TIDMBLND
RNS Number : 3697V
British Land Co PLC
14 April 2021
British Land Operational Update
14 April 2021
Ahead of our full year results on 26 May, we provide the
following update.
-- Good progress against our strategic priorities, leveraging our competitive strengths:
o Pre let nearly 30% of the office space at 1 Broadgate to
JLL
o Commitment to develop 1 Broadgate and Norton Folgate
o Canada Water planning secured, headlease drawn down, expect to
place build contracts for phase 1 over the summer
o Exploiting value opportunity for top quartile retail parks
with acquisition of Biggleswade and HUT minority interest
o Progressing urban logistics development opportunities
including working up planning for over 1m sq ft at Meadowhall and
Teesside; acquired urban logistics warehouse in Enfield with
significant redevelopment potential
o GBP1.2bn of disposals since 1 April 2020, recycling into
development and active asset management opportunities
-- Rent collection and operational performance:
o 82% total rent collected for FY21; Offices 99%, Retail 70%
o 76% of March 2021 rent collected to date; Offices 96%, Retail
54%, expect this to improve over coming weeks in line with previous
quarters
o 1.4m sq ft of total lettings and renewals in Retail for the
first 11 months, ahead of last year
-- 79% of stores open as at 12 April, following the opening of
non essential stores in England and Wales
-- Strong financial position: GBP1.8bn undrawn facilities and
cash; no requirement to refinance until 2025
Progress against Strategic Priorities
In November, we signalled our intention to more actively focus
our capital and activities on our competitive strengths to deliver
superior returns. We have four clear strategic priorities for our
business to exploit our expertise in development and active asset
management as well as our market leading position in campuses and
out of town retail parks. We have made good progress over recent
months:
1. Realising the potential of our Campuses
We are further aligning our mixed-use campuses towards
innovative growth sectors and businesses. We have several clear
opportunities, most notably at Regent's Place which sits in
London's Knowledge Quarter and is ideally placed to benefit from
the growing life sciences sector and Canada Water where we have
secured a highly flexible planning consent. At Broadgate, we have
repositioned the campus towards innovative, successful growth
businesses.
We were delighted that JLL selected 1 Broadgate for their UK
flagship office and committed to a 15 year lease over 134,000 sq
ft. This demonstrates their conviction that the modern, high
quality and sustainable space we are delivering has a key role to
play in promoting innovation, collaboration, training and
culture.
This is an excellent example of how successful businesses across
a range of sectors are looking beyond Covid to secure space which
enables them to perform at their best. We are under offer on a
further 156,000 sq ft across our portfolio and are encouraged by
the conversations we are having on our development space which are
typically with occupiers with significant requirements two to three
years in the future.
Activity was understandably subdued with total lettings and
renewals for the 11 months between 1 April 2020 and 28 February
covering 315,000 sq ft, including 126,000 sq ft of deals over one
year, ahead of ERV. In March, we also signed 30,000 sq ft of deals
to technology businesses at our campuses and we are seeing an
encouraging increase in activity in our Storey space.
The strong sustainability credentials of our space are an
important advantage. At Broadgate, we delivered our first net zero
carbon development at 100 Liverpool Street. Reflecting our broader
focus on sustainability, we were pleased to achieve a GRESB 5*
rating and the Science Based Target initiative (SBTi) validated
that our commitments to reduce greenhouse gas emissions align with
a 1.5degC global warming scenario, the most ambitious designation
available through the SBTi process.
2. Progressing value accretive development
We have committed to develop 1 Broadgate following the pre-let
of nearly 30% of the offices space to JLL. Covering 546,000 sq ft,
including 498,000 sq ft of workspace, it will target a BREEAM
Outstanding rating and will be the most energy efficient building
we have ever delivered. Enabling works are underway and we are due
to start demolition in May 2021. We committed to Norton Folgate in
November and have also achieved planning for our c.700,000 sq ft
development at 2-3 Finsbury Avenue at Broadgate.
At Canada Water, we completed the drawdown of our headlease in
December, combining the ownership of our assets into a single
500-year headlease with Southwark Council as the lessor. We have
commenced enabling works for the first three buildings which
together total 580,000 sq ft including 265 homes and expect to
place the main build contracts over the summer.
3. Addressing the challenges in Retail
Despite a challenging retail occupational market, leasing
volumes are ahead of last year although pricing is lower. For the
11 months from 1 April 2020 to 28 February 2021 total lettings and
renewals covered 1.4m sq ft, the same as the whole of FY20 (1.36m
sq ft), with 755,000 sq ft of deals over one year. On average,
deals over one year were c. 20% below previous passing rent. We
have a strong pipeline of deals, with 794,000 sq ft under offer of
which 456,000 sq ft is at our retail parks.
Our retail parks are well connected and affordable to retailers
meaning they play an important role in a successful online retail
strategy facilitating Click & Collect, returns and ship from
store. We have seen this trend accelerate, as rates of online
shopping have increased with shoppers more confident visiting
open-air locations they can access by car and where social
distancing can be more easily managed.
As a result, while footfall and sales were significantly reduced
during the third national lockdown, our portfolio outperformed the
benchmark. From 3 January to 27 February footfall on our portfolio
was 15pp ahead of the ShopperTrack UK National Footfall Index and
retailer sales were 10pp ahead of the BDO High Street Index. Retail
parks were ahead of the portfolio average on both metrics.
We see a value opportunity in out of town retail, reflecting
increased yields and a more stable occupational market, driven by
affordability and stronger demand from retailers who recognise the
important role that retail parks can play in supporting an
omnichannel strategy.
In this context, we recently completed the acquisition of The A1
Retail Park in Biggleswade, Bedfordshire for GBP49m on a net
initial yield of 8.5%. This is a strong trading, modern, well
located scheme, easily accessible from the A1 and within the
Oxford-Cambridge arc, benefiting from an affluent and growing
catchment. The park is let to a range of high quality occupiers
including M&S, Next and Boots. We expect to deliver attractive
financial returns off stabilised rents and reflecting our asset
management expertise.
We saw a similar opportunity in HUT (Hercules Unit Trust). The
trust comprises ten prime retail parks and in February we voted to
extend its terms, effectively committing to the acquisition of the
remaining 22% interest in the trust at March 2021 valuation. The
trust had a look-through blended net initial yield of over 8%, and
acquisition of the remaining interest is anticipated for June 2021
at a gross asset value of c.GBP150m.
We are exploring further opportunities to acquire high quality,
well located retail parks, but will remain disciplined in terms of
our return requirements.
We expect market rents for covered shopping centres to take
longer to stabilise than at retail parks due to generally higher
occupancy cost ratios for this format and lower visitor numbers
during Covid. Covered shopping centres accounted for 22% of our
retail portfolio value at 30 September 2020.
We expect the acceleration of online and same day delivery will
continue to support rental growth in urban logistics. In November,
we identified potential in our portfolio for urban logistics
development and are now focused on two key opportunities, at
Teesside and Meadowhall together spanning more than 1m sq ft. We
expect to submit planning applications on both in the coming
months.
Leveraging our skills in site assembly, planning and delivering
complex developments in London and our strong relationships with
retailers, we are also evaluating urban logistics development
opportunities inside the M25, where we believe rental growth
prospects are most compelling. We are therefore pleased to announce
that we have exchanged on the acquisition of Heritage House a
c.200,000 sq ft warehouse in Enfield for GBP87m. This asset is
currently fully let to high quality occupiers Waitrose (for their
North London customer fulfilment centre) and Crown Records
Management but offers significant redevelopment potential given the
opportunity to increase density.
4. Active capital recycling
We have executed GBP1.3bn of capital activity since 1 April
2020. This includes GBP1.2bn of sales, overall 6.1% ahead of book
value, comprising GBP640m of mature offices assets and GBP560m of
retail assets. The proceeds will be recycled into our attractive
development pipeline and value add opportunities like the
acquisitions of Biggleswade and Enfield.
Our balance sheet remains strong. We have GBP1.8bn undrawn
facilities and cash available at 31 March 2021. We retain
significant headroom to our debt covenants and have no requirement
to refinance until early 2025.
Our recent financing activity has included the extension in
March of our GBP450m ESG-linked unsecured RCF by a further year to
2026, with all eight banks in agreement. We also raised a loan of
GBP160m for seven years for our new Joint Venture with Allianz,
secured on the JV assets.
Rent collection
We have now collected 82% of rent for FY21. Across the business,
GBP83m of rent was due for payment in the March 2021 quarter before
taking account of adjustments made in support of our customers as a
result of Covid-19. This comprised GBP40m in Retail and GBP43m in
Offices. As of 12 April 2021, 11 working days after the quarter
end, we had collected 76% of the total amount.
In Offices, we have continued to deliver excellent rent
collection. We have now collected 99% of rent for FY21 overall (see
Tables A, B, C and D in the appendix for collection by quarter). As
at 12 April, we have collected 96% of March 2021 rent.
In Retail, we have continued to collect outstanding rental
balances and have now collected 70% of rent for FY21 overall. As at
12 April, we have collected 54% of March 2021 rent. In line with
previous quarters, we expect March quarter rent collection across
the business to improve further over the coming weeks.
March quarter date rent collection, as at 12 April 2021:
Rent due between 25 Offices Retail(1) Total
March and 12 April 2021
-------- ----------
Received 96% 54% 76%
Rent deferrals - - -
Rent forgiven - - -
Customer paid monthly 1% 12% 7%
Outstanding 3% 34% 17%
-------------------------- -------- ---------- -------
Total(3) 100% 100% 100%
--------------------------
GBP43m GBP40m GBP83m
-------------------------- -------- ---------- -------
Collection of adjusted
billing(2) 98% 61% 81%
-------------------------- -------- ---------- -------
(1) Includes non-office customers located within our London
campuses.
(2) Total billed rents exclusive of rent deferrals, rent
forgiven and tenants paying monthly.
(3) The amount billed is less than what was billed in previous
quarters due to the exclusion of Scottish quarter date amounts
which are due to be billed on 28 May and monthly amounts due for
May and June which will be billed later in the quarter. Total
billings for the quarter will be less than that of previous periods
due to the various asset disposals made since 30 September
2020.
We are continuing to engage, on a case-by-case basis, with
customers who have strong businesses but have been
disproportionately affected by Covid-19 to agree solutions which
help them to manage their rental obligations. These have typically
involved moves to monthly rents, deferrals and partial settlement
of outstanding rents for the period of closure in return for lease
extensions, reduced incentives, commitments to additional space and
the removal of lease breaks.
Following the opening of non-essential retail on 12 April 2021,
c.1540 of our stores are open, representing 79% of total. We would
expect this to increase in the coming weeks if restrictions are
relaxed in Scotland as planned and more generally in line with the
roadmap set out by the Government. Our team have done an excellent
job supporting our customers in re-opening and based on our
previous experience in September when footfall was 84% of the prior
year (89% at retail parks) we are confident of a strong recovery in
the coming months.
CFO appointment
Further to our announcement on the appointment of Bhavesh Mistry
as Chief Financial Officer in January, we are pleased to confirm
that he will take up his position on Monday 19 July 2021.
Appendices
Table A - Rent collection, March quarter 2020(1)
Rent due between 25 Offices Retail(2) Total
March and 23 June
-------- ----------
Received 98% 51% 72%
Rent deferrals 1% 18% 10%
Rent forgiven 1% 17% 10%
Outstanding - 14% 8%
------------------------ -------- ---------- --------
Total 100% 100% 100%
------------------------
GBP59m GBP76m GBP135m
------------------------ -------- ---------- --------
Collection of adjusted
billing(3) 100% 78% 90%
------------------------ -------- ---------- --------
Table B - Rent collection, June quarter 2020(1)
Rent due between 24 Offices Retail(2) Total
June and 28 September
-------- ----------
Received 99% 76% 85%
Rent deferrals - 3% 2%
Rent forgiven 1% 8% 5%
Outstanding - 13% 8%
------------------------ -------- ---------- --------
Total 100% 100% 100%
------------------------
GBP58m GBP80m GBP138m
------------------------ -------- ---------- --------
Collection of adjusted
billing(3) 100% 85% 92%
------------------------ -------- ---------- --------
Table C - Rent collection, September quarter 2020(1)
Rent due between 29 Offices Retail(2) Total
September and 24 December
-------- ----------
Received 100% 80% 88%
Rent deferrals - - -
Rent forgiven - 4% 2%
Outstanding - 16% 10%
---------------------------- -------- ---------- --------
Total 100% 100% 100%
----------------------------
GBP56m GBP80m GBP136m
---------------------------- -------- ---------- --------
Collection of adjusted
billing(3) 100% 83% 90%
---------------------------- -------- ---------- --------
Table D - Rent collection, December quarter 2020(1)
Rent due between 25 Offices Retail(2) Total
December and 24 March
-------- ----------
Received 99% 71% 83%
Rent deferrals - - -
Rent forgiven - 4% 2%
Outstanding 1% 25% 15%
------------------------ -------- ---------- --------
Total 100% 100% 100%
------------------------
GBP52m GBP67m GBP119m
------------------------ -------- ---------- --------
Collection of adjusted
billing(3) 99% 74% 85%
------------------------ -------- ---------- --------
(1) As at 12 April.
(2) Includes non-office customers located within our London
campuses.
(3) Total billed rents exclusive of rent deferrals and rent
forgiven.
Enquiries:
Investors & Analysts:
David Walker 07753 928382
Joanna Waddingham 07714 901166
Media: Charlotte Whitley 07887 802535
Notes to Editors
About British Land
Our portfolio of high quality UK commercial property is focused
on London Offices and Retail around the UK. We own or manage a
portfolio valued at GBP13.7bn (British Land share: GBP10.3bn) as at
30 September 2020 making us one of Europe's largest listed real
estate investment companies.
Our strategy is to provide places which meet the needs of our
customers and respond to changing lifestyles - Places People
Prefer. We do this by creating great environments both inside and
outside our buildings and use our scale and placemaking skills to
enhance and enliven them. This expands their appeal to a broader
range of occupiers, creating enduring demand and driving
sustainable, long term performance.
Our Offices portfolio comprises three office-led campuses in
central London as well as high quality standalone buildings and
accounts for 65% of our portfolio. Our Retail portfolio is focused
on retail parks and shopping centres, and accounts for 31% of our
portfolio. Increasingly our focus is on providing a mix of uses and
this is most evident at Canada Water, our 53 acre redevelopment
opportunity where we have plans to create a new neighbourhood for
London.
Sustainability is embedded throughout our business. Our places,
which are designed to meet high sustainability standards, become
part of local communities, provide opportunities for skills
development and employment and promote wellbeing.
Further details can be found on the British Land website at
www.britishland.com
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