Conference Call: Superstore PortfolioTuesday, 8 December 2009
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Agenda
• UK Grocery Market
• British Land’s Superstore portfolio
• Performance
• Activity
• Investment market
Bryan Lewis
Asset Manager for Superstores
Darren Richards
Retail Investment
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
The UK Grocery Market
Large Format GroceryRetailing(£106bn)
Non-store/Home retailing (£3bn)
Traditionalretailing (£7bn)
Convenienceretailing (£30bn)
• UK Grocery market sales £146bn pa, of which £106bn (72%) from large format grocery stores1
£0.6bn
£5.9bn
£6.5bn
£93.0bn
Total Sales
Discounters (e.g. Aldi, Lidl)
Co-op
Multiples (Tesco, Sainsbury’s, Asda, Morrisons, Waitrose)
Independents
Large Format Grocery Retailing
1 IGD (Institute of Grocery Distributors)
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Examples of our Superstore Portfolio
Sainsbury’s, Swansea (90,000 sq ft)
• 550 car spaces• Extended in 1998 & 2003• Rental value £18.50 psf• Let to Sainsbury’s until 2024
Tesco, Formby (60,000 sq ft)
• 400 car spaces• Extended in 2004• Rental value £22.00 psf• Let to Tesco until 2030
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
British Land’s Superstore Portfolio
• Largest owner of Superstores, other than the operators themselves
• 101 superstores totalling 6.1m sq ft – of which 44 Sainsbury’s & 35 Tesco
• £2.1bn portfolio (BL Share £1.1bn)
• 5.75% net initial yield
• 100% let; average lease length 17.6 years
• Average rent £20 psf (ERV: £21 psf)
• Food retailers represent 18% of total rent– of which 14% Tesco & Sainsbury’s
1 30 September 2009, pro forma for Broadgate JV (50% share of Broadgate)
West End offices(11%)
Other (3%)
Department stores (6%)
Retail Warehouses
(27%)
Shopping Centres (12%)
City offices (20%)
Superstores (16%) Europe (5%)
Superstores represent 16% of total portfolio – 24% of Retail portfolio1
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Partnerships with the Retailers
516
269
47
249
138
Value£m1
39
21
9
1
9
Number of Properties
32
15
3
17
8
Rent£m pa1
5-yr upward only rent reviewBLT properties
5-yr upward only rent review
Annual RPI
5-yr upward only rent review
5-yr upward only rent review
Lease
Tesco Aqua
Tesco BL
Tesco British Land
BL Sainsbury Superstores Ltd
• Majority (88%) of portfolio held in JV
• Closer relationships with the retailers to
maximise properties and drive footfall
• 77% of portfolio subject to 5-year upward
only rent review
• 23% of portfolio based on annual RPI
within range of 0 - 3.5% pa
Superstore Joint Ventures
1 BL Share (includes retail parks and shopping centres anchored by Tesco)
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Portfolio Performance
-6
-4
-2
0
2
4
6
6 mths 1 yr 3 yrs 5 yrs 10 yrs
Ren
tal V
alue
Gro
wth
(% p
a)
BL Superstores IPD All Retail
4.7% pa Rental Value Growth in BL’s Superstores over last 10 years vs. IPD All Retail 2.6% pa
BL’s Superstores Total Property Return 9.6% pa over 10 years vs. IPD All Retail 5.6% pa
-20
-15
-10
-5
0
5
10
6 mths 1 yr 3 yrs 5 yrs 10 yrsTo
tal P
rope
rty R
etur
n (%
pa)
BL Superstores IPD All Retail
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Expansion of Grocers
Retailers’ store opening plans:
Completed 87 new stores and is on track to re-fit/develop c.2m sq ft by this yearTesco
To continue to add 8-10 large format outlets each year. Potential for 300 convenience stores over 5-10 years
Opened 12 stores in 2009. Further 1m sq ft of openings planned in the South of England
50 new stores to open by mid-2011. Also extending existing stores
Scheduled to open 20 new sites this year
Morrisons
Sainsbury’s
Asda
Waitrose
• Retailers looking to increase floorspace for non-food items (e.g. clothing, entertainment, banking)
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Sustainable Income
627
193
382
495
311
674
Stores
4.6
3.5
11.1
14.3
13.9
18.4
Sales Area
(m sq ft)
Net Sales (£bn)
Supermarket Sales (£bn)
Change 2008 vs.
2007
Tesco 38 23 +8.4%
Asda 19 16 +5.5%
Sainsbury’s 19 16 +5.9%
Morrisons 15 14 +12.8%
Waitrose 4 4 +5.5%
Co-op 5 2 +2.0%
1 IGD
• Highest UK food store rents– M&S Food, Kings Road (£40.00 psf)– Tesco, Bishopsgate (£37.50 psf)– Sainsbury’s, Islington (£31.50 psf)– Tesco, Peterborough (£28.50 psf)
• BL portfolio average rent £20 psf
• In general, rent c.3-4% of turnover - equivalent to 2 weeks total sales
• However, rent reviews assessed on supply and demand instead of turnover
Food Retailers’ Store Sales1
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Rent Review Case Study – Sainsbury’s, Islington
Sainsbury’s, Islington (67,000 sq ft)
• Dominant store within 10 minutes drive time• 170,000 people within 10 minutes of store• Mixed affluence profile, heavily skewed towards
young singles with no children
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Active Property Management
• Over last 5 years, settled 72 rent reviews at average
17% above previous rent
• Funded 800,000 sq ft of extensions at 7% yield
• Currently evaluating funding further 165,000 sq ft of
extensions to existing portfolio expected to be built
out over next 2 years
• 4 Tesco JVs and 1 Sainsbury’s
– JV structure allows for greater co-operation
and success
BL increase1Sq ftNumber12 months to%£m pa
163.31,395202005
3,989
333
562
446
1,253
‘000
72
5
11
9
27
8.6
0.5
1.4
1.3
2.1 92006
17
16
23
20
2009
2008
2007
Total
30 September
1 BL Share of increase on previous passing rent
Rent Review Performance
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Attractive Long-term Fundamentals
• Market share
– UK grocery accounts for 51% of total
retail spend1
• Rental growth and affordability
• Covenant strength
• Long lease expiry profiles
• Restrictive planning environment
1 IGD
Waitrose (4%)
Other (13%)
Co-op/Somerfield
(8%)
Tesco (31%)
Sainsbury’s (16%)
Asda (17%)
Morrisons (11%)
UK Grocery Market Shares1
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Investment Market
• Strong investment demand based on
fundamentals
• Restricted supply
• Yields have compressed as a result
• Lease types (RPI vs. Open Market) an issue
• Risk fundamentals overlooked n/a£32m5.0%30 yrsSainsbury’s, Macclesfield(Under Offer)
4£50m5.0%25 yrsSainsbury’s, Cheltenham(Under Offer)
5£15m4.5%20 yrsWaitrose, Colchester
22£10m5.1%18 yrsWaitrose, West Byfleet
14£15m4.6%25 yrsWaitrose, Cheadle Hulme
BidsPriceNIYLease length
Recent Transactions
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
Summary
• Superstores a major part of BL’s portfolio
• Delivered excellent historic returns relative to the market
• Strong underlying business model andattractive long-term fundamentals continue to apply
• Good prospects for future performance
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Conference Call: Superstore PortfolioTuesday, 8 December 2009
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