Conference Call: Superstore Portfolio/media/Files/B/... · Morrisons Sainsbury’s Asda Waitrose...

Conference Call: Superstore PortfolioTuesday, 8 December 2009

www.britishland.com


Agenda

• UK Grocery Market

• British Land’s Superstore portfolio

• Performance

• Activity

• Investment market

Bryan Lewis

Asset Manager for Superstores

Darren Richards

Retail Investment

1


The UK Grocery Market

Large Format GroceryRetailing(£106bn)

Non-store/Home retailing (£3bn)

Traditionalretailing (£7bn)

Convenienceretailing (£30bn)

• UK Grocery market sales £146bn pa, of which £106bn (72%) from large format grocery stores1

£0.6bn

£5.9bn

£6.5bn

£93.0bn

Total Sales

Discounters (e.g. Aldi, Lidl)

Co-op

Multiples (Tesco, Sainsbury’s, Asda, Morrisons, Waitrose)

Independents

Large Format Grocery Retailing

1 IGD (Institute of Grocery Distributors)

2


Examples of our Superstore Portfolio

Sainsbury’s, Swansea (90,000 sq ft)

• 550 car spaces• Extended in 1998 & 2003• Rental value £18.50 psf• Let to Sainsbury’s until 2024

Tesco, Formby (60,000 sq ft)

• 400 car spaces• Extended in 2004• Rental value £22.00 psf• Let to Tesco until 2030

3


British Land’s Superstore Portfolio

• Largest owner of Superstores, other than the operators themselves

• 101 superstores totalling 6.1m sq ft – of which 44 Sainsbury’s & 35 Tesco

• £2.1bn portfolio (BL Share £1.1bn)

• 5.75% net initial yield

• 100% let; average lease length 17.6 years

• Average rent £20 psf (ERV: £21 psf)

• Food retailers represent 18% of total rent– of which 14% Tesco & Sainsbury’s

1 30 September 2009, pro forma for Broadgate JV (50% share of Broadgate)

West End offices(11%)

Other (3%)

Department stores (6%)

Retail Warehouses

(27%)

Shopping Centres (12%)

City offices (20%)

Superstores (16%) Europe (5%)

Superstores represent 16% of total portfolio – 24% of Retail portfolio1

4


Partnerships with the Retailers

516

269

47

249

138

Value£m1

39

21

9

1

9

Number of Properties

32

15

3

17

8

Rent£m pa1

5-yr upward only rent reviewBLT properties

5-yr upward only rent review

Annual RPI



Lease

Tesco Aqua

Tesco BL

Tesco British Land

BL Sainsbury Superstores Ltd

• Majority (88%) of portfolio held in JV

• Closer relationships with the retailers to

maximise properties and drive footfall

• 77% of portfolio subject to 5-year upward

only rent review

• 23% of portfolio based on annual RPI

within range of 0 - 3.5% pa

Superstore Joint Ventures

1 BL Share (includes retail parks and shopping centres anchored by Tesco)

5


Portfolio Performance

-6

-4

-2

0

2

4

6

6 mths 1 yr 3 yrs 5 yrs 10 yrs

Ren

tal V

alue

Gro

wth

(% p

a)

BL Superstores IPD All Retail

4.7% pa Rental Value Growth in BL’s Superstores over last 10 years vs. IPD All Retail 2.6% pa

BL’s Superstores Total Property Return 9.6% pa over 10 years vs. IPD All Retail 5.6% pa

-20

-15

-10

-5

0

5

10

6 mths 1 yr 3 yrs 5 yrs 10 yrsTo

tal P

rope

rty R

etur

n (%

pa)

BL Superstores IPD All Retail

6


Expansion of Grocers

Retailers’ store opening plans:

Completed 87 new stores and is on track to re-fit/develop c.2m sq ft by this yearTesco

To continue to add 8-10 large format outlets each year. Potential for 300 convenience stores over 5-10 years

Opened 12 stores in 2009. Further 1m sq ft of openings planned in the South of England

50 new stores to open by mid-2011. Also extending existing stores

Scheduled to open 20 new sites this year

Morrisons

Sainsbury’s

Asda

Waitrose

• Retailers looking to increase floorspace for non-food items (e.g. clothing, entertainment, banking)

7


Sustainable Income

627

193

382

495

311

674

Stores

4.6

3.5

11.1

14.3

13.9

18.4

Sales Area

(m sq ft)

Net Sales (£bn)

Supermarket Sales (£bn)

Change 2008 vs.

2007

Tesco 38 23 +8.4%

Asda 19 16 +5.5%

Sainsbury’s 19 16 +5.9%

Morrisons 15 14 +12.8%

Waitrose 4 4 +5.5%

Co-op 5 2 +2.0%

1 IGD

• Highest UK food store rents– M&S Food, Kings Road (£40.00 psf)– Tesco, Bishopsgate (£37.50 psf)– Sainsbury’s, Islington (£31.50 psf)– Tesco, Peterborough (£28.50 psf)

• BL portfolio average rent £20 psf

• In general, rent c.3-4% of turnover - equivalent to 2 weeks total sales

• However, rent reviews assessed on supply and demand instead of turnover

Food Retailers’ Store Sales1

8


Rent Review Case Study – Sainsbury’s, Islington

Sainsbury’s, Islington (67,000 sq ft)

• Dominant store within 10 minutes drive time• 170,000 people within 10 minutes of store• Mixed affluence profile, heavily skewed towards

young singles with no children

9


Active Property Management

• Over last 5 years, settled 72 rent reviews at average

17% above previous rent

• Funded 800,000 sq ft of extensions at 7% yield

• Currently evaluating funding further 165,000 sq ft of

extensions to existing portfolio expected to be built

out over next 2 years

• 4 Tesco JVs and 1 Sainsbury’s

– JV structure allows for greater co-operation

and success

BL increase1Sq ftNumber12 months to%£m pa

163.31,395202005

3,989

333

562

446

1,253

‘000

72

5

11

9

27

8.6

0.5

1.4

1.3

2.1 92006

17

16

23

20

2009

2008

2007

Total

30 September

1 BL Share of increase on previous passing rent

Rent Review Performance

10


Attractive Long-term Fundamentals

• Market share

– UK grocery accounts for 51% of total

retail spend1

• Rental growth and affordability

• Covenant strength

• Long lease expiry profiles

• Restrictive planning environment

1 IGD

Waitrose (4%)

Other (13%)

Co-op/Somerfield

(8%)

Tesco (31%)

Sainsbury’s (16%)

Asda (17%)

Morrisons (11%)

UK Grocery Market Shares1

11


Investment Market

• Strong investment demand based on

fundamentals

• Restricted supply

• Yields have compressed as a result

• Lease types (RPI vs. Open Market) an issue

• Risk fundamentals overlooked n/a£32m5.0%30 yrsSainsbury’s, Macclesfield(Under Offer)

4£50m5.0%25 yrsSainsbury’s, Cheltenham(Under Offer)

5£15m4.5%20 yrsWaitrose, Colchester

22£10m5.1%18 yrsWaitrose, West Byfleet

14£15m4.6%25 yrsWaitrose, Cheadle Hulme

BidsPriceNIYLease length

Recent Transactions

12


Summary

• Superstores a major part of BL’s portfolio

• Delivered excellent historic returns relative to the market

• Strong underlying business model andattractive long-term fundamentals continue to apply

• Good prospects for future performance

13


This presentation may contain certain “forward-looking” statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. British Land does not undertake to update forward-looking statements to reflect any changes in British Land’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

This presentation is made only to investment professionals as defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ('the FP Order'). The content of this presentation has not been approved by a person authorised under the Financial Services and Markets Act 2000 (“FSMA”). Accordingly, this presentation may only be communicated in the UK with the benefit of an exemption set out in the FP Order. An investment professional includes:(i) a person who is authorised or exempt under FSMA; and(ii) a person who invests, or can reasonably be expected to invest, on a professional basis for the purposes of a business carried on by him; and(iii) a government, local authority (whether in the United Kingdom or elsewhere) or an international organisation; and(iv) any director, officer, executive or employee of any such person when acting in that capacity.

This presentation is published solely for information purposes. This presentation does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any security, nor a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this presentation in any jurisdiction in contravention of applicable law. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein.

The distribution of this presentation in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about, and observe, any applicable requirements. This presentation has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that which would have been disclosed if this presentation had been prepared in accordance with the laws of jurisdictions outside the UK.

All opinions expressed in this presentation are subject to change without notice and may differ from opinions expressed elsewhere.

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Conference Call: Superstore Portfolio/media/Files/B/... · Morrisons Sainsbury’s Asda Waitrose...

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