Our history
2002 to 2006
In 2002 the Company became the subject of the unwelcome attentions of a concern called Laxey Partners, resident in the Isle of Man. Laxey Partners had acquired its interests in British Land through 105 subsidiaries each holding British Land shares, to propose three resolutions to be put to the 2002 Annual General Meeting. In reality, of course, there was only one requisitionist – Laxey. In brief, these resolutions sought British Land shareholder approval to compel the Board to undertake the mandatory repurchase of British Land shares by the Company, and to engage external property managers.
These controversial proposals achieved high levels of publicity, providing financial journalists with a hot topic through much of the first half of 2002. Laxey succeeded in borrowing shares to build up an apparent 10% stake in British Land, taking advantage of the stock lending Market. British Land was able to refute the thinking behind the Laxey proposals and to expose at the actual Annual General Meeting the use of borrowed stock. All the Laxey resolutions were defeated.
Though the Laxey incidents were an unwelcome distraction, they did not interrupt the pace of business activity. In 2001 BL Davidson, a joint venture with the Davidson family, had become the owner of Asda Property Holdings, which has a portfolio of retail warehouses and Central London offices. A package of 22 Homebase stores was bought; the renowned Accenture Consulting pre-leased 375,000 sq ft at
Plantation Place. The next year saw the Company extend its Broadgate interests still further by buying 1 Appold Street and the unowned half of Broadgate Phase 12, which had created a raft over the railway lines from Liverpool Street Station. This is the site for the Broadgate Tower and a further building being developed at 201 Bishopsgate.
Two new non-executive directors joined the Board at this time: Chris Gibson-Smith, Chairman of the London Stock Exchange and of National Air Traffic Services, and David Michels, then Chief Executive of Hilton Group. Dr Gibson-Smith was appointed senior independent non-executive director.
The Board’s Nomination Committee then set out to select a new Chief Executive, and appointed Stephen Hester, aged 43, with effect from November 2004. At this point the roles of Chairman and Chief Executive were split, with John Ritblat remaining as Chairman. In contrast to the Chairman’s 50-year stint in the property market, Stephen Hester’s previous career had been in banking. Coming from a non-property background, he has conducted a comprehensive review of the Company’s structure and business and management. He has already introduced a number of changes, including the formation of an Executive Committee comprised of executive directors and other senior members of staff.
Artist's impression of York House, London W1
Stephen Hester
The first transaction Stephen Hester completed was a highly significant one – the acquisition of Pillar Property, which specialises in developing and investing in retail warehousing. This activity is carried out in conjunction with offshore fund managers, the funding being provided by independent investing institutions and individuals. Pillar had been set up by two successful entrepreneurs, Raymond Mould and Patrick Vaughan. It was listed on the London Stock Exchange as a public company in July 1994 with a market value of £150 million.
Initially Pillar was a general property investor but, over time, it restricted its interests to retail parks and the City of London. At the start Pillar held a 49% stake in the Hercules Unit Trust. It was also the start of the concept of a property company being both an investor in and the adviser to a pooled property vehicle. Hercules was almost immediately followed by CLOUT, focussing on the City of London. 2004 saw the addition of the smaller park fund known as Hercules Income Fund. After two years of planning its entry into European retail parks, Pillar then embarked on a policy of investing abroad through its newest venture, the PREF fund. At the time of the deal that saw it become a key part of the British Land portfolio (July 2005), Pillar’s assets under management exceeded £3 billion.
The way ahead
Sir John Ritblat chose the 2006 Annual General Meeting as the occasion at which he formally announced his decision to retire. As the outgoing Chairman remarked, British Land had come a long way in a relatively short time. When he took over Union Property Holdings in 1969, it had assets of just £6 million and a share price measured in pennies. By 2006 the Company had assets owned and managed in excess of £18 billion and net assets per share of £15.
But a change of Chairman was not the only sign that a new era was emerging. As its 150th year of business drew to an end, British Land prepared to move into its new home, York House near Marble Arch. The building is a British Land development and so, for the first time in its long history, the Company will occupy a building it has itself created. More significantly, British Land is on the brink of being able to transform itself into an entirely new corporate form, a Real Estate Investment
Trust (REIT).
The effect will be to liberate British Land from liability to tax on capital gains and on profits for those activities within the REIT regime. A REIT is required to conform to various rules. The main one is an obligation to distribute 90% of its profits, and to ensure that rental income is at least 1¼ times the interest payment on debt. To enter the REIT regime, which has a start date of 1 January 2007, British Land will have to pay a one-off entry fee of 2% of its gross assets as a tax to the Government. The effect of this change is likely to make property held through a REIT more attractive to investors. REITs give property companies a level playing field when competing for investors’ funds.
Sir Derek Higgs retired from the Deputy Chairmanship and the Board in July 2006. At the same time two new non-executives joined the Board: Lord Turnbull, a former Secretary of the Cabinet and Head of the Home Civil Service, and Kate Swann, Chief Executive of W. H. Smith. Meanwhile Patrick Vaughan, the former Chief Executive of Pillar, has retired, having helped the successful integration of that company as part of a wider contribution to British Land. John Weston Smith, who joined British Land in 1971 and served as Company Secretary, an executive director, head of British Land of America, Finance Director and finally Chief Operating Officer during his 35 years with the Company, also retired at the AGM in July 2006.
Two new executive directors were elected to the Board at the same time. Andrew Jones joined British Land with Pillar in 2005. He is co-head of asset management concentrating on the retail sector and retail funds. Tim Roberts joined British Land in 1997 and in 2002 became joint head of its asset management.
The company's history to 2006 was extracted from:
'No Stone Unturned. A History of The British Land Company 1856 - 2006' John Weston Smith (2006)
