RETAIL EVENT
7 OCTOBER 2011 www.britishland.com Char lie MMdlaudsley Head of Retail One of the UK’s Largest Retail Landlor ds
£9.9bn UK Retail Assets Under Management Department Stores • 23m sq ft ‐ 202 UK assets 8% • Largest investment owner of 13% superstores • Largest owner/manager of retail 45% hall
ww 12% parks • Owner/manager of one of six Meado 22% super regional shoppin g centres
Manage 17% of IPD All Retail; 6% of UK Retail Universe
3 Key Messages
• A Portfolio suitable for the modern retail environment – Delivering for occupiers – Delivering for shareholders
• The right approach – Quality team, asset management and driving total returns
• Defensively positioned for today …. Well positioned for future growth
Delivering Superior Total Property Returns from Retail
4 Tod’day’s Agenda
Overview Charlie Maudsley Asset Management Approach Ben Grose Superstores Bryan Lewis Break Retail Warehouses John Maddison Shopp ing CtCentres Cla ire BbBarber Development Richard Wise Outlook Charlie Maudsley Questions & Answers Glasgow Fort Tour
5 British Land ‐ A High Quality Portflfolio
Offices ‐ Regent’s Place UK Retail ‐ Glasgow Fort
Delivering Superior Total Returns
6 Delivering Superior Total Returns
1. StiblSustainable 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
British Land’s Objective is to Deliver Superior Total Returns For Our Shareholders 7 Our Retail Strategy
1. AAtictivel y manage our prime portfo lio
2. Invest in high qyquality prime assets
3. Invest in good quality secondary with good fundamentals
4. Recycle capital where values not justified by rental prospects
5. Increase exposure to assets where we can create incremental value
Balancing Income and Capital Value Growth
8 Retail Portflfolio Consistently Outperforms
BL Retail ERV Growth Relative to BL Retail Total Returns Relative to IPD All Retail IPD All RilRetail % % 2.0 3.0
1.5 2.0 101.0 1.0 0.5
0.0 0.0 1 year 3 years 5 years 1 year 3 years 5 years
Source: IPD
Reflects the Quality of Our Portfolio and Strength of Team
9 A Portflfolio Delivering for Occupiers ‐ Diversity
UK Retail Investment Market Share Total Market IPD British Land £163bn £67bn £9.9bn DepartmentDepartment Stores Stores & High 100% Streetand High Street Shops SuperstoresSuperstores 80%
ShoppingShopping Centres Centres 60% FashionFashion Parks Parks 40% RetailRetail Warehouses Warehouses (exc. 20% Fashion(exc. Fashion Parks) Parks)
0%
Growth in Online Providing New Formats
10 APortflfolio Delivering for Occupiers – Consumer Choice
Convenience Shop Food Experience Shop
Tesco
Consumers Looking for Different Shopping Experiences
11 A Portfolio Delivering for Occupiers ‐ Polarisation Accelerating
Retail Lease Expiries 2012‐2017 15% IPD Prime Retail IPD Secondary Retail 12%
9%
6%
3%
0% 2012 2013 2014 2015 2016 2017
Source: IPD
Significant Lease Expiries in Secondary Retail
12 A Portfolio Delivering for Occupiers ‐ Polarisation Accelerating
Potential Retailer Expansion Profile “90% said they would use “90%Primark said theyHollister would use a physical stores to check the
High John Lewis
physicalIKEA stores to check the product before buying” l Dunelm aa product beforeAsda/George buying”Zara CBRE: EE’urope’s online consumer CBRE: Europe’sApple onlineSainsbury consumer
Potenti Tesco
al B&Q cc Boots House of Fraser “Multi‐channel consumers Debenhams spend over 80% more per
Physi Currys M&S transaction than store‐only
Gap Next
w Comet shoppers” Deloitte oo
L HMV iTunes Low Online Potential High
Source: Verdict
97% of BL Shopping Centres/Retail Parks Ranked in CACI Top Quartile
13 A Portfolio Delivering for Occupiers – Where Modern Retailers Want to Trade
Retailers Migrating to the Best Space
14 A Portfolio Delivering for Occupiers – Where Modern Retailers Want to Trade
St Stephen’s, Hull
Retailers Migrating to the Best Space
15 A Portfolio Delivering for Occupiers – Retailers Aggressively Managing Portflfolios
Expansion
Improvement
Rationalisation
Retailers Adapting on British Land’s Portfolio
16 A Portfolio Delivering for Occupiers – Retailers Aggressively Managing Portflfolios
Lettings and Lease Renewals By Industry BL Annual ‘000 Since July 2009 Rent £m sq ft DIY & Bulky Goods 12.5 903 Fashion & Footwear 11.3 483 General Retail 4.4 244 Restaurants & Fast Food 3.2 106 Health & Beauty 1.3 44 Electrical 1.3 114 Travel & Leisure 1.2 85 Home Entertainment/Books 0.8 38 Other 1.4 62
Attracting a Wide Range of Retailers Across Sectors
17 A Portfolio Delivering for Occupiers ‐ Four Factors for Retail Success
1. Location • Locally dominant and accessible
• Affordable rents 2. Rent • Where retailers can trade profblfitably
• The right type of space 3. Configuration/Flexibility • Adaptable at right cost
• Where consumers want to shop 4. EiEnvironmen t • Rig ht mix of complimen tary rettilailers and leisure
These Factors Define Prime
18 A Portfolio Delivering for Occupiers ‐ Four Factors for Retail Success
1. Location Locally Dominant and Accessible
2. Rent
3. Configuration/Flexibility
5. Environment
Elgin ‐ Scotland
Attracted 4 New Retailers –Over 50% Income Growth in Last 3 Years
19 A Portfolio Delivering for Occupiers ‐ Four Factors for Retail Success
1. Location Value for Money
2. Rent
3. Configuration/Flexibility
5. Environment
Mezzanine at Glasgow Fort
2.4m sq ft of Mezzanines Across 9.6m sq ft Retail Park Portfolio
20 A Portfolio Delivering for Occupiers ‐ Four Factors for Retail Success
1. Location Units Easily Adapted
2. Rent
3. Configuration/Flexibility
5. Environment
WH Smith Downsize at Deepdale
Over 80 Capital Asset Management Projects Initiated
21 A Portfolio Delivering for Occupiers ‐ Four Factors for Retail Success
1. Location Complementary Retailers and Leisure
2. Rent
3. Configuration/Flexibility
5. Environment
Kingswood –Costa, Subway ... soon M&S Simply Food
49 Food Lettings and Renewals Agreed
22 A Portfolio Delivering for Occupiers ‐ Four Factors for Retail Success
1. Location • Locally dominant and accessible
• Affordable rents 2. Rent • Where retailers can trade profitably
• The right type of space 3. Configuration/Flexibility • Adaptable at right cost
• Where consumers want to shop 4. Environment • Right mix of complimentary retailers and leisure
Success Depends on Delivering These Factors
23 Key Messages
• A Portfolio suitable for the modern retail environment – Delivering for occupiers – Delivering for shareholders
• The right approach – Quality team, asset management and driving total returns
• Defensively positioned for today …. Well positioned for future growth
Delivering Superior Total Property Returns from Retail
24 A Portfolio Delivering for Shareholders ‐ Lettings Success
New Lettings in the Last 12 Months Q2 Q3 Q4 Q1 Total 2010/11 2010/11 2010/11 2011/12 Number 51 55 46 54 206 ‘000 sq ft 208 142 175 222 747 Annual Rent £3.7m £2.8m £2.5m £3.8m £12.8m vs ERV (0.7)% 7.9% 5.7% 4.3% 3.9%
Three Consecutive Quarters of Lettings Ahead of ERV
25 A Portfolio Delivering for Shareholders ‐ Rental Growth
British Land Retail ERV Movement vs. All Retail IPD ERV growth (March 2010 = 100)
102% British Land IPD 101%
100%
99% Q4 09/10 Q1 10/11 Q2 10/11 Q3 10/11 Q4 10/11 Q1 11/12
Source: IPD
Four Consecutive Quarters of ERV Growth and Outperformance
26 A Portfolio Delivering for Shareholders ‐ Total Returns
British Land Total Returns by Subsector To June 2011
15% 12% 9% 6% 3% 0% 1 year 3 years 5 years ‐3% BL Retail Warehouses BL Shopping Centres BL Superstores ‐6% BL All Retail IPD All Retail
Source: IPD
Our Portfolio Diversity Has Driven Consistent Outperformance
27 A Portfolio Delivering for Shareholders – Subsector Performance
British Land Total Returns by Subsector Relative to IPD All Retail To June 22%12%
9%
6%
3%
0% 2009 2010 2011 ‐3%
‐6% Shopping Centres Superstores Retail Warehouses All Retail
Source: IPD
Our Portfolio Diversity Has Driven Consistent Outperformance
28 A Portfolio Delivering for Shareholders – Regional Returns
British Land Total Returns by Region Relative to IPD All Retail To June 2011 6%
4%
2%
0% London South East South West Midlands Yorkshire North West North East Scotland
‐2% 1 year 3 years 5 years Source: IPD
Our Portfolio Diversity Has Driven Consistent Outperformance
29 A Portflfolio Delivering for Shhldhareholders ‐ Lot Size
British Land Total Returns by Lot Size To June % of BL Retail 2009 2010 2011 Portfolio % % % Over £150m 39% ‐24.2 25.0 12.3
£100‐150m 9% ‐27.3 28.8 13.8
£50‐100m 19% ‐20.9 28.5 10.7
Under £50m 33% ‐19.6 32.8 9.9
IPD All retiltail ‐25.6 26.8 10.0
Source: IPD
Portfolio Diversity Driven Consistent Outperformance
30 Key Messages
• A Portfolio suitable for the modern retail environment – Delivering for occupiers – Delivering for shareholders
• The right approach – Quality team, asset management and driving total returns
• Defensively positioned for today …. Well positioned for future growth
Delivering Superior Total Property Returns from Retail
31 The Right Approach
• The qqyuality of our team
• How we manage the assets
• How we allocate capital
Generating Superior Total Returns
32 Our Team ‐ Strong and Experienced
Head of Retail
Charles Maudsley
Asset Portfolio Operational Superstores Investment Development Management Management
David Tudor Morgan Bryan Lewis Ben Grose Andrew Smith Darren Richards Richard Wise
Integrated Team Generating Superior Total Returns
33 Our Team ‐ Proactive Relationship with Joint Venture Partners
• Bougg,ht, sold, extended 11 stores; renewed and refinanced 3 joint ventures in last 18 months
Bristol, Tesco Hoddesdon, Sainsbury’s
Working in Partnership to Create Opportunity and Value
34 Our Team – Leveraging Expertise to Deliver Value
• Acquired for £10m
• Negotiated with local authority
• Joint Venture with original borrower
• Potential £125m+ development
Working in Partnership to Create Opportunity and Value
35 Our Asset Management Approach
• Understanding the local retail hierarchy
• Staying close to customers
• Creating the right environment
Driving Income Growth Through Active Asset Management
36 Asset Management Approach ‐ Future Proofing Our Assets
British Land Ipad App
Creating the Right Environment for the Future
37 The Right Approach ‐ Driving Total Returns
• Rental Income
• Yield
• Capital Expenditure (tenant incentives and refurbishment)
• Obsolescence
A Balanced Approach ‐ Understanding The Wider Investment Criteria
38 Driving Total Returns – Owning and Investing in The Right Assets
Prime Re‐engineering into prime Best Secondary • Effectively managed • Asset repositioning • Sustainable income • Positioned for growth • Aligning asset to consumer • Acceptable cap‐ex levels • First to see rental growth demand
[meadhlldowhall]
Meadowhall Leamington Spa Llandudno
A Balanced Approach to Investment Driving Total Returns – Investing in Prime at Drake Circus
• £240m acquisition
• 72% of space in large units
• Modern, rack‐rented
• 6.0% initial yield
Drake Circus, Plymouth
Regionally Dominant With 19m Visitors Each Year
40 Driving Total Returns – Re‐engineering to Prime at Mayflower Retail Park
• £51m acquisition
• Good tenant demand
• Under offer on vacant MFI unit
• 6.3% initial yield – 6.9% with letting of vacant unit
• Swapped for ex‐growth Mayflower Retail Park, Basildon asset
New Letting to Start Regeneration
41 Driving Total Returns – Investing in Best Secondary at Barnstaple
• £30m acquisition
• Fully occupied
• Sustainable income
• Affordable rents
• Low capex
• 83%8.3% initial yield
Barnstaple
Locally Dominant with Sustainable Income
42 The Market Today Lettings Under Offer By Retailer Type Health & Beauty • 190,000 sq ft vacant Travel and Leisure 2% • 490,000 sq ft 5% currently under offer 8% ahead of ERV
9% 42% • Second quarter lettings ahead of ERV 13%
21%
General Retail Continue to Believe Medium Term Rental Outlook Positive
43 Ben Grose Head of Retail Asset Management Essentials of Retail Asset Management
• Understanding an asset’s position in its local hierarchy
• A close relationship with retailers – understanding their business and trading
• Creating the right space in the right environment and time frame
Leads to Income and Capital Value Growth
45 Unddderstanding the Retail Hierarchy ‐ In Town
Drake Circus, Plymouth
Opportunities to Attract New Brands
46 Understanding the Retail Hierarchy – District Centre
Beaumont Leys, Leicester
3.5% Income Growth Over the Last 12 Months
47 Unddderstanding the Retail Hierarchy ‐ Out of Town
Kingswood Retail Park, Hull
6% Income Growth Over the Last 12 Months
48 Staying Close to Retailers
“British Land know what’s going on, sometimes better than we do! They clearly want to increase the value of their investment, but recognise there must be something in it for us as well. We try to do the same. We identify highly profitable stores with a good future and approach them with opportunities. It is a real partnership.’’ Food & Drink Retailer
“British Land is a model “British Land takes the time to understand their landlord. You go and talk tenants’ needs and requirements. They take the to them and they listen” time to develop a relationship with us ” Fashion Retailer Home & Garden Retailer
85% of Our Retailers Said We Are Good or Excellent Landlords
49 Staying Close to Retailers ‐ Our Senior Team
Ben Grose
Steve Hadfield Edward Cree Dan Clark Simon Meacock Claire Barber Steven Rickard John Maddison
Relationship Management is Not Separated from Asset Management
50 Staying Close to Retailers ‐ Transactions
Nugent, Orpington New Mersey, Speke
Evidence of Scale
51 Staying Close to Retailers ‐ Next
St Stephen’s, Hull New Mersey, Speke Birstall, Leeds
170,000 sq ft of Lettings, Re‐gears, Refits and Extensions
52 Staying Close to Retailers ‐ M&S
Teesside, Stockton Deepdale, Preston 250,000 sq ft Under Offer or in Discussion Across the Portfolio
53 Staying Close to Retailers ‐ H&M
Glasgow Fort St Nicholas Centre, Aberdeen
Driving Rental Income with Key Occupiers
54 Staying Close to Retailers ‐ Out of Town Mezzanines
New Look (Inverness)
Dunelm (Dartford) Hobbycraft (Orpington)
Working with Retailers to Enhance Affordability
55 Staying Close to Retailers ‐ Trading
• Footfall
• Car park stays
• Path intelligence
• Social media
Meadowhall Student Lock‐in
Sharing Information and Working Together
56 Minimising our Exposure to Tenants at Risk
Allied Carpets MFI Borders Focus 50
40 Units 30 of
er 20
Numb 10
0 ‐3 ‐2 ‐10 Years to Administration
All Five Focus Units Already Re‐let, Income Producing or Under Offer
57 Creating the Right Space ‐ Rothhherham
Parkgate, Rotherham
Improving Retailer Mix and Growing Rental Income
58 Creating the Right Space – Peterbhborough
Before After
Improving ERV and Growing Income
59 Creating the Right Environment ‐ Leamington Spa
Before After
Breathing New Life and Attracting Modern Retailers
60 Creating the Right Environment ‐ Bon Accord & Surrey Quays Shopping Centres
Bon Accord, Aberdeen Surrey Quays, London
Continually Improving Our Assets
61 Creating the Right Environment ‐ Cambdbridge
Before After
Visitor Numbers Up 27%, Driving 5% ERV Growth
62 Creating the Right Environment ‐ Adding Food and Drink
85,000 sq ft of Transactions Generating over £2.5m of Rent
63 Creating Tomorrow’s Retail Environment
The Tollgate Centre, Colchester St James, Northampton
Introducing New Concepts and Offering Greater Convenience
64 Summary
• Driving occupier demand even in a difficult environment
• Expert asset management – Understanding the retail hierarchy – Staying close to retailers – Creating the right space and environment
Sustainable Growth in Income and Capital Value
65 Bryan LiLewis Head of Superstores Key Themes
• Why Foodstores fit so well in the BL Portfolio
• How we drive outperformance
• Defensive today but with growth tomorrow
67 British Land Foodstore Portflfolio
• 22% of BL’s retail portfolio At 30 June 2011 BL Share Lease Value £m • 99 stores totalling 6m sq ft Sainsbury’s JV 632 Open market review Tesco BL Holdings 296 Open market review • Average rent £21psf (in line with ERV) Tesco Aqua 297 Annual RPI (0‐3.5%) BLT Properties 168 Open market review • 50%5.0% EPRA Net Initial Yield Shopping Centres Ltd 100 Open market review TBLPP 58 Open market review • 92% of income leased to Wholly owned 143 Open market review Sainsbury’s or Tesco Total 1,693
Significant, Sensibly Priced and Well Secured
68 Rental Value Growth ‐ BL Foodstores vs IPD
ERV Growth To June 2011
4%
3%
2%
1%
0% 1 year 3 years 5 years 10 years 15 years ‐1%
‐2%
‐3%
‐4% BL Foodstores IPD Shops IPD Retail Warehouses IPD Shopping Centres
Source: IPD
Growth in the Good Times, Defensive in Difficult Times
69 Strengths of Our Foodstore Portflfolio
• Anchored in non‐discretionary spending
• Strong covenants
• Retailers gaining market share
• Average lease length remaining of 17 years
Strong Covenants, Expanding Retailers and Long Leases
70 Limited Capital Expenditure
Tesco Bristol ‐ Before Tesco Bristol ‐ After
Retailers Frequently Refreshing Their Stores
71 Driving Income
Highest Open Market Lettings British Land Rent Reviews ‘000 sq ft £psf ‘000 sq ft £psf Over 100,000 sq ft: Over 100,000 sq ft: Colchester, Sainsbury’s 106 26.79 Peterborough, Tesco 136 28.50 Wakefield, Sainsbury’s 117 21.50 Milton Keynes, Tesco 141 26.00 35‐100,000 sq ft: 35‐100,000 sq ft: Southampton, Morrisons 58 22.40 Orpington, Sainsbury’s 69 28.25 Colchester, Waitrose 36 23.00 Maidstone, Tesco 50 25.00 London London Harrow, Morrisons 63 22.50 Chiswick, Sainsbury’s 76 33.75 Wimbledon, Waitrose 32 28.00 Islington, Sainsbury’s 67 31.50
Quality Assets Outperforming
72 Stock Selection ‐ Sales
Birkenhead Portsmouth
Newport Walthamstow
£111m (Gross) of Foodstores Disposals Since Apr‐10
73 Stock Selection ‐ Purchases
Durham Hoddesdon
Modern Conforming Stores Which Are Locally Dominant
74 Stock Selection ‐ Macclfldlesfield
Sold At 4.4% Yield Giving a Total Return of 17%
75 Delivering Total Returns
Total Property Returns To June 2011 BL Foodstores IPD Shops IPD Retail Warehouses IPD Shopping Centres 12%
9%
6%
3%
0% 1 year 3 years 5 years 10 years 15 years ‐3%
Source: IPD
Foodstores Consistently Outperformed IPD
76 CiContinue d Increase in Grocery Share of RilRetail
Grocery Retail Market Size £bn 200 6.0% Market Value (LHS) Annual Growth (RHS) 5.0% 150 4.0%
100 3.0%
2.0% 50 1.0%
0 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: IGD Research
Grocery Share Expected to Grow to 54% of Retail
77 Retailer New Store Activity
Foodstore Requirements • 1.5m sq ft of new stores will open in 2011 • 1.3m sq ft of new stores will open in 2012 • 188 new stores opened in 2011 • Expanded its estate by 6.3% with a total of 3,153 stores • Expect to open c.2m sq ft
• 250 stores in next fives years of 5,000 – 25,000 sq ft
• 1.5m sq ft for each of the next 5 years
• Aims to open 300 convenience stores in the next 10 years • 300,000 sq ft in 2011 • 350,000 sq ft in 2012
Strong Demand From All Five Major Retailers
78 Growing Internet Sales
“Online grocery purchases only account for 3.2 per cent of total grocery sales in the UK, although overall internet sales account for nearly 10 per cent of all retail sales.” Marketing Week
“Multi‐channel shopping is a key feature of online grocery –the vast majority still shop at the supermarket.” Evolution Insights
Online Shopping Accounts for Less Than 5% of the Grocery Market
79 Foodstore Supply ‐ Development Pipeline
Foodstore Development Pipeline m sq ft • 40% of the pipeline has 50 Proposed With Consent Under Construction no consent 40 • 50% is developer led 30 with no occupier
20 • OlOnly 5% of piliipeline is under construction 10
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: CBRE
Only 5% is Actually Under Construction
80 Growing Thhhrough Extensions
• BL average site density only 27%
• Over 100,000 sq ft funded or currently under construction
• Further 120,000 sq ft under discussion
Preston, Sainsbury’s – 14% increase in store size
81 Summary
• A significant part of British Land’s portfolio
• Delivered excellent historic returns relative to the market
• Sensibly priced on a risk adjusted basis – 5.0% Yield
• Strong underlying business model and attractive long terms fundamentals continue to apply
• Good prospects for future performance
Portfolio Provides Combination of Resilience and Growth
82 JhJohn Maddi son Senior Asset Manager ‐ Out of Town Retail The Largest Owner/Manager of RtilRetail PkParks
• 80 assets; 9.6m sq ft • 82% open A1 consent 22% 25% • Low void rate – 99.1% let (from 97.7% in 13% June 2009) • Average lease length of 10.3 years 9% 31%
British Land Manages £4.4bn of Retail Warehouses
84 Out of Town ‐ Key Asset Criteria
1. Location • Locally dominant and accessible
• Affordable rents 2. RtRent • Where retailers can trade profitably
• The right type of space 3. Configuration/Flexibility • Adaptable at right cost
• 4. Environment Where consumers want to shop • Right mix of complimentary retailers/leisure
The Makings of a Good Asset
85 Driving Value Thhhrough Controlling Costs
• BL average Shoppin g/Su per Park service charge only £1.50psf • Average benchmark for UK Shopping Centres is £6.34psf
• Landlord of the Year 2009/10 • Service Charge Provider of the Year 2009/10 • Platinum Audit Award 2011 (only one ever issued to a landlord)
Source: Jones Lang LaSalle
Industry Wide Acclaim
86 Examples of Our Retail Parks
Super Park Traditional Retail Park Purpose Built Shopping Park
Teesside Stafford Glasgow Fort
Different Assets, Same Strong Fundamentals
87 Teesside ‐ Dominant and Accessible
• 750,000 sq ft retail/ leisure park • Annual footfall of 8m • Easily accessible
Number One Super Park in the UK
88 Teesside ‐ Scale and Strength
• Average rent £29psf • Achieving headline rents of £47.50psf
Trades Really Well and Headline Rents Are Growing
89 Teesside – Affor da bi lity
• Consistently trades in top 5 stores in UK out of 450 stores
• In the top 20 stores in the UK out of 400 stores
• In the top 10 stores in the UK out of 80 stores
• Best store in the region out of 65 stores
• In the top 10 retail park stores in the UK out of 49 stores
Strong Trading Platform is Key to Affordability
90 Teesside ‐ Configuration and Fllblexibility
Republic and TUI Units
Subdivision Increases Fascias and Enhances Retailer Mix
91 Teesside ‐ Configuration and Fllblexibility
Next Mezzanine
Mezzanine Drives Sales Densities and Rental Growth
92 Teesside ‐ Continually Improving the Environment
COSTA unit and Public Information Centre
Improving Offer and Increasing Dwell Time
93 Staffor d ‐ Key Facts
• 172,500 sq ft • Purchased 2008 • 11 new lettings since ownership
Rental Income Increased From £1.4m to £3.1m Since Purchase
94 Staffor d ‐ Whlholesa le Reffbhurbishment
Before After
Modernising and Continually Improving
95 Staffor d ‐ Configuration and Fllblexibility
Before After
Regenerating Space and Increasing Retail Offer
96 Staffor d ‐ Affor da bi lity
Trading Well Above Expectations
97 Staffor d ‐ Continually Improving
Before After
Enhancing Space for the Right Occupiers
98 Staffor d‐Improving Customer Experience
COSTA unit and Carphone Warehouse
Essential Facilities Key to Growth
99 Glasgow Fort ‐ Scotld’land’s Premier Shopping Park
• Dominates East Glasgow • Extended opening hours – 50% of trade between 5pm and 10pm • Significant extension growth potential
Locally Dominant – 12.5m Visitors a Year
100 Glasgow Fort ‐ Flexibility, Configuration and Affor da bi lity in Practice
Before After
Reconfiguring Space to Create Capital Growth & Increase Income
101 Glasgow Fort ‐ The Finishdhed Article
High Sales Densities for Fashion Retailers
102 Glasgow Fort ‐ Further Improving the Environment
Adding New Pre‐let 8‐screen Cinema and Five Restaurants
103 Glasgow Fort ‐ Continually Adding Value
Converting 15,000 sq ft Leisure Unit to Retail
104 Summary
• Right assets
• Doing the right things
• Meeting customers’ needs
• Achieving targeted total returns
Well Placed to Meet Customer Needs and Deliver Returns
105 Cla ire BbBarber Senior Asset Manager – Shopping Centres
Well Placed to Meet Customer Needs and Deliver Returns Our UK Shopping Centres Portflfolio
Bon Accord & St Nicholas, Aberdeen
Lisnagelvin, Londonderry
St Stephen’s, Hull Meadowhall, Sheffield
Serpentine Green, Peterborough Beaumont Leys, Leicester Eastgate, Basildon Green Lanes, Barnstaple Surrey Quays, London
Drake Circus, Plymouth
107 Our UK Shopping Centres Portfflolio
• £2.3bn uudender maaageetnagement (BL Share £1.5bn)
• High Occupancy of 97.6%
• Average lease 9.7 years
• 14.6% of income expiring in next 3 years (IPD 25.8%)
Quality Assets With Strong Income Profiles
108 Drake Circus, Pllhymouth
• 560,000 sq ft
• Opened in 2006
• Anchor tenants include M&S, Primark, Next, Boots and H&M
• 1,270 car parking spaces
Dominates Catchment – 19m Visitors Each Year
109 Drake Circus ‐ Plh’lymouth’s Only Modern Retail Environment
72% of Space in Units of Over 7,500 sq ft
110 Drake Circus ‐ Understanding our Customer Base
• 30,000 students
• Over‐representation of key customer group (15‐34 years)
• Dominated by ACORN group described as ‘Comfortably off’
Opportunity to Attract More Affluent Shoppers
111 Drake Circus ‐ Enhancing the Future Offer
To Drive Future Rental Growth
112 Meadhlldowhall
• 14m1.4m sq ft
• Annual footfall 24m
• Anchored by House of Fraser, M&S, and Debenhams
• 11 screen Vue Cinema
• 12,000 free parking spaces
One of Only Six ‘Super Regional’ Shopping Centres in the UK
113 Meadhlldowhall ‐ Improving the Customer Profflile
• Targeted marketing ‐ focus on 3 key high spending groups
• Proportion of visitors from these 3 key groups increased by 5%
• 42% of first time visitors from these key groups
Symbols of Success Happy Families Suburban Comforts
Generated Income Growth of 3.2% in Last 12 Months
114 Leveraging Customer Relhlationships ‐ House of Fraser
Store Under Investment by Tenant Since Opening 21 Years Ago
115 Leveraging Customer Relhlationships ‐ House of Fraser
Strong Double Digit Sales Growth Post Refurbishment
116 A More Premium Retail Offer
• First Fashion Rocks in the UK
Increasing Rental Income With Lettings At or Above ERV
117 Working with Retailers to Grow their Businesses
• At Meadowhall …….. • and Bon Accord, Aberdeen……..
By Delivering the Right Space in the Right Environment
118 St Steph’hen’s, Hull
• 563,000 sq ft
• Annual footfall 10m
• Anchdhored by Tesco, Next, H&M and TK Maxx
• 1,500 car parking spaces
Dominant City Centre Scheme – Fully Let
119 Modern Retail Space in a City Centre Environment
Demand Outstrips Supply ‐ Recent Letting Increased Zone A by 5%
120 Expanding Our Restaurant Offers
Extending Dwell Time and Increasing Spend
121 Improving the Food Offer at Meaddhllowhall
• Fast food dominates and over trades
• Underperforms relative to its out of town peers due to the lack of premium offers
Oasis Food Court ‐ Before
Major £7m Refurbishment and Reconfiguration
122 Improved Offer, Appealing to a More Affluent Customer
Oasis Food Court ‐ After
Creative Use of Space Generating Yield on Cost of Over 14%
123 Future Growth Potential ‐ Meadhlldowhall
Imaginative Tenant Engineering Attracting New International Brands
124 Future Growth Potential ‐ Peterbhborough and Surrey Quays
Satisfying demand at Serpentine Green Investing to reposition Surrey Quays
In Discussions to Meet a Number of Active Retailer Requirements
125 Future Growth Potential ‐ Barnstaple
Improving the Retail Mix By Reconfiguring and Refurbishing Units
126 Summary
• Understanding the retail hierarchy
• Delivering the right space for retailers
• Understanding our customers
Strategic Asset Management Leads to Outperformance
127 Ric har d Wise Head of Retail Development Four Central Themes
• The supply shortage of prime space
• Planning policy supports regeneration
• Our competitive advantages
• We have the right strategy
Opportunity to Add Incremental Value
129 The Supply Shortage
Retail Development Completions m sq ft 15.0 Retail Warehouses Town Centre 12.0
9.0
606.0
3.0
000.0 2001 2003 2005 2007 2009 2011 2013 2015
Source: Verdict
Current Development at Historic Low
130 Public Sector Support
• Central and local planning policy uncertain
• Regeneration and job creation is strongly supported
• Now is the right time to bring forward tomorrow’s developments
Planning Window is Opening
131 Our Competitive Advantages
• Scale and volume
• Experienced team
• No significant UK development exposure prior to the recession
• Development partner of choice
• Financial strength
Experienced Team with Financial Strength
132 The Right Development Strategy
• Focus on mid‐sized projects (£50‐250m)
• Buy control today to develop tomorrow
• Develop more food stores
Whiteley Shopping Centre
Lower Costs Lead to Affordable Rents
133 Proposed Major UK Projects
‘000 BL ERV Total Cost sq ft Share (BL Share) (BL Share) £m £m Power Court, Luton c.200 100% TBC TBC
Whiteley Shopping Centre 302 50% 2.5 34
Surrey Quays 100 50% 101.0 13 Development Funding 310 100% 5.9 88 (under offer)
• Plus 400,000 sq ft of unimplemented planning consents
£275m of Proposed/Identified Schemes
134 Whlhiteley Shopping Centre
• 1 mile from J9 of the M27
• 302,000 sq ft in 50 units
• Likely start 2012
Over 40% (by Value) Now Under Offer
135 Power Court, Luton
c.200,000 sq ft Scheme with Food Store Anchor
136 Surrey Quays Shopping Centre
Before After
Major 100,000 sq ft Extension Adding 17 Units
137 Summary
• Very little A grade stock being developed
• Planning policy supportive of urban regeneration
• Limited UK development exposure prior to the recession
• Focus on mid‐sized urban projects and food stores
• We are lklooking to buy control today and develop tomorrow
British Land is Well Placed to Exploit Market Opportunity
138 Char lie MMdlaudsley Head of Retail Key Messages
• A Portfolio suitable for the modern retail environment – Delivering for occupiers – Delivering for shareholders
• The right approach – Quality team, asset management and driving total returns
• Defensively positioned for today …. Well positioned for future growth
Delivering Superior Total Property Returns from Retail
140 Our Portflfolio ‐ Defensive Today
At 30 June 2011 Occupancy rate 98.7% Fixed uplifts 24.4% Lease length 12.6 years Income expiring (June 2011‐14) 6.9%
Strong and Secure Income Profile
141 Our Portflfolio ‐ Defensive Today
• 75% of income from top 50 retailers • Rent collection 98% within two weeks of quarter day • 0.5% occupiers in administration and only 0.5% temporary lettings % of Retail Rent % of Retail Rent Tesco 11.8 House of Fraser 1.7 Sainsbury 10.1 New Look 1.5 Debenhams 696.9 TK Maxx 141.4 Homebase 3.7 Argos 1.3 Kingfisher (B&Q) 3.5 Kesa (Comet) 1.2 Next plc (inc. Next at Home) 3.2 Mothercare 1.2 Alliance Boots 222.2 BHS 121.2 Asda (inc. Asda Living) 1.8 Burtons/Dorothy Perkis/Wallis/Evans 1.0 Currys 1.8 SportsDirect 1.0 Marks & Spencer 1.8 Pets at Home 0.9
Strong and Secure Income Profile
142 Our Portflfolio ‐ Defensive Today
• Portfolio is rack rented or reversionary today
At 30 June 2011 British Land IPD Average contracted rent £21psf £17psf Average ERV £22psf £19psf EPRA Net Initial Yield 5.4% 5.8% Net Equivalent Yield 5.7% 6.3%
Strong and Sustainable Platform for Growth
143 Positioned For Future Growth
• Growth from existing portfolio
• Adding space through extensions and development
• Recycling
Delivering Superior Total Returns
144 Growth From Existing Portfolio ‐ Shortage of the Right Space
UK Retail Development Completions • Continued demand – m sq ft 490,000 sq ft under offer 12.0 Retail Warehouses • Town Centre Shortage of the right space – little new sttkock in 9.0 the pipeline
6.0
3.0
0.0 2001 2003 2005 2007 2009 2011 2013 2015
Source: Verdict
Positive Rental Outlook for the Right Space
145 Growth From Existing Portflfolio ‐ Rents
At 30 June 2011 Contracted Rent ERV £psf £psf Superstores 21 21 Meadowhall 58 60 Other Shopping Centres 19 19 Retail Warehouses 23 23 Retail Warehouses (inc. mezzanine) 19 21 Department Stores 12 9 TlTotal 21 22
Affordable Rents With Good Potential in the Medium‐term
146 Growth From Existing Portflfolio ‐ Affor da ble Rents
Illustrative Comparison of In Town and Out of Town Total Occupational Costs
In Town Out of Town Out of Town Out of Town Typical 5,000 sq ft Unit (Zone A) (No Cover) (50% Cover) (100% Cover)
£150psf £45psf £70psf £90psf
£200psf £60psf £90psf £120psf
£250psf £75psf £110psf £150psf
147 Growth From Existing Portfolio ‐ Potential Extensions and Developments
‘000 sq ft BL Share
Whiteley Village, Fareham 302 50%
Glasgow Fort Shopping Park 175 39%
Glasgow Fort Shopping Park (leisure) 48 39%
Fort Kinnaird, Edinburgh 223 19%
Surrey Quays Shopping Centre 103 50%
Deepdale Retail Park, Preston 76 19%
Broughton Park, Chester 58 39%
Power Court Luton c.200 100%
Superstore extensions 103 50%
Kingston Centre, Milton Keynes 21 50%
Over 1m sq ft of Potential New Space Across Our Portfolio
148 Capital Recycling ‐ Availbllable Investments
• Very little prime assets oppyenly available
£m Prime Secondary Total
Retail Warehouses (above £15m) ‐ 238 238
Shopping centres (above £20m) 325 909 1,234
Total 325 1,147 1,472
Source: CBRE (September)
Greater Opportunities in More Challenging Assets
149 Summary
• We have the right assets for the modern retail environment
• The right approach to deliver superior returns
• Defensively position for today …. Well positioned for future growth
Delivering Superior Total Property Returns from Retail
150 Glasgow Fort Shopping Park
Delivering Superior Total Property Returns from Retail
151