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respect
innovation excellence
integritycustomer service
Presentation to UKSA 19 January 2005
Francis SalwayGroup Chief Executive
Focused business model
…with scope for opportunism
Retail Property outsourcing
London offices
Urban community
development
Retail£4.8bn assets
£257m net income
London offices£3.3bn assets
£200m net income
Property outsourcing£1.9bn operating properties
£196m operating profit(1)
Three core businesses
Market leading positions
(1) Six months to 30 September 2004 annualised, excluding profit on sales of properties
Strategic focus on value creation
Aiming to deliver enhanced financial returns
Effective recycling of capital
£mActive management of balance sheet
2004
2003
2002
2001
2000
1999
1998
£m
Telereal disposals Property investment expenditureDisposals LS Trillium acquisitions
Capital returnsCorporate acquisitions
Recycling capital to achieve higher returns
Richard Akers (43) Managing Director, Retail
Mike Hussey (39)Managing Director, London
Mark Collins (48) Chief Operating Officer
Ian Ellis (49)Property Outsourcing
Andrew Macfarlane (48)Group Finance Director
Francis Salway (47)Group Chief Executive
Experienced management team
Leading a group of 1,950 employees
The last 12 months
2004
Organisational restructuring
Exit from industrial
Debt restructuring
Innovative financing solution
Retail
Scottish Real Estate Limited Partnership – joint venture with British Land
Metro Shopping Fund Limited – joint venture with Delancey
Asset swap with Slough Estates
Successful anchor tenant lettings for shopping centre developments in Exeter and Cardiff
High level of activity
The last 12 months
2004
London office
Let, disposed or agreed terms for letting for over 145,000m2 of our London office development programme
Landflex roll-out
LS Trillium
3 new contract wins – Employment Services, Norwich Union and Barlcays Bank
Strong profit and loss contribution
High level of activity
Financial highlights6 months to 30 September 2004
Key statistics
Pre-tax profit £196.6m 8.2%
Revenue profit (pre-tax) (1)£189.3m 13.4%
Adjusted diluted earnings per share (2) 28.56p
11.8%
Dividend per share 10.40p 5.1%
Property investment business valuation change £445.7m 5.3%
Adjusted diluted NAV per share(3)(4) 1443p 8.4%
(1) Excludes FRS3 profits and exceptional items.(2) Based on revenue profits. Excludes deferred tax on investment properties.(3) Adds back deferred tax on investment properties and Telereal deficit(4) Compared to 31 March 2004
Strong growth in adjusted EPS and NAV
Investment Active management creating value
Shopping centres +6.2%(1)
Retail warehouses +7.3%(1)
Innovative asset acquisitions 18 shopping centres, 25 retail parks Over one million m2 of retail
accommodation Nearly 300 million shopper visits per yearDevelopment Meeting targets on development lettings Planning consent for over 100,000m2 of
retail development(2)
Estimated future development spend of c.£531m(2)(3)
Retail
Retail
(1) Valuation change for six months to 30 September 2004(2) LS share(3) Excludes land costs and capitalised interest
Vision of long term, dominant assets
Scottish Retail Property Limited Partnership
Joint venture with British Land created in March 2004
Over 130,000m2 of retail space, valued at circa £500m
Assets: Aberdeen - Bon Accord Centre and St
Nicholas Centre East Kilbride – Princes Mall, Olympia,
Plaza Centre and Centre West Roles:
Land Securities – asset and property management
British Land – administration Rationale
Coordinated asset management and tenant mix strategies
Future development opportunities
Maximise long-term value of centres
Centre West, East Kilbride
• Long leasehold at peppercorn
• £3.8m p.a. rental income
• 21,350m2
• Freehold
• £1.9m p.a. rental income
• 9,500m2
Howard Centre, Welwyn Bishop Centre, Taplow
• 50% interest with Henderson
• Long leasehold at peppercorn
• £8.3m p.a. rental income (LS share)
• 55,750m2
• Freehold
• £6.4m p.a. rental income
• 32,500m2
Buchanan Galleries, Glasgow Lewisham Centre, Lewisham
Asset management and development opportunities
Assets acquired through Slough Estates swap
Retail developments
Princesshay, Exeter37,500m2 retail
St David’s 2, Cardiff(1)
70,000m2 retail
Broadmead, Bristol(1) 88,750m2 retail
One of the largest development pipelines
Whitefriars, Canterbury37,100m2 retail
Investment Disposal of ‘ex-growth’ assets Valuation increase(1) +4.4% Like-for-like portfolio(2):
Average passing rent £358 per m2 Average estimated
rental value £321 per m2
Current income yield 7.1%
Over 810,000m2 of office accommodation More than 50,000 people work in offices owned
by us
Development Strong progress on development lettings Potential to develop 500,000m2 of commercial
and residential space over next 10 years Estimated future development spend of c.
£581m(3)
Retail
Central London office
(1) for six months to 30 September 2004(2) As at 30 September 2004(3) Excludes land costs and capitalised interest
Poised for market recovery phase
London investment portfolio opportunities
Current income yield 7.1% Gross nominal equivalent yield 7.1% Average passing rent per m2 £358 Average ERV per m2 £321
London offices (like-for-like portfolio) as at 30 September 2004:
Property A – long lease Property B – short leases
Mean lease length 9.0years Gross reversionary potential 7.8% Over-rented income (14.3)%
Capital value Rental value
60
70
80
90
100
110
Mar-01 Mar-02 Mar-03 Mar-04
60
70
80
90
100
110
Mar-01 Mar-02 Mar-03 Mar-04
Positioned for capital growth
Office developments
Cardinal Place, SW1
Bankside 123, SE1
New Street Square, EC4
Can satisfy major occupiers’ property requirements
Eastbourne Terrace, W2
120 Cheapside, EC2
Landflex
ClientLandSecurities
Higher earnings from capital invested
Increased renewal rates
Improved IRRs
Menu of lease lengths
Indexed rent increases
Inclusive charges
No dilapidations
Additional services
Budget certainty
Product innovation matched to market trends
Building Office space Status
7 Soho Square, W1 41,000m2 Let
Empress State, SW6 5,720m2 Let
Eastbourne Terrace, W2 7,640m2 Under development
Property outsourcing
ClientLSTrillium
Freehold asset transfer
Leasehold liability transfer
Unitary charge
Capital value payment/release
Integrated property services
Occupational flexibility
Price certainty
Property outsourcing: risk transfer, price certainty, customer service
More than 250,000 people work in offices managed by LS Trillium
2.6m m2 = 1,700 buildings
0.4m m2 = 76 buildings
5.3m m2 = 6,700 buildings
0.1m m2 = 19 buildings
Property outsourcing
6 months to
30/09/03£m
31/03/04£m
30/09/04£m
Segment profit including profit on sales
PRIME (including amortisation of goodwill) 27.6 29.6 29.1
ES (1.8) (4.4) 17.2
BBC (3.4) 10.0 10.5
Norwich Union - - 2.9
Bid costs (1.7) (4.5) (0.7)
Central costs (3.2) (4.1) (1.9)
Segment profit 17.5 26.6 57.1
Telereal profit before tax 16.4 13.9 37.7
Net assets(1) 746.7 889.6 960.0
Investment in Telereal joint venture 89.0 (47.9) (52.6)
(1) Including £36m Norwich Union assets defined as finance leases
Strong growth from new contracts
LS Trillium - new business pipeline
Corporates Public Sector
2
5
1Final proposal
Outline proposal
Marketing and pre-proposal
Final close
Mobilisation
7
1
2
Balance sheet Consolidation Government efficiency review
Flexibility Cost reduction £30 billion asset disposals
Drivers:
Growing private sector interest within pipeline
1 0
(1) Eastern Quarry 79% ownership Outline planning application submitted 7,250 homes, 267,250m2 commercial and community accommodation
(2) Ebbsfleet 42.5% ownership Outline planning consent obtained 789,500m2 commercial and residential floorspace
(3) Springhead, Ebbsfleet phase I 42.5% ownership Quarter Master approval secured 600 homes and 50,000m2 offices
(4) Swanscombe Peninsula Development management role Outline planning application to be submitted 1,700 residential units, 25,000m2 offices and 6,000m2 retail and community accommodation
Urban community development
Kent Thameside, south-east England
London
SevenoaksBexley
Maidstone
Brentwood
Thurrock
Kent Thameside
4
3
2
1
Exciting opportunity – delivering profits over 20 years
Effect of debt refinancingBased on final pricing
Before After
£1.80bn debentures and bonds £2.30bn secured bonds
weighted average interest rate: 8.51% weighted average interest rate:
5.35%
A/A- rating (bonds only) AA/AA rating
£1.55bn committed unsecured facilities expiring 2005 & 2006.
New £1.5bn committed bank facility expiring late 2009. Bank debt has migrated
At 30 September 2004 :At 30 September 2004 pro-forma for transaction(1):
Gearing (net debt/equity) 40.7% Gearing 54.7%
Adjusted diluted NAV 1443p Adjusted diluted NAV 1342p
NNNAV 1228p NNNAV 1223p
Group weighted average cost of debt 7.64% Group weighted average cost of debt 5.52%
(1) As if refinancing had happened at 30 September 2004 but based on final prices
Improved flexibility with lower future funding costs
Summary
Sharper focus to range of activities
More efficient debt structure – earnings enhancing
London portfolio well positioned for recovery phase:
short average lease lengths
development pipeline
Retail portfolio strengthened through organic growth
Increasing interest in property outsourcing from private sector
A strategy delivering growing returns
Contacts
Emma Denne Jennifer van der EemDirector of Corporate Communication Investor Relations ManagerTel: +44 (0) 20 7024 5460 Tel: +44 (0) 20 7024 5185Fax: +44 (0) 20 7024 5011 Fax: +44 (0) 20 7024 5011Email: emma.denne@landsecurities.com Email: jennifer.vandereem@landsecurities.com
www.landsecurities.com
Land Securities Group PLC, 5 Strand, London, WC2N 5AF
respect
innovation excellence
integritycustomer service
Robert HeskettHead of Asset Management, Central London portfolio
UKSA Central London Tour 19 January 2005
One New Change, EC4
Description
The building comprises 385,000ft2 of offices and 26,000ft2 of retail held on a long lease from the Corporation of London. The majority of the office building is let to Allen & Overy, who will occupy the premises until 2006. The retail accommodation is let to a mixture of tenants, including Lloyds Bank and Boots.
Comment
Land Securities purchased New Change from the Bank of England during 2000 and provides the opportunity to develop a substantial landmark building adjacent to St Paul’s, with the ability to create the first major shopping complex on the City’s most prime retail frontage.
30 Gresham Street, EC2
Description
Gresham Street is one of the City’s largest buildings providing approximately 390,000ft2 net of offices with floor plates up to 49,220ft2, offering exceptional levels of flexibility to high density occupiers. In addition, the scheme will provide approximately 14,000ft2 net of retail accommodation.
Comment
The scheme was completed in December 2003. The property stands on an island site providing a high profile frontage onto Gresham Street. The building was recently let in its entirety to DrKW, thus releasing their Fenchurch Street site to Land Securities.
Red Lion Court, SE1
Description
This is a 128,325ft2 building of high quality specification with full air-conditioning and raised floors. The building is wholly let to Lloyds TSB Bank PLC for a term of 25 years from June 1990, expiring June 2015, on FRI terms and five yearly rent reviews.
Comment
Land Securities purchased the property in December 2004. The building is let off a rent of £35ft2 and rental growth prospects are good, bearing in mind the improvements in the South Bank area. The value is underpinned by the possibility of a residential development in a popular riverside location.
Bankside 123, SE1
Description
A mixed use development providing approximately 750,000ft2 net of offices, 110,000ft2 net retail and health and fitness, arranged over 3 buildings. Bankside neighbours the Tate Modern and is well connected to a number of transport hubs providing access to the City, West End and Docklands.
Comment
The building has been demolished and, as a result of the early pre-letting campaign, Bankside 1 has been pre-sold to IPC. Tenants are being sought for the remainder of the space before construction starts.
Hill House, 1 Little New Street, EC4
Description
This is a building comprising 133,260ft2 plus car parking let in its entirety to Deloittes. The terms of the lease is 35 years from 1983, expiring in 2018 at a rent of c. £38ft2 per annum exclusive.
Comment
Land Securities purchased the freehold interest in this building in July 2004. The attractive running yield of 6.5% made this an attractive acquisition adjacent to the company’s existing holdings in New Street Square and based on a first class covenant.
New Street Square, EC4
Description
Planning permission for a 700,000ft2 scheme on the site of New Fetter Lane was submitted in 2004.
Comment
After carefully considering current market trends, Land Securities has now made a planning application for the site which will involve 3-4 buildings of between 150,000ft2 and 400,000ft2 each. A pre-letting marketing campaign is underway and Heads of Terms have been agreed with Deloittes to take over 200,000ft2, although it is not yet documented.
Greater London House, NW1
Description
This is a landmark 335,000ft2 building between Camden and the West End. Major occupiers include Book Club Associates, Young & Rubicam and TUI. The building is fully occupied with most leases expiring in 2013.
Comment
Land Securities purchased the freehold interest in this building in July 2004. Average rents are c. £23ft2 and the rental growth prospects are strong for this popular building.
6-17 Tottenham Court Road, W1
Description
A development completed in 1999 and comprising 56,500ft2 of retail space currently divided into six large units let to a variety of tenants, including Sainsbury’s, Boots the Chemist and Specsavers. There is also a restaurant and some offices.
Comment
A new development providing good quality retail space, which is in short supply generally in the West End. The parade shows good rental growth prospects which should be reflected in the rent reviews in 2004, which are being progressed at present.
Piccadilly Circus, W1
Description
Seven advertising screens let to international brands, such as Coca-Cola, McDonald’s and TDK. Two large ground floor retail/restaurant units let to Boots the Chemist and Burger King.
Comment
A multi-let building in the heart of the West End. The signs have attracted household names for almost a century and the block continues to be popular with retailers and advertisers.
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