Land Securities Group PLC · LSE:LAND
Land Securities — Sanford C. Bernstein's Pan-European Strategic Decisions Conference 2009
29 slides from Land Securities's conference presentation, Sep 16, 2009
Slide 1: UK commercial property and Land Securities
Sanford C. Bernstein’s Pan-European Strategic Decisions Conference – 16 September 2009 UK commercial property and Land Securities Francis Salway Chief Executive – Land Securities Group PLC
Slide 2: Recent trends in listed and direct real estate markets in the UK
Recent trends in listed and direct real estate markets in the UK Listed market FTSE Real Estate • 80.9% off peak (Jan 2007) to low point (March 2009) Index • 64.7% off peak to now • 84.9% up from low point to now Direct market Capital values • 44% off peak (June 2007) Rental values • 8% off peak (Ap
Slide 3: Issues underlying downturn in UK direct commercial property markets
Issues underlying downturn in UK direct commercial property markets 1. Investment property pricing bubble 2. Economic downturn 3. Lack of availability of credit Page 3
Slide 4: Issues underlying downturn in UK direct commercial property markets
Issues underlying downturn in UK direct commercial property markets 1. Investment property pricing bubble (25)% 2. Economic downturn (20) – (25)% 3. Lack of availability of credit (5) – (10)% (43) – (50)% How much will be recovered? Page 4
Slide 5: Factors supporting a recovery in UK direct commercial property markets
Factors supporting a recovery in UK direct commercial property markets Positive factors Speed and severity of re-pricing Positive yield gap relative to ‘risk free return’ Weak sterling Positive balance of buyers to sellers Positive outlook for capital values Page 5
Slide 6: Factors supporting a recovery in UK direct commercial property markets
Factors supporting a recovery in UK direct commercial property markets Positive factors Speed and severity of re-pricing Positive yield gap relative to ‘risk free return’ Weak sterling Positive balance of buyers to sellers Risk factors Unwinding of over-lending by banks Size of gap betwe
Slide 7: Yield pricing for commercial property relative to risk free rate and finance costs
Yield pricing for commercial property relative to ‘risk free’ rate and finance costs 12 Gap 12 Gap 10 year gilt yield 5 year swap rate 10 10 Equivalent yield Initial yield 8 8 6 6 percent percent 4 4 2 2 0 0 -2 -2 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Ju
Slide 8: UK bank lending to commercial property
Commercial property lending UK bank lending to commercial property 250 14 Bank lending to property, £billion, (lhs) Property share of total lending, % (rhs) 12 property share of total lending, % bank lending to property, £billion 200 10 150 8 6 100 4 50 2 0 0 Q1 1987 Q1 1988 Q1 1989 Q1 1990 Q1 1991
Slide 9: UK commercial property market investment, £billion
UK commercial property market invetsment, £billion 0 5 10 15 2000.Q1 20 2000.Q2 2000.Q3 2000.Q4 2001.Q1 2001.Q2 2001.Q3 Source: Property Data Limited. 2001.Q4 2002.Q1 2002.Q2 2002.Q3 2002.Q4 2003.Q1 2003.Q2 2003.Q3 Investment volume by quarter 2003.Q4 2004.Q1 2004.Q2 2004.Q3 2004.Q4 2005.Q1 2005.Q2
Slide 10: Trends in rental values
Trends in rental values Real growth in rental values 30 20 10 0 percent -10 -20 All property rental value growth - real -30 All retail rental value growth - real London office rental value growth - real -40 H1 2009 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Slide 11: Central London office market: vacancy rates
Central London office market London office vacancy rates 25 City West End 20 15 percent 10 5 0 Jun-09 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: PMA London office vacancy rates currently below levels in 1991 and 2003 Pag
Slide 12: Construction starts in City and West End
starts, rolling 6 months, million sqf 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Source: PMA Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 City Q1 2003 Q2 2003 West End Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Central London office market Q2 2005 Constructio
Slide 13: Retail property: investment portfolio voids
Retail property Retail market investment portfolio voids 10 8 6 percent 4 2 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: IPD Retail void levels higher than in early 1990s Page 13
Slide 14: Retail property: retail sales growth
Retail property Retail sales growth 12 Like-for-like Total 9 6 percent 3 0 -3 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Source: BRC Retail sales more resilient than expected in downturn Page 14
Slide 15: UK commercial property market trends
UK commercial property market trends Comparison to early 1990s Early 1990s Current cycle (to date) All property Capital values -27.1 -44.2 Rental values -21.7 -8.0 Retail Capital values -19.0 -45.7 Rental values -7.0 -5.7 Void rate 6.0 7.1 London offices Capital values -51.2 -47.0 Rental values -56.
Slide 16: Drivers of capital value change: rental values and yield shift
Drivers of capital value change: rental values and yield shift 30 ERV growth Capital growth 20 10 percent 0 -10 -20 -30 H1 2009 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: IPD Divergence between r
Slide 17: Land Securities – key facts
Land Securities – key facts £9.4bn portfolio Focus on London offices and retail Retail – 25 shopping centres and 21 retail parks London offices – 9.7 million sq ft Strong development capabilities Efficient debt structure not linked to specific assets , but benefiting Piccadilly Lights, W
Slide 18: Land Securities – key assets: London Portfolio
Land Securities – key assets London Portfolio Piccadilly Circus Cardinal Place Lights New Street Square Queen Anne’s Gate One New Change 36% of London Portfolio in West End offices and 18% in retail Page 18
Slide 19: Land Securities – key assets: Retail Portfolio
Land Securities – key assets Retail Portfolio Team Valley, Newcastle Buchanan Galleries, Glasgow White Rose, Leeds Bullring, Birmingham Westwood Cross, Thanet St David’s 2, Cardiff N1, Islington, London Cabot Circus, Bristol 25 shopping centres and 21 retail warehouse parks Page 19
Slide 20: Land Securities – property yields
Land Securities – property yields (1) Range of Gross Income Equivalent equivalent Yield(2) Yield(3) yields(4) % % % Shopping centres and shops 9.0 8.0 6.9-10.3 Retail warehouses and foodstores 8.3 7.9 6.9-10.7 London retail 5.6 5.8 5.0 - 7.7 London office 8.1 7.3 6.3-10.5 Total portfolio 8.1 7.5 5.0
Slide 21: Land Securities – balance sheet management
Land Securities – balance sheet management Approximately £4.0bn of disposals since April 2007 Rights issue to raise £756m (net) in March 2009 Devonshire House, W1 Group LTV at 31 March 2007 of Sold in 2007 at 3.9% yield 38.0% Group LTV at 31 March 2009 of 52.0% Whitefriars, Canterbury Sold i
Slide 22: Land Securities – liquidity management
Land Securities – liquidity management £3.7bn net debt with average duration Expected debt maturities (nominal) of 9.9 years £m 2500 Cash holdings of £2.2bn 2000 (as at 31 July 2009) 1500 1000 Weighted average cost of gross debt of 4.4% 500 0 No event of financial default under 2010 2011 201
Slide 23: Q1 Interim Management Statement
Q1 Interim Management Statement Trends in property values in line with our February Rights Issue expectations Investment property sales in the quarter £357.4m at 2.7% below March 2009 valuation Positioned to take advantage of opportunities that will arise as the market turns Portman House, Oxf
Slide 24: Positioning a business for the recovery phase
Positioning a business for the recovery phase 1 ge Sta Stage 1 Capital values Attractive level of gearing increase Stage 2 Occupier demand Attractive development 2 improves / rental opportunities – especially ge values increase in London West End Sta office market Land Securities – c.50% LTV gearing
Slide 25: London offices: adding value through development
London offices Adding value through development London office development 1800 completions 1600 1400 Square feet (‘000s) 1200 1000 Park House, W1 800 600 38% pre-let 400 200 0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14+ - year to 31 March - Selborne House, SW1 A good track record on timing of Londo
Slide 26: Retail: adding value through asset management and tenant mix
Retail Adding value through asset management and tenant mix Turnover rent per square foot £60 £50 £40 £30 £20 £10 £- 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 Outgoing Incoming Gunwharf Quays, Portsmouth Understanding retailer performance to optimise shopping centre values Page 26
Slide 27: Creating a property business from a blank sheet of paper
Creating a property business from a blank sheet of paper High quality portfolio Portfolio priced Portfolio in in priced line line with market with transactions market transactions Development opportunities Gearing Gearing at c.50% at c.50% LTV LTV for recovery in occupational markets Land Securities
Slide 28: Important notice
Important notice 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 express
Slide 29: Contacts
Contacts Edward Thacker Abby Guthkelch Investor Relations Manager Investor Relations Executive Tel: +44 (0) 20 7024 5185 Tel: +44 (0) 20 7024 5255 Fax: +44 (0) 20 7024 5011 Fax: +44 (0) 20 7776 9305 Email:[email protected] Email: [email protected] Web: www.landsecurit