Corporate strategy
Our portfolio is well balanced and focused on sectors with good long-term potential growth in income and value.
Our vision
To build the best Real Estate Investment Trust in Europe.
Our objective:
To deliver superior total returns for our shareholders.
Our strategic priorities:
Creating sustainable and growing property rental income
Our core business consists of high-quality assets capable of generating secure and growing income streams. Our long-term investment strategy is focused on those sectors of the property market where we expect demand from occupiers will be the strongest over the medium to longer term: well located prime retail in the UK and Europe and Central London offices. Assets in these sectors will provide the core rental cash flows enabling us to pay a high and growing dividend and fund the business and its growth through competitively priced equity and debt finance.
Case study
DRAKE CIRCUS SHOPPING CENTRE, PLYMOUTH
Our assets are well located and designed to attract a broad range of high-quality occupiers. The quality of our income stream is underpinned by our high occupancy rates, long leases and low levels of contracted rent subject to expiry (see statistics below), all of which are above the IPD industry benchmark.
Acquisitions during the year included £363 million of existing retail assets, adding £23 million to our annual rental income streams. All the schemes have strong local positions where retailers trade well. Our largest purchase was Drake Circus Shopping Centre in Plymouth, which was bought for £240 million, a net initial yield of 6%.
As one of the West Country’s most popular shopping destinations, Drake Circus has an extensive catchment area covering both Devon and Cornwall, and an annual footfall of nearly 19 million people.
The 560,000 sq ft Shopping Centre, opened in 2006, is well configured and an attractive environment for people to shop in. The rents are affordable and with limited competition locally, there is potential for rental growth. The Centre has 70 units in modern retail formats and is anchored by Primark, Marks and Spencer and Next with other key occupiers including established retailers such as Topshop, Boots and H&M as well as newer fast growing retail brands such as Cult/Superdry and Republic.
97.8%
Occupancy rate1
11.5 years
Average lease length2
8.4%
Rent expiring in next three years2
1 Including space under offer or subject to asset management.
2 To first break.
Investing in assets which protect and grow the capital value over the medium to long term
As well as investing in strong rental income streams, we need to ensure we both protect and grow the value of the underlying assets. We need to continually renew and upgrade our portfolio to retain its quality, the security of our income and its attraction to investors. Our portfolio is focused on well located retail units where consumers and retailers increasingly want to be. Our office buildings are modern work environments that provide the quality and flexibility occupiers now want and which meet their increasing technology and sustainability needs.
Case study
TRANSFORMING REGENT’S PLACE, LONDON
Over the past 25 years, British Land has developed buildings and improved the working environment at Regent’s Place, transforming this 13-acre West End estate.
During our ownership, the estate has evolved through asset management, refurbishment and development to provide highquality, flexible accommodation on floor plates that are rarely available in the West End. Today, it is a vibrant multi use estate, home to a broad range of high-quality occupiers and over 98% occupied. As a result, the estate has performed well consistently outperforming the IPD West End benchmark on rental growth and capital returns over the past five years.
The transformation started in the 1990s but it is more recently that the most significant changes have been made. Working in partnership with the architect Sir Terry Farrell and local communities we have developed a visionary masterplan for the estate placing significant emphasis on the design of the communal spaces with £8 million invested in public realm improvements.
In 2009, we completed two buildings at 10 and 20 Triton Street and a residential development at One Osnaburgh Street, comprising both social and high-end apartments. Despite the challenging market conditions, all the residential units were presold ahead of our expectations with the offices 96% let within nine months of completion. On completion of our final phase of NEQ, in 2013, the estate will have doubled in size over the last four years to 2 million sq ft where 14,000 people will work or live.
In recognition of our partnership with the local community and commitment to regeneration, we were awarded the Royal Town Planning Institute’s Award for Sustainable Communities in February 2011.
2 million sq ft
Size upon completion of NEQ 2013
98%
Occupancy rate1
1 Including space under offer and subject to asset management.
Creating incremental value through developing, repositioning assets and exploiting market anomalies
Where we see the right opportunity, we will invest a proportion of our capital in assets with the objective of creating incremental value. A good recent example is the office market in Central London where a shortage of high-quality space coupled with a lack of development debt finance is expected to underpin strong development returns. Over the last year, we have committed £1.6 billion (British Land share: £1.1 billion) to Central London’s largest office development programme. This will deliver 2.2 million sq ft of prime office space to the market between 2012 and 2014 against a backdrop of constrained supply, rising rents and capital values. During 2011, we expect to put more capital behind investments where we believe we can reposition assets and exploit market anomalies.
Case study
LEADENHALL
Based in the heart of the City of London insurance district the Leadenhall Building is one of our largest current development sites.
In December 2010, we completed our joint venture agreement with Oxford Properties, the property investment business of OMERS, a major Canadian pension fund, to develop the building, bringing together two world-class property companies with proven development and asset management expertise.
At 736ft (224m), and providing 610,000 sq ft of the highest quality office space, the 47-storey building is set to become one of the tallest and most iconic buildings in the City. The spectacular scale of the public space at the base of the building, with mature trees and a range of retail and amenity provision covering nearly half an acre, will be unprecedented in Central London.
The development’s tapering shape delivers varied sizes of floor plates, all with spectacular views over London. Locating the core to the rear of the building allows for adaptable, clear floors at each level. Ranging from 21,000 sq ft at the base of the building to 6,000 sq ft at the top of the tower they are already generating interest from a broad range of occupiers from across the insurance, financial, professional and corporate business sectors.
In early 2011, we started piling and basement works and are on schedule to start construction mid-year. Practical completion to shell and core is expected in the third quarter of 2014.
In May 2011, we announced we had agreed non-binding heads of terms with Aon Limited for a 191,000 sq ft pre-let at the building (levels 4–13) with options to take up to a further 85,000 sq ft (levels 14–18).
610,000sq ft
Overall size
up to21,000sq
6,000 - 21,000 sq ft of individual floor plates
Controlling our costs to maximise profit generation
Controlling our operating costs so that we maximise the amount of profit we generate will continue to be a key focus of our business. Based on the percentage of net operating costs relative to our gross property rental income – currently 13.5% – we are one of the most efficient listed property companies in the UK. We are able to keep operating costs low through a combination of having a small and efficient Head Office, maintaining high levels of occupancy across our portfolio and owning efficient modern properties.
Case study
MANAGING COSTS FOR OCCUPIERS
Controlling costs is a discipline we pass on to our partners. We actively manage occupancy costs, while ensuring we deliver the right environment for the occupier, by effective management, smart procurement and creative thinking.
Not only does our scale mean we are able to negotiate competitive rates on behalf of 1,000 occupiers (in 2010 we achieved property insurance rates more than 10% lower on average than in 2008) it also means that many small initiatives add up to big savings.
We focus on modern high-quality buildings with efficiency built in but also believe there is always more you can do. It is our approach to getting the best efficiencies from our existing portfolio that really marks us out from the crowd.
Last year we carried out our fourth independent customer service survey. 80% of our retail occupiers rated us good or excellent with satisfaction with value for money at nearly 60% versus a national average of 3%. Over 80% of office occupiers rate us good or excellent with satisfaction for value for money at 65% versus a national average of 14%.
Following a pilot at our York House Head Office building where we installed a new energy metering system and optimisation process helping to cut British Land influenced energy use by nearly 40%, we are now rolling out this system across our office and retail portfolios so that more businesses can recoup the benefits and savings. This collaborative approach, sharing information, providing support and funding energy reviews to highlight how savings can be made, has been recognised by prestigious industry awards.
Elsewhere we have switched to local suppliers, reduced waste to landfill and subsequent taxes, increased recycling, and a long-term approach to planned preventative maintenance, easing out peaks and troughs in cost cycles all contribute to cutting and controlling costs.
3 Platinum awards
And six gold awards at properties independently audited against the service charge code in 2010/11
Exploiting our scale and financial strength
Our scale, knowledge and expertise in UK property makes us a natural partner of choice for major investors. We have an established track record of working with major institutions with complementary expertise and interests to our own, including Blackstone Group, London & Stamford, Oxford Properties, Sainsbury’s, Tesco and Universities Superannuation Scheme.
The scale and security of our rental income streams enables us to finance our business on competitive terms and maintain substantial credit facilities to support current and future investment needs. Over the last few years, when the availability of banking finance has become highly constrained, our access to finance has made us one of a relatively few number of companies able to invest in major London office development.
Case study
BLT PROPERTIES LIMITED
BLT Properties Limited, is a 50:50 joint venture between British Land and Tesco, which owns eight Tesco superstores and one retail park currently valued at £334 million.
In 2010, it successfully raised a new £185 million seven-year term loan to replace an existing facility at maturity. The strength of the joint venture’s rental income streams meant that a single bank was willing to provide the whole facility. The overall finance rate achieved was lower than the maturing facility. In conjunction with the refinancing, the joint venture was extended for a further ten years, the second renewal after its establishment in 1996.
45%
Loan to value1
10.1 years
Average debt maturity1
1 Proportionally consolidated.
Corporate Responsibility
Being the best at sustainability issues that matter most to us and our stakeholders
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