Interim Results - 6 Months to 30 Sept 1999, Part 1
British Land Co PLC
29 November 1999
PART 1
THE BRITISH LAND COMPANY PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30TH SEPTEMBER 1999
HALF-YEAR PRE-TAX PROFITS up 94% at £97.4 million (1998 - £50.1 million).
Gross rents including British Land's share of joint ventures up 21% to £208.1
million (1998 - £171.9 million).
Gross rents excluding British Land's share of joint ventures up 21% to £172.8
million (1998 - £142.7 million).
PROFIT SOURCES
British Land Group:
Net Rents: up 19.4% to £161.3 million (1998 - £135.1 million).
Property Trading: £41.9 million (1998 - £2.1 million).
Joint Ventures:
Profits up 9.9% at £32.3 million (1998 - £29.4 million).
Interest earnings £8 million (1998 - £10.3 million).
Interest earnings are less because some of the shareholder loans in
the ventures were replaced by bank borrowings, which we were able
to arrange without recourse to British Land or its partners.
EARNINGS PER SHARE 15.3p (1998 - 8.1p).
INTERIM DIVIDEND PAYMENT INCREASED BY 5.26% to 3.4p per share (1998 - 3.23p).
PROPERTY ACTIVITY SINCE 31st MARCH 1999.
PROPERTY EXPENDITURE £1.34 billion.
Principal items (see below) - Meadowhall Shopping Centre, BL Fraser,
Cherrywood and Swiss Centre.
DEVELOPMENT EXPENDITURE £31.4 million.
PROPERTY SALES £184 million.
Principal items - the Corn Exchange, Broad Street House and First Avenue
House. Additionally, since 30th September we have sold the Swan Centre,
Rathmines, Dublin.
NEW FINANCE:
£1.54 billion securitisation supported by cashflows from the Broadgate Estate
completed in May.
The funding cost is 6.15%, with a life extending to 2038. The loan amounts to
73% of the value of the assets securitised, an indication of the covenant
quality of the tenants. The secured element was restricted to £100 million of
the Notes, none of which have recourse to British Land.
Joint Ventures:
£125 million non-recourse loan for BL Fraser Limited (new joint venture
owning 15 department stores with House of Fraser PLC).
£210 million non-recourse loan for Tesco BL Holdings Ltd (owning most of the
properties formerly owned by The Tesco British Land Property Partnership).
AVAILABLE UNUSED BANK FACILITIES AND CASH (AFTER THE MEADOWHALL ACQUISITION)
AMOUNT TO £1.4 billion.
AVERAGE COST OF FUNDS (INCLUDING DERIVATIVES) REDUCED TO 7.2% AFTER THE
MEADOWHALL ACQUISITION.
87% of debt at fixed rates, 7% capped and 6% at variable rates (including
British Land's share of joint ventures).
DIFFERENCE BETWEEN BOOK AND MARKET VALUES OF DEBT (NET OF TAX) REDUCED TO
£131.4 million (31st March 1999 - £312.4 million) (including British Land's
share of joint ventures).
ACTIVITY IN THE PORTFOLIO
Meadowhall Acquisition
----------------------
We completed the acquisition of the highly reversionary Meadowhall Shopping
Centre near Sheffield, which provides 124,500 sq m (1.34 million sq ft) of
prime space occupied by 300 retailers to a catchment area of 7.5 million
people within sixty minutes driving time. It has its own mainline train
station, with 400 trains a day, a supertram station with 104 trams a day and a
bus station with 120 bus departures per hour serving 84 routes. The Centre is
close to the M1 motorway from which it has two access interchanges, three
miles north east of Sheffield.
Rent reviews settled so far have been ahead of our projections of £66.1
million by the end of 2000, and full reversionary income of £74.8 million.
The equivalent yield on cost is 6.04% and the reversionary yield is 6.4%. We
are more than pleased that the entire existing on site management team under
the Presidency of Mr. Eddie Healey is remaining.
New Lease at 100 New Bridge Street
----------------------------------
We achieved a major restructuring of the occupational leases at 100 New Bridge
Street, London EC4, as a result of which the property has a single tenant of
its 14,200 sq m (153,000 sq ft) office space until June 2017. As part of the
rearrangement, tenants' options to break the lease during the term have been
removed. Including also the 1,100 sq m (12,000 sq ft) retail element, the
rent is £6.5 million per annum.
The Swiss Centre now 100% Owned
-------------------------------
British Land has now stepped up from 75.5% to 100% in its ownership of the
9,000 sq m (97,000 sq ft) Swiss Centre, Leicester Square, London W1. A
revision of Switzerland Tourism's leases as part of the transaction opens the
way to realising further potential from the building.
DEVELOPMENT PROGRAMME
Regents Place
-------------
We are relocating Abbey National plc from Abbey House, Baker Street, London
NW1 to its new headquarters, a 18,200 sq m (196,000 sq ft) six storey building
we are constructing for the Bank at 2/3 Triton Square, London NW1.
Preliminary work has also begun on an additional 12,100 sq m (130,000 sq ft)
office building at 5 Triton Square.
We leased an additional 2,000 sq m (21,800 sq ft) to the Inland Revenue at the
thirty-three storey Euston Tower at Regents Place, and we are creating 1,000
sq m (10,500 sq ft) of attractive retail space in its podium.
Blythe Valley Park, Solihull
----------------------------
Infrastructure improvements, including a direct link to the M42 motorway, are
nearing completion at the 69 hectare (170 acre) development joint venture at
Blythe Valley Park, Solihull, with Prologis Kingspark, also in association
with the Solihull Metropolitan Borough Council. The development has outline
planning consent for 111,500 sq m (1.2 million sq ft) of office and other
accommodation. The Oracle Corporation has completed the construction of the
first phase of its 23,200 sq m (250,000 sq ft) office. Construction is in
progress on two further buildings totalling 7,900 sq m (85,000 sq ft) which
are pre-let.
Cherrywood, Dublin
------------------
The Cherrywood development, on a 160 hectare (400 acre) site eight miles south
of Dublin, is in a joint venture with Dunloe Ewart plc and in association with
Dun Laoghaire Rathdown County Council. The venture will shortly complete a
5,800 sq m (62,400 sq ft) science and technology building pre-let to Lucent
Technologies plc and a second 5,000 sq m (53,800 sq ft) building is under
construction.
201 Bishopsgate
---------------
Early next year with our partners, Railtrack plc, we will complete the raft
over railway lines forming the site for a 63,000 sq m (680,000 sq ft) office
building at 201 Bishopsgate, London EC2 for which there is planning
permission. A marketing suite has been opened next to the site.
Plantation Place
----------------
Demolition is complete and a marketing office has been built at Plantation
Place, London EC3. Piling works have begun. There is planning permission for
61,000 sq m (656,000 sq ft) of offices and retail space.
BOARD
We warmly welcome Robert Swannell, Vice-Chairman of J. Henry Schroder & Co.
Limited, who joined the Board as a non-executive director in August.
Extracts from the Interim Statement by Mr John Ritblat, Chairman.
-----------------------------------------------------------------
Pre-tax profits are a record, up 94% at £97.4 million (1998 - £50.1 million),
for the six months ended 30th September 1999, reflecting a period of strong
and wide-ranging activity.
We completed the £1.54 billion securitisation supported by cashflows from the
Broadgate Estate in May. The funding cost of 6.15%, with a life extending to
2038, looks even more attractive in hindsight. The loan amounted to 73% of
the value of the assets securitised, an indication of the covenant quality of
our tenants. The secured element was restricted to £100 million of the Notes,
none of which have recourse to British Land.
A comparison of market values and book values of net debt for British Land and
its share of joint ventures indicates that the difference after tax has shrunk
from £312.4 million at 31st March 1999 to £131.4 million at 30th September
1999.
Prospects
---------
British Land's modern, largely freehold, well-located, strongly-tenanted
portfolio, 93% of which has been purchased in the last ten years, is
positioned to capture the best of the growth which our industry offers, the
baleful uncertainties of increased stamp duty and business rates' revaluation
notwithstanding. The rises in Stamp Duty are deplorable. It is a massive and
retrospective tax, and the chronic uncertainty as to future increases unfairly
blights the entire stock of UK property which is already burdened with Capital
Gains Tax.
The portfolio's intrinsic reversionary prospects, well evidenced by the rise
in rents, are enhanced by the long-term financing and leases which we have put
in place. Property is a long-term business and rarely provides a smooth
progression, as values move irregularly but tend to rise over time. Our role
is to add value through selective purchases, through working our own high
quality portfolio and our geared joint ventures, and through a development
programme currently standing at over £1 billion. We aim to get a full share
of what's going from the present strong direct property market.
Contacts
John Ritblat, Chairman The British Land Company PLC
John Weston Smith, Finance Director telephone 0207-486-4466
Chairman's Statement
--------------------
Pre-tax profits are a record, up 94% at £97.4 million (1998 - £50.1 million),
for the six months ended 30th September 1999, reflecting a period of strong
and wide-ranging activity.
The foundation of our profitability is rents. Gross rents for the half-year,
including our share of the joint ventures, rose 21% to £208.1 million (1998 -
£171.9 million). For the British Land Group alone, excluding joint ventures,
gross rents were up to £172.8 million (1998 - £142.7 million) and net rents
were £161.3 million (1998 - £135.1 million).
Another sustained source of earnings is property trading where sales,
principally of the redevelopment of the Corn Exchange, London EC3 and the
reconstructed First Avenue House, London WC1, contributed a record £41.9
million (1998 - £2.1 million).
Joint ventures came in with profits of £32.3 million (1998 - £29.4 million)
and interest earnings of £8 million (1998 - £10.3 million). Interest earnings
are less because some of the shareholder loans in the ventures were replaced
by bank borrowings, which we were able to arrange without recourse to British
Land or its partners.
Earnings per share rose to 15.3p (1998 - 8.1p). The price of success with
property trading is a rise in the tax rate to 18.6% and the tax charge is
£18.1 million. The Interim Dividend payment is increased by 5.26% to 3.4p per
share (1998 - 3.23p).
We warmly welcome Robert Swannell, Vice-Chairman of J. Henry Schroder & Co.
Limited, who joined the Board as a non-executive director in August.
Property Portfolio
------------------
Property purchases and development expenditure amounted to no less than £1.34
billion in the half-year and sales to £184 million. Additionally, since 30th
September we have sold the Swan Centre, Rathmines, Dublin.
Meadowhall Acquisition
----------------------
We completed the acquisition of the highly reversionary Meadowhall Shopping
Centre near Sheffield, which provides 124,500 sq m (1.34 million sq ft) of
prime space occupied by 300 retailers to a catchment area of 7.5 million
people within sixty minutes driving time. It has its own mainline train
station, with 400 trains a day, a supertram station with 104 trams a day and a
bus station with 120 bus departures per hour serving 84 routes. The Centre is
close to the M1 motorway from which it has two access interchanges, three
miles north east of Sheffield.
Rent reviews settled so far have been ahead of our projections of £66.1
million by the end of 2000, and full reversionary income of £74.8 million.
The equivalent yield on cost is 6.04% and the reversionary yield is 6.4%. We
are more than pleased that the entire existing on site management team under
the Presidency of Mr. Eddie Healey is remaining.
New Lease at 100 New Bridge Street
----------------------------------
We achieved a major restructuring of the occupational leases at 100 New Bridge
Street, London EC4, as a result of which the property has a single tenant of
its 14,200 sq m (153,000 sq ft) office space until June 2017. As part of the
rearrangement, tenants' options to break the lease during the term have been
removed. Including also the 1,100 sq m (12,000 sq ft) retail element, the
rent is £6.5 million per annum.
The Swiss Centre now 100% Owned
-------------------------------
British Land has now stepped up from 75.5% to 100% in its ownership of the
9,000 sq m (97,000 sq ft) Swiss Centre, Leicester Square, London W1. A
revision of Switzerland Tourism's leases as part of the transaction opens the
way to realising further potential from the building.
Joint Ventures
--------------
We concluded a new £172.7 million joint venture with House of Fraser PLC, BL
Fraser Limited, which owns fifteen House of Fraser department stores. We also
arranged a £125 million non-recourse bank loan to finance the transaction.
BL Universal, our joint venture with The Great Universal Stores P.L.C., has
profitably sold 34 properties to the value of £30.6 million since 31st March,
making total sales since the venture began in February 1997 of 616 properties
raising £317.1 million, an achievement in itself. During the first 2.5 years
of the joint venture there has been a significant change in the structure of
the portfolio, as £270 million of the sales proceeds have been redeployed to
acquire new larger properties, including retail parks in Cambridge, Wakefield
and Leeds.
The majority of the properties in the existing Tesco British Land Property
Partnership are now owned by a newly -formed joint venture company, for which
we have recently raised a £210 million unsecured non-recourse loan with West
LB Bank. BLT Properties Limited, the earlier venture with Tesco plc, is
already separately financed.
The Development Programme
-------------------------
Regents Place
-------------
We are relocating Abbey National plc from Abbey House, Baker Street, London
NW1 to its new headquarters, a 18,200 sq m (196,000 sq ft) six storey building
we are constructing for the Bank at 2/3 Triton Square, London NW1.
Preliminary work has also begun on an additional 12,100 sq m (130,000 sq ft)
office building at 5 Triton Square.
We leased an additional 2,000 sq m (21,800 sq ft) to the Inland Revenue at the
thirty-three storey Euston Tower at Regents Place, and we are creating 1,000
sq m (10,500 sq ft) of attractive retail space in its podium.
Blythe Valley Park, Solihull
----------------------------
Infrastructure improvements, including a direct link to the M42 motorway, are
nearing completion at the 69 hectare (170 acre) development joint venture at
Blythe Valley Park, Solihull, with Prologis Kingspark, also in association
with the Solihull Metropolitan Borough Council. The development has outline
planning consent for 111,500 sq m (1.2 million sq ft) of office and other
accommodation. The Oracle Corporation has completed the construction of the
first phase of its 23,200 sq m (250,000 sq ft) office. We are building two
further buildings totalling 7,900 sq m (85,000 sq ft) which are pre-let.
Cherrywood, Dublin
------------------
The Cherrywood development, on a 160 hectare (400 acre) site eight miles south
of Dublin, is in a joint venture with Dunloe Ewart plc and in association with
Dun Laoghaire Rathdown County Council. The venture will shortly complete a
5,800 sq m (62,400 sq ft) science and technology building pre-let to Lucent
Technologies plc and a second 5,000 sq m (53,800 sq ft) building is already
under construction.
201 Bishopsgate
---------------
Early next year with our partners, Railtrack plc, we will complete the raft
over railway lines forming the site for a 63,000 sq m (680,000 sq ft) office
building at 201 Bishopsgate, London EC2, for which there is planning
permission. A marketing suite has been opened next to the site.
Plantation Place
----------------
Demolition is complete and a marketing office has been built at Plantation
Place, London EC3. Piling works have begun. There is planning permission for
61,000 sq m (656,000 sq ft) of offices and retail space.
Finance
-------
We completed the £1.54 billion securitisation supported by cashflows from the
Broadgate Estate in May. The funding cost of 6.15%, with a life extending to
2038, looks even more attractive in hindsight. The loan amounted to 73% of
the value of the assets securitised, an indication of the covenant quality of
our tenants. The secured element was restricted to £100 million of the Notes,
none of which have recourse to British Land.
After the Meadowhall acquisition the weighted average interest rate has fallen
again, to 7.2%. Available bank facilities and cash are at £1.4 billion.
Including its share of joint ventures, 87% of British Land debt is fixed, 7%
is capped and 6% is at variable rates of interest.
A comparison of market values and book values of net debt for British Land and
its share of joint ventures indicates that the difference after tax has shrunk
from £312.4 million at 31st March 1999 to £131.4 million at 30th September
1999.
The Company has taken appropriate steps to protect its business from the
effects of the Millennium Bug. The costs of so doing have not been material,
because the majority of its buildings are new, as are its computer systems.
Prospects
---------
British Land's modern, largely freehold, well-located, strongly-tenanted
portfolio, 93% of which has been purchased in the last ten years, is
positioned to capture the best of the growth which our industry offers, the
baleful uncertainties of increased stamp duty and business rates' revaluation
notwithstanding. The rises in Stamp Duty are deplorable. It is a massive and
retrospective tax, and the chronic uncertainty as to future increases unfairly
blights the entire stock of UK property which is already burdened with Capital
Gains Tax.
The portfolio's intrinsic reversionary prospects, well evidenced by the rise
in rents, are enhanced by the long-term financing and leases which we have put
in place. Property is a long-term business and rarely provides a smooth
progression, as values move irregularly but tend to rise over time. Our role
is to add value through selective purchases, through working our own high
quality portfolio and our geared joint ventures, and through a development
programme currently standing at over £1 billion. We aim to get a full share
of what's going from the present strong direct property market
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