ERV Resetting to Market (Next 3 Years)
Committed Developments
97
At 31 March 2012 BL Share Sq ft PC Calendar Current Value
Cost to complete Notional interest ERV Pre-let Resi End Value
% '000 Year £m £m £m1,2 £m3 £m £m4 5 Broadgate 50 700 Q4 14 117 141 26 19.1 19.1 - The Leadenhall Building5 50 610 Q2 14 88 136 19 18.6 5.6 - NEQ, Regents Place6 100 500 Q2 13 211 123 13 19.1 9.4 113 199 Bishopsgate 50 142 Q4 12 37 8 1 3.5 - - 10 Portman Square7 100 159 Q2 13 70 37 4 8.4 - 17 Marble Arch House8 100 86 Q4 13 29 29 4 3.9 - 14 39 Victoria Street 100 92 Q2 13 41 24 4 4.9 - - Total Offices 2,289 593 498 71 77.5 34.1 144 Puerto Venecia, Zaragoza 50 1,360 Q4 12 52 42 7 7.6 4.0 - Whiteley Village, Fareham 50 302 Q2 13 10 21 1 2.4 1.2 - Glasgow Fort (Cinema) 41 45 Q1 13 2 4 - 0.5 0.5 - Total Retail 1,707 64 67 8 10.5 5.7 -
Total Residential 70 50 23 6 - - 94 Total Committed 4,066 707 588 85 88.0 39.8 238 Data includes Group's share of properties in Joint Ventures & Funds (except area which is shown at 100%) 1 from 1 April 2012 to practical completion (PC) 2 based on a notional cost of finance of 6% 3 estimated headline rental value net of rent payable under head leases (excluding tenant incentives) 4 parts of residential development expected to be sold, no rent allocated – of which £108 million completed or exchanged 5 191,000 sq ft pre-let to Aon signed with an option to take a further 85,000 sq ft 6 includes 126,000 sq ft of residential 7 includes 25,000 sq ft of off-site residential and retail (95-99 Baker Street) – sale completed 8 includes 10,000 sq ft of residential
Prospective Developments
98
At 31 March 2012 BL Share % Sq ft '000 6-9 Eldon Street 100 47 Pre-submission Colmore Row 100 284 Detailed planning consent 100 Liverpool Street 50 383 Planning pending New Century Park 50 1,000 Outline Total Offices 1,714 Fort Kinnaird, Edinburgh 21 84 Planning pending Glasgow Fort, Glasgow 41 185 Detailed planning consent Kingston Centre, Milton Keynes 50 21 Detailed planning consent Broughton Park, Chester 41 54 Planning pending Surrey Quays, London 50 99 Detailed planning consent Power Court, Luton 100 200 Planning pending Superstore Extensions 50 99 Board Commitment to Fund Deepdale Retail Park, Preston 21 76 Detailed planning consent Meadowhall Surrounding Land 50 142 Planning submitted Total Retail 960 Total Prospective 2,674
Estimated Future Development Spend for Offices and Retail
99
PC Prelet
ERV Cost to complete £m (excluding notional interest) – Six mths As at 31 March 2012 Calendar Year £m Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15
199 Bishopsgate, EC2 Q4 12 6 2
10 Portman Square, W1 Q2 13 10 18 9
NEQ, Regent’s Place, NW1 Q2 13 9.4 36 59 28
39 Victoria Street, SW1 Q2 13 5 12 7
Marble Arch House, W1 Q4 13 5 10 10 4
The Leadenhall Building, EC3 Q2 14 5.6 34 51 19 10 22
5 Broadgate, EC2 Q4 14 19.1 16 28 34 28 17 18
Total Offices 34.1 112 180 107 42 39 18
Puerto Venecia, Zaragoza Q4 12 4.0 22 21
Glasgow Fort (Leisure) Q1 13 0.5 1 2 1
Whiteley Shopping Centre Q2 13 1.2 5 5 10
Total Retail 5.7 28 28 11
Total Committed 39.8 140 208 118 42 39 18
Illustrative Unrealised Office Development Profits
100
Unrealised profit illustration1 Average Valuation Yield (£m) +75bps +50bps +25bps 5.4% (25bps) (50bps) (75bps)
Estimated Rental Value2
(10%) (24) 22 73 131 194 265 342
(5%) 3 50 102 162 227 299 379
£58 29 78 131 192 260 334 416
+5% 67 118 173 236 306 383 468
+10% 94 146 202 267 338 417 504
+15% 120 173 232 298 371 452 542
1 Estimated remaining valuation surpluses on committed office developments, based on external valuers’ March 2012 assumptions (sensitised for movements in yields and headline rents) excluding valuation surplus of £167m realised to date
2 Headline (excluding tenant incentives)
Disclaimer
101
The information contained in this presentation has been extracted largely from the Full Year Results Announcement for the year ended 31 March 2012. This presentation may contain certain “forward-looking” statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. 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 in relation 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-looking statements to reflect any changes in British Land’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. This presentation is made only to investment professionals as defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ('the FP Order'). The content of this presentation has not been approved by a person authorised under the Financial Services and Markets Act 2000 (“FSMA”). Accordingly, this presentation may only be communicated in the UK with the benefit of an exemption set out in the FP Order. An investment professional includes: (i) a person who is authorised or exempt under FSMA; and (ii) a person who invests, or can reasonably be expected to invest, on a professional basis for the purposes of a business carried on by him; and (iii) a government, local authority (whether in the United Kingdom or elsewhere) or an international organisation; and (iv) any director, officer, executive or employee of any such person when acting in that capacity. This presentation is published solely for information purposes. This presentation does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any security, nor a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this presentation in any jurisdiction in contravention of applicable law. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. The distribution of this presentation in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about, and observe, any applicable requirements. This presentation has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that which would have been disclosed if this presentation had been prepared in accordance with the laws of jurisdictions outside the UK. All opinions expressed in this presentation are subject to change without notice and may differ from opinions expressed elsewhere.
