Conference Call: Superstore Portfolio - Tuesday, 8 December 2009 - www.britishland.com
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Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
www.britishland.com
Agenda
• UK Grocery Market Bryan Lewis
Asset Manager for Superstores
• British Land’s Superstore portfolio
• Performance
Darren Richards
• Activity Retail Investment
• Investment market
Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
1
The UK Grocery Market
• UK Grocery market sales £146bn pa, of which £106bn (72%) from large format grocery stores1
Convenience
retailing (£30bn)
Large Format Grocery Retailing Total Sales
Multiples (Tesco, Sainsbury’s,
£93.0bn
Asda, Morrisons, Waitrose)
Traditional Large
retailing (£7bn) Format Co-op £6.5bn
Non-store/Home Grocery
retailing (£3bn) Retailing
(£106bn) Discounters (e.g. Aldi, Lidl) £5.9bn
Independents £0.6bn
1 IGD (Institute of Grocery Distributors) Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
2
Examples of our Superstore Portfolio
Sainsbury’s, Swansea (90,000 sq ft) Tesco, Formby (60,000 sq ft)
• 550 car spaces • 400 car spaces
• Extended in 1998 & 2003 • Extended in 2004
• Rental value £18.50 psf • Rental value £22.00 psf
• Let to Sainsbury’s until 2024 • Let to Tesco until 2030
Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
3
British Land’s Superstore Portfolio
• Largest owner of Superstores, other than Superstores represent 16% of total
portfolio – 24% of Retail portfolio1
the operators themselves
City offices
• 101 superstores totalling 6.1m sq ft Retail (20%)
– of which 44 Sainsbury’s & 35 Tesco Warehouses
(27%)
• £2.1bn portfolio (BL Share £1.1bn)
• 5.75% net initial yield West End
offices
(11%)
• 100% let; average lease length 17.6 years
Other (3%)
• Average rent £20 psf (ERV: £21 psf) Department
Superstores stores (6%)
(16%) Europe (5%)
• Food retailers represent 18% of total rent
– of which 14% Tesco & Sainsbury’s Shopping
Centres (12%)
1 30 September 2009, pro forma for Broadgate JV (50% share of Broadgate) Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
4
Partnerships with the Retailers
Superstore Joint Ventures
• Majority (88%) of portfolio held in JV
Number of Value Rent Lease
Properties £m1 £m pa1
• Closer relationships with the retailers to BLT properties 9 138 8
5-yr upward only
rent review
maximise properties and drive footfall
5-yr upward only
Tesco British Land 1 249 17
rent review
• 77% of portfolio subject to 5-year upward 5-yr upward only
Tesco BL 9 47 3
rent review
only rent review
Tesco Aqua 21 269 15 Annual RPI
• 23% of portfolio based on annual RPI
BL Sainsbury 5-yr upward only
39 516 32
within range of 0 - 3.5% pa Superstores Ltd rent review
1 BL Share (includes retail parks and shopping centres anchored by Tesco) Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
5
Portfolio Performance
4.7% pa Rental Value Growth in BL’s Superstores BL’s Superstores Total Property Return 9.6% pa
over last 10 years vs. IPD All Retail 2.6% pa over 10 years vs. IPD All Retail 5.6% pa
6 10
4 5
Total Property Return (% pa)
Rental Value Growth (% pa)
2 0
0 -5
-2 -10
-4 -15
-6 -20
6 mths 1 yr 3 yrs 5 yrs 10 yrs 6 mths 1 yr 3 yrs 5 yrs 10 yrs
BL Superstores IPD All Retail BL Superstores IPD All Retail
Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
6Expansion of Grocers
• Retailers looking to increase floorspace for non-food items (e.g. clothing, entertainment, banking)
Retailers’ store opening plans:
Tesco Completed 87 new stores and is on track to re-fit/develop c.2m sq ft by this year
Asda Scheduled to open 20 new sites this year
Sainsbury’s 50 new stores to open by mid-2011. Also extending existing stores
Morrisons Opened 12 stores in 2009. Further 1m sq ft of openings planned in the South of England
Waitrose To continue to add 8-10 large format outlets each year. Potential for 300 convenience stores over 5-10 years
Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
7Sustainable Income
• Highest UK food store rents Food Retailers’ Store Sales1
– M&S Food, Kings Road (£40.00 psf) Stores Sales Net Supermarket Change
Area Sales Sales (£bn) 2008 vs.
– Tesco, Bishopsgate (£37.50 psf) (m sq ft) (£bn) 2007
– Sainsbury’s, Islington (£31.50 psf)
Tesco 674 18.4 38 23 +8.4%
– Tesco, Peterborough (£28.50 psf)
Asda 311 13.9 19 16 +5.5%
• BL portfolio average rent £20 psf
Sainsbury’s 495 14.3 19 16 +5.9%
• In general, rent c.3-4% of turnover Morrisons 382 11.1 15 14 +12.8%
- equivalent to 2 weeks total sales
Waitrose 193 3.5 4 4 +5.5%
• However, rent reviews assessed on supply
Co-op 627 4.6 5 2 +2.0%
and demand instead of turnover
1 IGD Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
8Rent 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
Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
9Active Property Management
• Over last 5 years, settled 72 rent reviews at average Rent Review Performance
17% above previous rent 12 months to Number Sq ft BL increase1
30 September ‘000 £m pa %
2005 20 1,395 3.3 16
• Funded 800,000 sq ft of extensions at 7% yield
2006 27 1,253 2.1 9
• Currently evaluating funding further 165,000 sq ft of
2007 9 446 1.3 20
extensions to existing portfolio expected to be built
out over next 2 years 2008 11 562 1.4 23
2009 5 333 0.5 16
• 4 Tesco JVs and 1 Sainsbury’s
– JV structure allows for greater co-operation Total 72 3,989 8.6 17
and success
1 BL Share of increase on previous passing rent Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
10Attractive Long-term Fundamentals
• Market share UK Grocery Market Shares1
– UK grocery accounts for 51% of total Other (13%)
Tesco
retail spend1 (31%)
Waitrose (4%)
Co-op/
• Rental growth and affordability Somerfield
(8%)
• Covenant strength
Morrisons
(11%)
• Long lease expiry profiles
Asda
(17%)
Sainsbury’s
(16%)
• Restrictive planning environment
1 IGD Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
11Investment Market
Recent Transactions
• Strong investment demand based on
Lease NIY Price Bids
fundamentals length
Waitrose, Cheadle Hulme 25 yrs 4.6% £15m 14
• Restricted supply
Waitrose, West Byfleet 18 yrs 5.1% £10m 22
• Yields have compressed as a result
Waitrose, Colchester 20 yrs 4.5% £15m 5
• Lease types (RPI vs. Open Market) an issue Sainsbury’s, Cheltenham
25 yrs 5.0% £50m 4
(Under Offer)
Sainsbury’s, Macclesfield
• Risk fundamentals overlooked 30 yrs 5.0% £32m n/a
(Under Offer)
Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
12Summary
• Superstores a major part of BL’s portfolio
• Delivered excellent historic returns relative
to the market
• Strong underlying business model and
attractive long-term fundamentals
continue to apply
• Good prospects for future performance
Conference Call: Superstore Portfolio
Tuesday, 8 December 2009
13Disclaimer
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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