Interim Management Statement

RNS Number : 4204I

British Land Co PLC

25 July 2012

 



THE BRITISH LAND COMPANY PLC INTERIM MANAGEMENT STATEMENT

Continued Robust Operational Performance

British Land today publishes its interim management statement for the quarter to 30 June 2012

Chris Grigg, Chief Executive said: "I am very pleased with our performance in the last period, achieved in the context of a tough economic environment. Operationally, we had another good quarter with 650,000 sq ft of lettings and lease extensions; we also increased occupancy across the business while Retail footfall rose, in contrast to the broader market. We are delighted to announce today the purchase of the Clarges Estate in Piccadilly, an important mixed used development opportunity in the heart of Mayfair. This acquisition will further enhance our presence in the West End and underlines the benefits of our size and scale. We are also seeing a number of other attractive investment opportunities and expect to continue to recycle assets in order to release capital."

Highlights

Asset Management - strong operational performance reflecting strength and quality of our portfolio*

·      £13.5 million (564,500 sq ft) of lettings and lease renewals/extensions at 1.6% above ERV; occupancy up 10 bps at 98.1%

·      Continued demand for our high quality UK retail schemes: 172,400 sq ft of retail lettings and lease renewals at 1.0% ahead of ERV; occupancy up 20 bps over last 3 months to 98.5%

·      Retail footfall 0.5% positive, outperforming the market benchmark which was down 2.4%

·      Exposure to rents in administration lower at 0.8% of total rent following successful lettings

·      Retaining existing office occupiers: 392,100 sq ft of office lease extensions and lettings at 7.9% ahead of ERV (excludes lease extensions); encouraging level of letting enquiries

Developments - progressing well with good levels of pre-letting interest

·      Further 85,000 sq ft of development pre-lets; total income secured through pre-lets now £41 million

·      Continued occupier interest in West End and City offices including The Leadenhall Building

·      Further residential development pre-sales brings residential sales over the last 3 years to £173 million

·      High levels of interest in retail developments: Whiteley Shopping Centre 76% pre-let and due to open in May 2013; Zaragoza 82% pre-let/under offer and opening in early October 2012

Investment - attractive opportunities supported by capital recycling

·      £205 million of investment (BL share) including £143 million of acquisitions exchanged/completed

·      Investments focused on committed and future development pipeline

·      £130 million acquisition of the Clarges Estate, a 191,500 sq ft office/residential development opportunity in Mayfair announced today

·      Asset sales to fund investments; £59 million of assets (BL share) sold at 1.1% ahead of valuation

Financing - strong financial position and access to finance

·      First quarter dividend confirmed at 6.6 pence, 1.5% ahead of prior year

·      Financial position remains strong; agreed £374 million of new financings in joint ventures and funds

·      Proportionally consolidated loan to value (LTV) at 45.6% (June pro-forma) and average interest rate marginally lower at 4.5%

* For further information on our leasing activity vs ERV for 3 and 6 months to 30 June see table below.

Retail Portfolio

The attractiveness of our retail offer is reflected in the continued strength of our operational metrics despite the tough UK retail market backdrop.  Our overall occupancy in the UK remains strong, increasing by 20bps to 98.5% over the last three months and our footfall was up 0.5% in the quarter to June. This compares with the industry benchmark which was down 2.4% (source: Experian) as consumers continue to gravitate to the best locations.  We have continued to see good demand from key retailers for our high quality space although deals are taking longer to conclude.  We agreed 172,400 sq ft of lettings and renewals during the quarter, at an average of 1.0% ahead of ERV at 31 March 2012.  This included: lettings to Armani Exchange, Crocs and Lego at Meadowhall; Bank at Drake Circus; TK Maxx at Glasgow Fort; and Sports Direct and Frankie & Benny's at Rotherham.  We currently also have around 360,000 sq ft lettings and pre-lets under offer at terms ahead of ERV.  We have made good progress on re-letting/assigning space with occupiers in administration.  As a result, rents in administration have fallen from 1.0% in May (after Clinton Cards administration) to 0.8% at 30 June 2012 and we are in active discussions to re-let/assign 53 of the 69 stores which remain in administration.  

We have pre-let a further 56,000 sq ft of our retail development space in the UK including 15,000 sq ft at Whiteley Shopping Centre near Southampton.  Whiteley is now 76% pre-let/under offer and is on track to complete early next year with pre-lets including M&S, Next, Boots, H&M and River Island.  Enabling works are complete at our Glasgow Fort leisure extension which is fully pre-let and due to open in July 2013.  We have submitted plans on a further 160,000 sq ft of retail development projects on our existing schemes which, alongside recent acquisitions, continue to build our future retail development pipeline.

In Europe, which accounts for 3% of our portfolio, the environment continues to deteriorate as consumer spending contracts.  Our business in Southern Europe has been impacted by increased occupier administrations along with higher levels of letting incentives and concessions.  Our 1.4 million sq ft shopping centre at Zaragoza now has 82% of space pre-let/under offer and will open in early October.

Offices and Residential Portfolio

Our Offices portfolio continues to benefit both from the quality of our buildings and from our focus on London. Occupancy rose by 10bps at 98.1% over the quarter with further leasing activity strengthening income.  Since the beginning of April, we have let or extended leases on 392,100 sq ft of office space with lettings at 7.9% ahead of ERV at 31 March 2012. We have a further 62,000 sq ft of lease extensions and lettings under offer.  Despite the economic uncertainty, we are seeing continued interest in our buildings in both the City and West End and at levels generally ahead of ERV.

Reflecting the quality of our portfolio and the customer service we deliver, we have continued to successfully retain occupiers.  The majority of our leasing activity over the quarter has been at Broadgate where we have 388,000 sq ft of deals agreed/under offer with existing occupiers who are either extending their leases or are taking additional space.  At Broadgate Tower, we have let 5,900 sq ft on Level 18 to Itochu who are expanding in the building, at a rent of £62.50 per sq ft and a term certain of 8.5 years and have a further 12,000 sq ft under offer in excess of ERV. At Exchange House and 10 Exchange Square, we have agreed lease extensions on nearly 370,000 sq ft of space.  Herbert Smith have extended their leases on 315,000 sq ft by 10 years at an average passing rent of £52psf and F&C have extended leases on 54,000 sq ft to 2027 with an average passing rent of £49psf, rising to a minimum of £51psf in August 2014.  F&C will also be vacating around 16,000 sq ft at lease expiry at the end of July 2012, which we will be refurbishing. Taken together, our leasing activities have increased the weighted average lease length at Broadgate by 12 months.

We remain on track with our major 2.3 million sq ft Central London development programme. 94% of the contracts are now placed within time and budget and during the quarter we let a further 29,500 sq ft of office space to Debenhams at 10 Brock Street, Regent's Place, taking their total pre-let to 174,000 sq ft, around half the building.  We are seeing encouraging levels of interest across our West End and City development schemes including at the Leadenhall Building where works are progressing well with practical completion on track for Q2 2014.

Between the start of 2009 and 30 June 2012, we have committed £293 million to 343,000 sq ft of residential development in Central London both in mixed use office-led and in standalone schemes. To date, we have completed 143,000 sq ft of these residential developments, with a further 200,000 sq ft due to be completed by the end of 2013.  Continued successful pre-sales during the quarter brings total sale proceeds from our residential programme to £173 million. Acquisitions over the last six months, principally Aldgate Place and Clarges House, have increased our prospective residential pipeline.

Investment Activity

We are seeing a number of attractive investment opportunities come on to the market, particularly those with current or prospective development potential.  Since the financial year end, we have completed or exchanged £143 million of acquisitions (BL share) including: Clarges House, a mixed use office and residential development site in Mayfair; and the Daily Mail's 14.6 acre printing work site at Harmsworth Quays in South London.  Since 1 April 2012, we have realised £59 million (BL share) from asset sales, a 1.1% premium to the 31 March 2012 valuation.

Financing

Net borrowings on a proportionally consolidated basis were £4.9 billion at 30 June 2012 broadly similar to net borrowings at 31 March 2012.  On a proportionally consolidated basis and at 31 March 2012 valuations, our LTV was 45.6% (Group LTV 29.9%) and our weighted average interest rate was marginally lower at 4.5%. Group cash and committed unutilised bank facilities were £1.5 billion.  In May, the HUT fund (British Land share 41%) successfully agreed a new £350 million five year loan facility comprising a £250 million term loan and a £100 million revolving loan.  The term loan has been drawn and the existing credit facility fully repaid. In April, PREF (British Land share 65.3%), repaid in full its remaining syndicated bank loan principally funded with a new loan provided by unit holders. The unit holder loan has subsequently been partly repaid following the completion in June of a new bank facility to finance PREF's Italy asset.

Dividend

The first interim dividend payment for the current financial year ending 31 March 2013 will be 6.6 pence per share, a 1.5% increase on the comparable period last year.  The dividend will be paid on 9 November 2012 to shareholders on the register at close of business on 05 October 2012.  An announcement on the availability of the split between PID and non-PID income along with the availability of any scrip dividend alternative will be made no later than 48 hours before the ex-dividend date on 03 October 2012.

Leasing Activity

To 30 June 2012	3 months %	6 months %
UK Lettings & renewals vs. ERV:
- Retail	+1.0	+5.2
- Offices	+7.9	+5.8
- Total	+1.6	+5.3
UK Rent Reviews vs. previous rent:
- Retail	+5.2	+4.6
- Offices	-	+2.8
- Total	+5.1	+4.5
UK Retail Footfall (year-on-year growth):
- British Land Retail	+0.5	(0.1)
- Experian Index	(2.4)	(2.8)

Investor Conference Call

British Land will host a conference call at 8.30am today, 25 July 2012.  The details for the conference call are as follows:

UK Toll Free Number:                 0800 279 4841

UK Number:                              0207 136 2054

Passcode:                                 5409109

A dial in replay will be available later in the day and the details are:

Replay number:                         0800 358 7735

Passcode:                                 5409109#

For Information Contact

Investor Relations

Sally Jones, British Land                                    020 7467 2942

Media 

Pip Wood, British Land                                       020 7467 2838

Gordon Simpson, Finsbury Group/                       020 7251 3801

Guy Lamming, Finsbury Group

Forward-Looking Statements

This document contains certain "forward-looking" statements reflecting, among other things, current views on our markets, activities and prospects.  By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may or may not occur and which may be beyond British Land's ability to control or predict (such as changing political, economic or market 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.  Except to the extent required by law, British Land does not undertake to update or revise forward-looking statements to reflect any changes in British Land's expectations with regard thereto or any changes in information, events, conditions or circumstances on which any such statement is based.

Notes to Editors:

About British Land

British Land is one of Europe's largest Real Estate Investment Trusts (REITs) with total assets, owned or managed, of £15.8 billion (British Land share £10.3 billion), as valued at 31 March 2012.  Through our property and finance expertise we attract experienced partners to create properties and environments which are home to over 1,000 different organisations and visited by over 300 million people each year.  Our property portfolio is focused on prime retail locations and Central London offices which attract high quality occupiers committed to long leases.  Our occupancy rate of 98.1% and average lease length to first break of 11.3 years are among the highest of the major UK REITs.

Retail assets account for 61% of our portfolio with around 27 million sq ft of retail space across 89 retail parks, 97 superstores, 12 shopping centres and 10 department stores.  The retail portfolio is modern, flexible and adaptable to a wide range of formats and our active asset management delivers space which is attractive and meets the needs of both retailers and consumers.  Over 80% of our retail parks have open A1 consent.

London offices, located in the City and West End, comprise 34% of the portfolio (which will rise to an estimated 40% on completion of current developments).  Our 7 million sq ft of high quality office space includes Broadgate, the premier City office campus (50% share) and Regent's Place in the West End.  We have committed £1.2 billion to create Central London's largest committed office development programme which will deliver 2.3 million sq ft of high quality space by 2014, including a 700,000 sq ft building at 5 Broadgate, the 610,000 sq ft Leadenhall Building in London's insurance district and a 500,000 sq ft mixed office and residential scheme at Regent's Place in the West End.

Managing our environmental, economic and social impacts is central to the way we do business and deliver value for our shareholders.  We assess the issues that matter most to us and our stakeholders on an on-going basis and, where appropriate, adjust our strategic focus to reflect this.  For the coming year we have adjusted our priorities to focus on managing our buildings efficiently, supporting communities, developing sustainable buildings and engaging our staff.  For each of these priorities we are targeting our efforts and resources at initiatives where we can achieve the biggest impacts.

Further details can be found on the British Land website at www.britishland.com.

 

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