TIDMBLND
RNS Number : 5708B
British Land Co PLC
09 October 2020
British Land announces resumption of dividend & operational
update
9 October 2020
Following the latest quarter date for rental payments on 29
September, and ahead of our half year results, we provide the
following update:
-- All retail assets and 86% of stores open. Footfall 21% ahead
of benchmark, retailer sales 90% of the same period last year
-- Open air, out of town retail parks driving outperformance; playing a key role for retailers
-- Collection rates for June have improved to 74%; 98% Offices, 57% Retail
-- 69% of September rents already collected, 91% Offices, 50% Retail
-- c.GBP245m of retail asset sales since 1 April, overall 8% ahead of March book value
-- Balance sheet remains strong: GBP1bn of undrawn facilities
and cash; no requirement to refinance until 2024; senior unsecured
rating affirmed by Fitch at 'A' with a Stable Outlook
-- Dividend payments to resume and be paid semi-annually at 80%
of Underlying Earnings Per Share. Intend to declare interim
dividend on this basis in November
1. Operational update
Throughout the pandemic, the safety and wellbeing of our
colleagues, customers, suppliers and our local communities has been
our priority. We have worked tirelessly to provide safe and secure
environments for people to work, shop, live and visit and we thank
everyone for their effort and commitment.
Retail delivering outperformance of benchmarks
All of our retail assets are open and, as of 1 October, 86% of
our stores are open (1,470 units). In September, footfall was 84%
of the same period last year, which represents a continuation of
the consistent improvement in footfall we have seen since the
re-opening of non-essential retail in June. Encouragingly,
like-for-like retail sales in September for stores that were open
were 90% of the same period last year. We are delivering clear
outperformance versus the wider market with footfall 21% ahead of
the benchmark (ShopperTrak UK National Footfall Index).
Retail Parks driving outperformance
48% of our retail assets are out-of-town retail parks which are
playing a key role in retailers' post-lockdown reopening strategies
and we are continuing to deliver outperformance at these
locations.
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 and enabling returns as
well as supporting mission-based shopping. 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, in September, footfall on our retail parks was 89%
of the same period last year and like-for-like sales for stores
that were open were 93% of the same period last year with strong
performances from Giltbrook in Nottingham, Mayflower in Basildon
and Nugent in Orpington.
Monthly year-on-year footfall percentage change
Refer to page 2 for the relevant chart
http://www.rns-pdf.londonstockexchange.com/rns/5708B_1-2020-10-8.pdf
Update on CVAs and Administrations
Since April, there has been an increase in CVAs and
Administrations across the retail market. We have a further 16
occupiers operating under agreed terms on CVAs or Administration
accounting for 80 units. Of these, 13 units have closed, 62 have
seen reduced rents and 5 remain unaffected. Overall, this has
resulted in a GBP11.6m reduction in annualised rents.
London Offices open and operational, but physical occupancy
low
Our London campuses and standalone office buildings have
remained open and fully operational throughout the last six months
and we continue to work closely with our customers to help make
their space Covid-safe.
Physical occupancy levels at our offices reached 18% of
pre-Covid levels in mid-September and have remained around this
level. Across our campuses, 65% of the retail and food &
beverage outlets have reopened.
2. Rent collection update
Improvement in June collection following discussions with
occupiers
We remain in active discussions with our retail occupiers about
the payment of rent. This has led to an increase in rent collection
for the June quarter which now stands at 74% (see Table B of the
appendix).
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.
Encouraging rent collection progress for September, ahead of the
same point in June
Before taking account of adjustments made in support of our
customers as a result of Covid-19, GBP96m rent was due for payment
at the September quarter, comprising GBP51m in Retail and GBP45m in
Offices.
As at 8 October, we have collected 69% of the total amount,
comprising 91% of Offices rent and 50% of Retail rent. This
compares to the collection rate of 36% for Retail we reported in
the week after the June quarter date.
In a similar manner to the June quarter, we expect September
quarter rent collection to improve further over the coming
weeks.
September rent collection, as at 8 October:
Rent due between 29 Offices Retail(1) Total
September and 1 October
Received 91% 50% 69%
-------- ---------- -------
Rent deferrals - - -
-------- ---------- -------
Rent forgiven - - -
-------- ---------- -------
Customer paid monthly 1% 6% 4%
-------- ---------- -------
Outstanding 8% 44% 27%
-------- ---------- -------
Total(2) 100% 100% 100%
-------- ---------- -------
GBP45m GBP51m GBP96m
-------- ---------- -------
Collection of adjusted
billing(3) 92% 53% 72%
-------- ---------- -------
(1) Includes non-office customers located within our London
campuses
(2) The amount billed is below the GBP136m billed in March and
June due to the exclusion of Scottish quarter date amounts which
are due to be billed on 28 November and monthly amounts due for
November and December which will be billed later in the
quarter.
(3) Total billed rents exclusive of rent deferrals, rent
forgiven and tenants moved to monthly payments.
3. Leasing activity
Retail: pragmatic approach focused on maximising occupancy with
sustainable rental cash flows
Leases signed between 1 April and 31 August for periods greater
than 1 year covered 132,000 sq ft, on average 11% below previous
passing rent and 9% below ERV.
Occupancy across our retail portfolio remains high at 95% as at
30 September. Our continued focus is on maintaining high occupancy
at our assets with the right mix of retailers, who are additive to
our places. We are both pragmatic and proactive in our approach,
working with successful, financially strong retailers to ensure
leasing structures are appropriate and deliver sustainable cash
flows. Whilst rents on new lettings and renewals are below previous
passing levels, in a very low interest rate environment, this
approach of improving the quality of our cash flow will in the long
run underpin the appeal of our assets to investors.
London Offices
Following the completion of 100 Liverpool Street, occupancy
across our London offices is 95% as at 30 September. Office leasing
activity from 1 April to 31 August covered 55,000 sq ft, on average
6% ahead of March ERV. Activity has understandably been subdued,
given the challenges of physically viewing space.
So far, our occupiers have been primarily focused on the
near-term challenge of returning to work safely. Longer term,
Covid-19 will undoubtedly cause many businesses to consider how to
use their space most productively, but our conversations suggest
there is a consensus that high quality office space will remain key
to enable them to perform at their best. As part of this, we expect
demand to focus still further on the highest quality, most
sustainable prime office space such as we are delivering at our
three mixed use London campuses. In the short term though, as we
indicated in May, macro uncertainties relating to both Covid-19 and
Brexit will impact activity. Whilst investment volumes remain
subdued, prime central London offices are generally transacting
around 5% lower than pre Covid levels.
4. Developments
We reached practical completion at 100 Liverpool Street in late
September and the building is now 93% pre let or under offer
including space allocated to Storey. At 1 Triton Square, which is
fully pre-let to Dentsu Aegis, productivity on site has increased
and we currently expect Practical Completion in April 2021.
We are making good progress at Norton Folgate, with demolition
completed and pre-construction and enabling works at an advanced
stage. We expect to place the main build contract for this exciting
mixed-use development soon.
At Canada Water we expect to draw down the head lease in the
coming months, having secured planning permission in May 2020. A
claim for judicial review was refused permission by the High Court
in August, and whilst the claimant has applied for an oral hearing
which will take place in late October, we are confident with
respect to the outcome of this process. We are excited about
commencing work on site so that the substantial public benefits of
the masterplan can be delivered as soon as possible.
5. Capital activity & balance sheet
We have a clear strategy to further focus our business on our
mixed-use London Campuses by recycling proceeds from retail
disposals into our attractive development pipeline, including our
unique 53-acre development opportunity at Canada Water. In line
with this, we have completed c.GBP245m of retail sales since March,
overall 8% ahead of March book value. Our most recent disposal
comprised four standalone B&Q stores sold for GBP100m.
We have GBP1bn undrawn facilities and cash available including
proceeds from the transactions above. We retain significant
headroom to our debt covenants and have no requirement to refinance
until 2024. In the half year we extended GBP650m of bank RCFs by a
further year to 2025. Our GBP350m Convertible Bond was repaid at
its scheduled maturity in June using RCFs.
In September 2020, our senior unsecured rating was reaffirmed by
Fitch at 'A' with a Stable Outlook.
6. Dividend policy
Dividends to resume, with pay-out set at 80% of earnings
In March 2020, the Board took the difficult decision to
temporarily suspend the dividend. Given the unprecedented
circumstances we faced and the uncertainty of outlook, this enabled
us to better support our customers, protect the long-term value of
the business and strengthen our financial position.
Like many businesses, we continue to face challenges as a result
of the Covid-19 pandemic, but we also recognise the importance of
the dividend to shareholders. We benefit from the strong financial
position we have established over several years, a unique and
world-class portfolio of real estate and are reassured by the
improving operational performance of our assets over recent
months.
As a result, the Board are pleased to announce that the dividend
will resume. Going forward, dividends will be paid semi-annually,
as opposed to quarterly. Dividends will be announced at the time of
our interim and full year results, with payments made to
shareholders in February and August.
Future dividends will be paid at 80% of Underlying Earnings Per
Share, based on the most recently completed six-month period. This
policy ensures dividends will reflect the impact of development
completions, acquisitions, disposals, and trading conditions as
they change over time. We intend to declare an interim dividend on
this basis at our results in November.
7. Board appointment
As previously announced, we are delighted that Irvinder Goodhew
was appointed to the Board as a Non-Executive Director at the
beginning of October. Irvinder is currently a Transformation
Director at Lloyds Banking Group plc and she brings over 25 years
of experience in various operational and strategic roles, in a
broad range of sectors including retail and financial services.
Irvinder will also join the Board's Corporate Social Responsibility
Committee.
Appendices
Table A: Rent collection - March Quarter(1)
Rent due between 25 Offices Retail(2) Total
March and 23 June
Received 97% 44% 67%
-------- ---------- --------
Rent deferrals 1% 32% 19%
-------- ---------- --------
Rent forgiven 1% 7% 4%
-------- ---------- --------
Moved to monthly - - -
-------- ---------- --------
Outstanding 1% 17% 10%
-------- ---------- --------
Total 100% 100% 100%
-------- ---------- --------
GBP58m GBP78m GBP136m
-------- ---------- --------
Collection of adjusted
billing(3) 99% 73% 87%
-------- ---------- --------
Table B: Rent collection - June Quarter(1)
Rent due between 24 Offices Retail(2) Total
June and 28 September
Received 98% 57% 74%
-------- ---------- --------
Rent deferrals - 1% -
-------- ---------- --------
Rent forgiven - 5% 3%
-------- ---------- --------
Moved to monthly - - -
-------- ---------- --------
Outstanding 2% 37% 23%
-------- ---------- --------
Total 100% 100% 100%
-------- ---------- --------
GBP57m GBP79m GBP136m
-------- ---------- --------
Collection of adjusted
billing(3) 98% 61% 77%
-------- ---------- --------
(1) As at 8 October
(2) Includes non-office customers located within our London
campuses
(3) Total billed rents exclusive of rent deferrals, rent
forgiven and tenants moved to monthly payments
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014.
The person responsible for arranging the release of this
announcement on behalf of British Land is Gavin Bergin, Assistant
Company Secretary.
Enquiries:
Investors & Analysts: David Walker 07753 928 382
Media: Charlotte Whitley 07787 802 535
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 GBP14.8bn (British Land share: GBP11.2bn) as at
31 March 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 60% of our portfolio. Our Retail portfolio is focused
on retail parks and shopping centres, and accounts for 35% 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. In April 2016
British Land received the Queen's Award for Enterprise: Sustainable
Development, the UK's highest accolade for business success for
economic, social and environmental achievements over a period of
five years.
Further details can be found on the British Land website at
www.britishland.com
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