Landsec ─ Appendices | 1 |
Contents
Page | Page | |||||
Sustainability | Financial data and performance | |||||
Sustainability leadership | 2 | Financial history - adjusted diluted earnings per share and dividend per share | 23 | |||
Our sustainability programme | 3-4 | Cash flow and adjusted net debt | 24 | |||
Our portfolio - sustainability performance of our assets | 5 | Financial history - adjusted diluted net assets per share and Group LTV | 25 | |||
Five steps we are taking to achieve net zero carbon buildings | 6 | Expected debt maturities (nominal) | 26 | |||
Financing | 27 | |||||
Asset performance | The Security Group - summary | 28 | ||||
Top 10 assets by value | 7 | The Security Group - portfolio concentration limits | 29 | |||
Valuation movements - year ended March 2020 | 8 | |||||
Yield movements - like-for-like portfolio | 9 | Development and market analysis | ||||
Rental and capital value trends - like-for-like portfolio | 10 | Development programme returns | 30 | |||
Rental and capital value trends - Office like-for-like portfolio | 11 | Impact of Covid-19 on development programme | 31 | |||
Rental and capital value trends - Retail like-for-like portfolio | 12 | Optionality in the development programme | 32 | |||
Portfolio performance relative to MSCI | 13 | Pipeline of office-led development opportunities | 33 | |||
Analysis of performance relative to MSCI | 14 | Pipeline of retail re-purposing development opportunities | 34 | |||
Property/gilt yield spread | 35 | |||||
Rental and lease analysis | Central London investment market | 36 | ||||
Reversionary potential - like-for-like portfolio | 15 | Central London office market - take-up | 37 | |||
Combined Portfolio - lease maturities (expiries and break clauses) | 16 | Central London rolling 12-monthtake-up | 38 | |||
Central London availability and vacancy rate | 39 | |||||
Retail analysis | Central London secondhand supply vs rental value growth | 40 | ||||
Retail sales, footfall and affordability | 17 | |||||
London Office market availability - Grade A vs. secondhand space | 41 | |||||
Top retail and leisure occupiers by percentage of Group rent | 18 | |||||
Central London supply - grade A completions and vacancy rate | 42 | |||||
Company voluntary arrangements (CVA) | 19 | |||||
Central London supply - grade A pre-let and speculative supply | 43 | |||||
CVA/Administration exposure by occupier | 20 | |||||
Central London office - development completions, vacancy, rental and capital growth | 44 | |||||
CVA/Administration analysis by annualised rental income | 21 | |||||
Voids and units in administration | 22 |
Landsec ─ Appendices | 2 |
Sustainability leadership
Demonstrated by our performance across all key ESG benchmarks
Benchmark | Performance in 2019/20 | Benchmark | Performance in 2019/20 |
GRESB 5 star rated entity, score 90% sector leader, ranking 1stin Europe and UK diversified office/retail (mixed)
A-list (top 2%) for the third year running The only A-list UK REIT
Score 82/percentile ranking 98thEuropean Real Estate leader, ranking 4thglobally
We've again been named a climate leader, ranking 5thfor all FTSE 100 companies and 1stfor our sector
Received our 6thGold Award from EPRA for best practice sustainability reporting
Percentile ranking 89th
We continue to retain our established position in the FTSE4Good Index
ESG rating AA
Score 82/percentile ranking 97th
Landsec ─ Appendices
Our sustainability programme
Ambitious commitments split into three core areas
3
Updated target
Creating jobs and opportunities
Community employment
Create £25m of social value through our community programmes by 2025
Efficient use of natural resources
Carbon
Reduce carbon emissions by 70% by 2030 compared with a 2013/14 baseline, for property under our management for at least two years
Sustainable design and innovation
Resilience
Assess and mitigate physical and financial climate change adaptation risks that are material across our portfolio
Fairness
By 2020, ensure everyone working on our behalf, in an environment we control, is given equal opportunities, protected from discrimination and paid at least the Foundation Living Wage
Diversity
Make measurable improvements to the profile - in terms of gender, ethnicity and disability - of our employee mix
Health, safety and security
Renewables
Ensure 100% of our electricity supplies through our corporate contract are from REGO-backed renewable sources and achieve 3 MW of renewable electricity capacity by 2030
Energy
Reduce energy intensity by 40% by 2030 compared with a 2013/14 baseline, for property under our management for at least two years
Waste
Materials
Source core construction products and materials from ethical and sustainable sources
Biodiversity
Maximise the biodiversity potential of all our development sites and achieve a 25% biodiversity net gain across our five sites with the greatest potential by 2030
Wellbeing
Maintain an exceptional standard of health, safety and security in all the working environments we control
Send zero waste to landfill and at least 75% waste recycled across all our operational activities by 2020
Ensure our buildings are designed and managed to maximise wellbeing and productivity
Landsec ─ Appendices
Our sustainability programme
Delivering significant results across all areas
4
Creating jobs and opportunities
Social Value
Created more than £4.8m of social value through our community programmes, exceeding our in-year target to create £4m
Efficient use of natural resources
Carbon
Increased the level of ambition of our science-based target, as we achieved previous 2030 target 11 years early. In line with our target, we've reduced carbon emissions by 42% since 2013/14
Sustainable design and innovation
Resilience
Continued to align our climate-related disclosures with the TCFD recommendations. Quantitative assessment of transition risks to be undertaken in 2020
Fairness
Continue to pay everyone in our business at least the Real Living Wage. On track to meet our commitment to pay everyone working on our behalf, in an environment we control, the Real Living Wage by the end of 2020
Renewables
Continued to procure 100% renewable electricity across our portfolio through our corporate contract. Our current on site renewable electricity capacity has reached 1.5 MW
Materials
Created a 'red list' for banned materials to guide our supply partners and mitigate human rights risks.
99.9% of key construction materials responsibly sourced
Diversity
Across the whole organisation 52% of our employees are female, exceeding our 2025 target of 50%. In the representation of women at leader level, we increased to 24% this year
Health and safety
Migrated to ISO 45001 and launched a new mandatory health and safety training for all employees. We have invested over £7m rectifying almost 125,000 firestopping defects in our buildings
Energy
Reduced energy intensity by 22% since 2013/14 against our 2030 target
Waste
Continued to divert 100% from landfill and we're recycling 73% of operational waste
Biodiversity
Continue to partner with The Wildlife Trusts to enhance biodiversity net gain at our five operational sites. On track to deliver significant net gain on our developments
Wellbeing
Our commercial office developments are designed to enable customers to achieve the WELL certification for their operations
Landsec ─ Appendices | 5 |
Our portfolio
Sustainability performance of our assets
42% reduction in carbon emissions (tCO2e) compared to 2013/14 baseline
22% reduction in energy intensity (kWh/m2) compared to 2013/14 baseline
£5m avoided energy consumption costs benefitting customers in year
Zero waste sent to landfill with 73% of waste recycled
40% BREEAM certified by portfolio floor area
- 0.2% - Outstanding
- 19.3% - Excellent
- 17.5% - Very Good
- 2.8% - Good/Pass
59% BREEAM certified by portfolio value
CGI of Nova East, SW1
Landsec ─ Appendices | 6 |
Five steps we are taking to achieve net zero carbon buildings
What
Reducing operational energy use
Investing in renewable energy
Using an internal shadow price of carbon
Reducing construction impacts
Offsetting remaining carbon
How
- Usingscience-based operational targets
- Designing our developments to ensure performance
- Purchasing 100% renewable electricity through our corporate procurement contracts
- Increasing our on site renewable generation
1. Factoring carbon risk and cost into decision-making to drive investment towards cleaner options
- Measuring the embodied carbon profile of developments to enable design and specification of low carbon choices
- Repositioning assets towards lower carbon options
1. Purchasing carbon offsets for the construction impacts of new developments and disclosing quantities
Current status
- Approved updatedscience-based target, committing us to a 70% reduction in carbon by 2030; currently at a 42% reduction compared with a 2013/14 baseline Targeting to reduce energy intensity by 40% by 2030; currently at a 22% reduction
- Undertaking advanced energy modelling for all our live commercial developments following the BBP (Better Buildings Partnership) initiative
- Purchasing 100%REGO-backed renewable electricity since 2016 and investigating feasibility of moving to Power-Purchase Agreements (PPAs) to support additional renewable generation and increase price certainty
- Our current on site renewable electricity capacity has reached 1.5 MW
1. Modelling of the internal shadow price of carbon with our investment teams included in Investment Committee papers to prepare the business for a potential future real carbon price
-
Embodied carbon reduced by over 40% compared to traditional construction by working on alow-carbon steel and engineered timber hybrid structure
at Lavington Street; Embodied carbon at Sumner Street is 21% lower than developed design baseline - Prioritising the refurbishment of assets, such as Portland House
1. Investigating carbon offsetting projects with carbon offsetting project developer
Landsec ─ Appendices | 7 |
Top 10 assets by value as at 31 March 2020
Name | Ownership | |
interest | ||
% | ||
New Street Square, EC4 | 100 | |
Cardinal Place, SW1 | 100 | |
One New Change, EC4 | 100 | |
1 & 2 New Ludgate, EC4 | 100 | |
Gunwharf Quays, Portsmouth | 100 | |
Queen Anne's Gate, SW1 | 100 | |
Nova, SW1 | 50 | |
21 Moorfields, EC2 | 100 | |
Bluewater, Kent | 30 | |
62 Buckingham Gate, SW1 | 100 |
Aggregate value of top 10 assets: £5.7bn (44% of Combined Portfolio)
- Landsec share. Rental Income is as reported in the income statement
- Development area
- Pre-letto Deutsche Bank
Floor
area
Sq ft (000)
Office: 932
Retail: 22
Office: 459
Retail: 57
Office: 349
Retail: 210
Office: 369
Retail: 27
Retail: 552
Office: 354
Office: 480
Retail: 75
Office: 564(2)
Retail: 1,881
Office: 261
Retail: 16
Rental | Let | Weighted | ||
income(1) | by income | average unexpired | ||
lease term | ||||
£m | % | Years | ||
52 | 100 | 8.6 | ||
29 | 100 | 4.4 | ||
27 | 100 | 5.4 | ||
20 | 100 | 12.6 | ||
30 | 97 | 4.3 | ||
32 | 100 | 6.7 | ||
18 | 100 | 10.4 | ||
Development in progress | 100(3) | 25.0 | ||
29 | 93 | 5.1 | ||
16 | 100 | 5.0 | ||
Landsec ─ Appendices | 8 |
Valuation movements
Year ended 31 March 2020
Market value | Valuation | Rental value | Net initial | Equivalent | Movement in | ||||||||||||||||||||||||
31 March 2020 | change | change(1) | yield | yield | equivalent yield | ||||||||||||||||||||||||
£m | % | % | % | % | bps | ||||||||||||||||||||||||
Office | 6,009 | 1.9 | 4.6 | 4.3 | 4.6 | 6 | |||||||||||||||||||||||
London retail | 1,307 | -15.8 | -5.6 | 4.6 | 4.6 | 37 | |||||||||||||||||||||||
Regional retail | 1,494 | -27.5 | -9.8 | 6.4 | 6.2 | 103 | |||||||||||||||||||||||
Outlets | 871 | -10.3 | 2.3 | 5.6 | 5.9 | 56 | |||||||||||||||||||||||
Retail parks | 444 | -25.5 | -7.7 | 7.5 | 7.4 | 111 | |||||||||||||||||||||||
Leisure and hotels | 1,153 | -10.9 | -1.9 | 4.3 | 5.8 | 31 | |||||||||||||||||||||||
Other | 398 | 1.7 | - | 3.3 | 4.4 | 18 | |||||||||||||||||||||||
Total like-for-like portfolio | 11,676 | -8.8 | -1.0 | 4.8 | 5.1 | 27 | |||||||||||||||||||||||
Proposed developments | 218 | -14.7 | n/a | - | n/a | n/a | |||||||||||||||||||||||
Development programme | 558 | 3.5 | n/a | - | 4.3 | n/a | |||||||||||||||||||||||
Completed developments | 169 | -28.1 | -11.4 | 6.1 | 6.0 | 113 | |||||||||||||||||||||||
Acquisitions | 160 | -9.3 | n/a | 2.2 | 4.8 | n/a | |||||||||||||||||||||||
Total Combined Portfolio | 12,781 | -8.8 | -1.2 | 4.5 | 5.1 | 25 | |||||||||||||||||||||||
Office | 6,826 | 1.1 | 3.8 | ||||||||||||||||||||||||||
London retail | 1,370 | -15.0 | 4.6 | ||||||||||||||||||||||||||
Regional retail | 1,663 | -27.6 | 6.4 | ||||||||||||||||||||||||||
Outlets | 871 | -10.3 | 5.6 | ||||||||||||||||||||||||||
Retail parks | 444 | -25.5 | 7.5 | ||||||||||||||||||||||||||
Leisure and hotels | 1,188 | -10.9 | 4.3 | ||||||||||||||||||||||||||
Other | 419 | 1.3 | 3.3 | ||||||||||||||||||||||||||
Total Combined Portfolio | 12,781 | -8.8 | 4.5 |
(1) Rental value change figures exclude units materially altered during the year and other non like-for-like movements
Landsec ─ Appendices | 9 |
Yield movements
Like-for-like portfolio
31 March 2020 | 31 March 2019 | |||||||
Net initial | Equivalent | Topped-up net | Net initial | Equivalent | ||||
yield | yield | initial yield(1) | yield | yield | ||||
% | % | % | % | % | ||||
Office | 4.3 | 4.6 | 4.5 | 3.9 | 4.5 | |||
London retail | 4.6 | 4.6 | 4.7 | 4.1 | 4.3 | |||
Regional retail | 6.4 | 6.2 | 6.7 | 4.9 | 5.2 | |||
Outlets | 5.6 | 5.9 | 5.6 | 5.0 | 5.4 | |||
Retail parks | 7.5 | 7.4 | 8.0 | 6.2 | 6.2 | |||
Leisure and hotels | 4.3 | 5.8 | 4.5 | 5.2 | 5.5 | |||
Other | 3.3 | 4.4 | 3.3 | 3.0 | 4.2 | |||
Total like-for-like portfolio | 4.8 | 5.1 | 5.0 | 4.4 | 4.8 | |||
(1) Topped-up net initial yield adjusted to reflect the annualised cash rent that will apply at the expiry of current lease incentives
Landsec ─ Appendices | 10 |
Rental and capital value trends
Like-for-like portfolio
Like-for-like portfolio value at 31 March 2020: £11,676m | Rental value change(1) | Valuation change | ||
OFFICE
RETAIL
SPECIALIST
TOTAL LFL PORTFOLIO
Six months ended 30.09.19 | Six months ended 31.03.20 | Year ended 31.03.20 | ||
% | % | % | ||
1.9 | 2.7 | 4.6 | ||
0.3 | 1.6 | 1.9 |
-2.3 | -3.8 | -6.1 | |
-6.1 | -14.4 | -20.5 |
-1.1 | -0.8 | -1.9 |
-2.2 | -5.8 | -8.0 |
-0.4 | -0.6 | -1.0 |
-2.7 | -6.1 | -8.8 |
(1) Rental value change figures exclude units materially altered during the year and other non like-for-like movements
Landsec ─ Appendices | 11 |
Rental and capital value trends
Office like-for-like portfolio
Office like-for-like portfolio value at 31 March 2020: £6,009m | Rental value change(1) | Valuation change | ||
West End
City
Mid-town
Southwark and other
OFFICE
Six months ended 30.09.19 | Six months ended 31.03.20 | Year ended 31.03.20 | |||||
% | % | % | |||||
2.4 | 3.3 | 5.7 | |||||
0.5 | 1.4 | 1.9 | |||||
0.8 | 2.4 | 3.2 | |||||
-0.1 | 2.5 | 2.4 | |||||
2.3 | 2.5 | 4.8 | |||||
0.3 | 1.3 | 1.6 | |||||
0.1 | - | 0.1 | |||||
0.5 | - | 0.5 | |||||
1.9 | 2.7 | 4.6 | |||||
0.3 | 1.6 | 1.9 | |||||
(1) Rental value change figures exclude units materially altered during the year and other non like-for-like movements
Landsec ─ Appendices | 12 |
Rental and capital value trends
Retail like-for-like portfolio
Retail like-for-like portfolio value at 31 March 2020: £4,116m | Rental value change(1) | Valuation change | ||
London retail
Regional retail
Outlets
Retail parks
RETAIL
Six months ended 30.09.19 | Six months ended 31.03.20 | Year ended 31.03.20 | |||||
% | % | % | |||||
-2.7 | -2.9 | -5.6 | |||||
-4.3 | -11.5 | -15.8 | |||||
-3.7 | -6.1 | -9.8 | |||||
-9.4 | -18.1 | -27.5 | |||||
1.0 | 1.3 | 2.3 | |||||
0.6 | -10.9 | -10.3 | |||||
-2.0 | -5.7 | -7.7 | |||||
-11.1 | -14.4 | -25.5 | |||||
-2.3 | -3.8 | -6.1 | |||||
-6.1 | -14.4 | -20.5 | |||||
(1) Rental value change figures exclude units materially altered during the year and other non like-for-like movements
Landsec ─ Appendices | 13 |
Portfolio performance relative to MSCI
Year ended 31 March 2020
Rental value performance | Ungeared total property return | |||||
Landsec(1) | MSCI | Landsec | MSCI | |||
% | % | % | % | |||
OFFICE | 4.6 | 1.2(2) | 4.5 | 3.5(2) |
RETAIL | -6.1 | -5.9(3) | -17.3 | -9.8(3) |
SPECIALIST | -1.9 | n/a(4) | -3.9 | n/a(4) |
TOTAL PORTFOLIO | -1.0 | -1.0(5) | -4.5 | -0.4(5) | ||
- Like-for-likeproperties: rental value performance figures exclude units materially altered during the year and other non like-for-like movements
- MSCI Central and Inner London Office benchmark
- MSCI All Retail benchmark
- No benchmark available
- MSCI All Property Quarterly Universe
Landsec ─ Appendices | 14 |
Analysis of performance relative to MSCI
Attribution analysis, ungeared total property return, year ended 31 March 2020, relative to MSCI All Property Quarterly Universe
%
1.0
0.0 | 0.1 | - | - | ||
-0.7
-1.0
-2.0 | -4.3 | -4.1 | ||
-3.0
-4.0 | 0.1 | ||||
-5.0
Relative income | Capital | Contribution of | Contribution of | Contribution of | Total | Impact of structure |
return | growth | developments | purchases | disposals |
Source: MSCI
Landsec ─ Appendices
Reversionary potential
Like-for-like portfolio
Net reversionary potential(1)
%
-0.6 | |
March 19 | -2.5 |
0.6 | |
-1.3 |
1.5
September 19 | -3.4 |
-1.3 | |
-1.0 |
3.9 | |
March 20 | -4.7 |
-0.8 | |
-0.4 |
OFFICE | RETAIL | SPECIALIST | TOTAL PORTFOLIO | |||
15
Reversionary potential(1)at 31 March 2020
% | ||||||||||||||
OFFICE(2) | -6.5 | 10.4 | ||||||||||||
3.9 | ||||||||||||||
London retail | -11.1 | 8.4 | ||||||||||||
-2.7 | ||||||||||||||
Regional retail | -17.5 | 11.3 | ||||||||||||
-6.2 | ||||||||||||||
Outlets | -2.8 | 3.5 | ||||||||||||
0.7 | ||||||||||||||
Retail parks | -17.2 | 5.3 | ||||||||||||
-11.9 | ||||||||||||||
RETAIL | -12.9 | 8.1 | ||||||||||||
-4.7 | ||||||||||||||
Leisure and hotels | -8.4 | 7.4 | ||||||||||||
-0.9 | ||||||||||||||
Other | -0.8 | 0.8 | ||||||||||||
- | ||||||||||||||
TOTAL PORTFOLIO(2) | -9.3 | 8.9 | ||||||||||||
-0.4 | ||||||||||||||
Gross reversionary potential | Over-renting | Net reversionary potential | ||||||||||||
- Excludes voids and rent free periods
- As at 31 March 2020, Queen Anne's Gate (QAG), SW1 accounted for 92% of the Officelike-for-likeover-renting. Excluding QAG, the Office segment and Combined Portfolio would be 10.1% and 2.3% net reversionary, respectively
Landsec ─ Appendices | 16 |
Combined Portfolio - lease maturities (expiries and break clauses)
Excluding development programme
As at 31 March 2020
% of portfolio rental income | 10.7 | ||||||||||
11 | |||||||||||
9.6 | |||||||||||
10 | |||||||||||
9 | 8.5 | ||||||||||
8 | |||||||||||
7 | 6.4 | 6.7 | |||||||||
6 | |||||||||||
5 | |||||||||||
4 | |||||||||||
3 | |||||||||||
2 | 1.4 | ||||||||||
1 | |||||||||||
0 | |||||||||||
Holding over / 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | ||||||
OFFICE | RETAIL | SPECIALIST | |||||||||
Landsec ─ Appendices | 17 |
Retail sales, footfall and affordability
Same centre sales 408bps ahead of BRC benchmark
Footfall and sales growth/(decline)(1)
Landsec | % | % | % | % | % | 12-month relative | 11-month relative | ||||
12-month(1) | 11-month(1) | 11-month(1) | 12-month | 11-month | performance | performance | |||||
Footfall | -4.3 | -1.2 | UK Footfall(2) | -6.5 | -3.7 | +222bps | +254bps | ||||
March YOY | -44.4 | ||||||||||
Same centre sales(3) | -3.8 | 0.9 | BRC non-foodin-store - total(4) | -6.0 | -3.2 | +220bps | +408bps | ||||
Same centre sales excluding automotive sales | -4.5 | 0.1 | |||||||||
Same store sales(6) | -2.0 | -0.9 | BRC non-foodin-store - LFL(4) | -6.0 | -3.3 | +403bps | +238bps | ||||
Same store sales excluding automotive sales | -2.9 | -1.8 | |||||||||
BRC non-food all retail(5) | -3.0 | -1.1 |
Occupancy cost trends
11 months to February 2020
Overall
Excluding anchor stores
Excluding anchor stores and MSUs
Catering only
Rent | Occupancy cost | |
to physical store sales ratio(7) | to physical store sales(8) | |
% | % | |
10.6 | 20.7 | |
12.8 | 24.1 | |
12.9 | 23.7 | |
11.5 | 21.5 |
Rent/sq ft
£
41
53
66
50
Source: Landsec, unless specified below, data is exclusive of VAT and for the 48/53 week figures above, based on over 1,500 tenancies where the occupiers provide Landsec with turnover data
- 12 month measures refer to 53 weeks to 5th April 2020 vs 53 weeks to 7th April 2019 and 11 month measures refer to 48 weeks to 1st March 2020 vs 48 weeks to 3rd March 2019
- ShopperTrakUK national benchmark, ShopperTrakMalls index based on more than 300 UK Malls
- Landsec same centre total sales. Based on all store sales and takes into account new stores and new space
- BRC-KPMGRetail Sales Monitor (RSM). Based on an average of four quarters non-food retail sales growth for physical i.e. bricks and mortar stores only (does not include online sales)
- BRC-KPMGRetail Sales Monitor (RSM). Based on an average of four quarters non-food retail sales growth including online sales
- Landsec same store/same tenantlike-for-like sales
- Rent as a percentage of total 11 month physical store sales
- Total occupancy cost (rent, rates, insurance and service charge) as a percentage of total 11 month physical store sales
Landsec ─ Appendices | 18 |
Top retail and leisure occupiers by percentage of Group rent
Brand | Status | Number | Group | Brand | ||||
of units | rent | |||||||
Cineworld | 14 | 1.6% | Superdrug / Perfume Shop | |||||
Boots | 21 | 1.4% | John Lewis Partnership(3) | |||||
Sainsbury's | 13 | 1.2% | River Island | |||||
H&M | 15 | 1.0% | Debenhams | |||||
Next | 14 | 1.0% | VF Corporation | |||||
M&S(1) | 12 | 0.9% | JC Decaux | |||||
The Restaurant Group(2) | 45 | 0.9% | ||||||
Odeon | ||||||||
Tesco | 9 | 0.8% | Victoria's Secret | |||||
Vue | 6 | 0.8% | Signet Group | |||||
Primark | 5 | 0.7% | ||||||
Aurum Holdings | ||||||||
Dixons Carphone | 20 | 0.7% | Barclays Bank | |||||
Gap | 12 | 0.6% | Frasers Group(4) | |||||
Arcadia | CVA | 11 | 0.6% | Clarks | ||||
Nando's | 29 | 0.5% | Superdry | |||||
New Look | CVA | 9 | 0.5% | TX Maxx / Homesense | ||||
- Includes M&S Simply Food Store
- Includes Chiquitos who are in administration
- Includes Waitrose & Partners Stores
- Includes Sports Direct and brands acquired out of administration, House of Fraser, Evans Cycles and Jack Wills
Status
Administration
Number |
of units |
22 |
7 |
8 |
5 |
18 |
19 |
6 |
6 |
17 |
14 |
4 |
14 |
12 |
7 |
6 |
Group |
rent |
0.4% |
0.4% |
0.4% |
0.4% |
0.4% |
0.3% |
0.3% |
0.3% |
0.3% |
0.3% |
0.3% |
0.3% |
0.3% |
0.3% |
0.3% |
Landsec ─ Appendices
Company voluntary arrangements (CVA)
Voting rights
Creditors are entitled to vote for the full amount of their outstanding debt as at the date of the creditors meeting.
A landlord's claim will comprise of amounts due for:
- Arrears of rent, service charges and insurance - admitted at 100% of the outstanding value
- Future rent, service charge and insurance up to the earlier of the first lease break or contractual end of the lease; and
- An amount in respect of dilapidations
- As the future occupational costs and dilapidations are an unliquidated claim and cannot be substantiated by the chairman of the creditors meeting, to enable them to be admitted for a "meaningful" vote these are generally subject to a 75% discount
19
Landlord lease categories
The company proposing the CVA will employ a property agent to assist it in grouping the leases into different categories which form the basis of the varying degrees of rental compromises across its leasehold portfolio.
A typical CVA will have four categories, these being the following:
- Category 1 - The most profitable stores (and their core portfolio) which require no rental reduction
- Category 2 - Marginal stores that only require a small rental reduction (normally 25% of current passing rent) for them to return to profit
- Category 3 - Stores that with a larger reduction in rent (normally 50% of current passing rent) will return to profitability
- Category 4 - Stores that even with a large rent reduction will not return to profitability and therefore will close
Following the end of the compromise period those leases that have been subject to a rental reduction under the terms of the CVA will have their annual rent reset to the higher of the compromise rent or the market rent at that time.
Landsec ─ Appendices | 20 |
CVA/Administration exposure by occupier as at 31 March 2020
Brand | Status |
Arcadia | CVA |
New Look | CVA |
Debenhams | CVA(1) |
Clintons | Administration |
Monsoon Accessorize | CVA |
Carpetright | CVA |
Jack Wills | Administration |
Homebase | CVA |
House of Fraser | Administration |
Paperchase | CVA |
Select | CVA |
Carluccio's | Administration |
Number of | Group |
units | rent |
trading(2) | |
11 | 0.6% |
9 | 0.5% |
4 | 0.4% |
5 | 0.2% |
11 | 0.1% |
4 | 0.1% |
5 | 0.1% |
1 | 0.1% |
1 | <0.1% |
7 | <0.1% |
4 | <0.1% |
4 | <0.1% |
Brand | Status |
Prezzo | CVA |
Giraffe | CVA |
Regis | Administration |
Gourmet Burger Kitchen | CVA |
Byron Hamburgers | CVA |
Khaadi | Administration |
Patisserie Valerie | Administration |
LK Bennett | Administration |
Others | CVA/Administration |
Units trading(2)in
CVA/Administration
Number of | Group |
units | rent |
trading(2) | |
7 | <0.1% |
5 | <0.1% |
7 | <0.1% |
5 | <0.1% |
3 | <0.1% |
1 | <0.1% |
3 | <0.1% |
2 | <0.1% |
38 | 0.4% |
137 | 3.3% |
- Debenhams entered administration in April 2020
- Units still trading before temporary closure ofnon-essential retail due to Covid-19
Landsec ─ Appendices | 21 |
Summary of retail and leisure units in CVA/Administration
Analysis by annualised rental income
2019/20 2018/19 2017/18
Administrations
CVAs
Administrations
CVAs
Administrations
CVAs
TOTAL
CVAs and Administrations | |||||||||||
from 01.04.17 to 31.03.20 | As at 31.03.20 | Net change | |||||||||
Reduction | in annualised | ||||||||||
Annualised rental | in annualised | Annualised | rental income | ||||||||
income entering | rental income | rental income | % of | Future reduction | Lettings | after re-lettings | |||||
CVA or | recognised | in CVA or | Group | in annualised | agreed as at | and future | |||||
Administration | Units | to date(1) | Administration | Units | rent | rental income | 31.03.20(2) | reductions | |||
£m | £m | £m | £m | £m | £m | ||||||
2.1 | 13 | (2.1) | - | - | - | - | 1.3 | (0.7) | |||
5.7 | 32 | (0.9) | 4.8 | 26 | 0.7% | (0.1) | 0.1 | (0.9) | |||
5.3 | 55 | (3.5) | 1.8 | 20 | 0.3% | (0.4) | 1.8 | (2.1) | |||
4.1 | 30 | (1.8) | 2.3 | 24 | 0.4% | - | 0.2 | (1.5) | |||
7.8 | 57 | (3.0) | 4.8 | 31 | 0.7% | (1.5) | 1.4 | (3.2) | |||
11.5 | 37 | (3.8) | 7.7 | 36 | 1.2% | - | 0.5 | (3.3) | |||
36.5 | 224 | (15.1) | 21.4 | 137 | 3.3% | (2.0) | 5.3(3) | (11.7) | |||
Still trading(4): | 137 | ||||||||||
- Relates to impact of CVA/Administration. Ignoresre-letting of vacated units
- Lettings agreed as at 31.03.20 are lettings that have exchanged. Prior periods have been restated to reflect subsequent asset disposals and where tenants in CVA have entered administration
- £3.9m already recognised within Group annualised rental income as at 31.03.20 (before impact ofCovid-19)
- Units still trading before temporary closure ofnon-essential retail due to Covid-19
Landsec ─ Appendices | 22 |
Voids and units in administration
Like-for-like portfolio
%
6
5
4
3
2
1
0
%
6
5
4
3
2
1
0
Voids | |||||||||||||||||
31 Mar 2019 | |||||||||||||||||
5.2 | 4.5 | 31 Mar 2020 | |||||||||||||||
4.3 | 4.1 | 4.0 | 3.9 | ||||||||||||||
3.0 | 3.1 | 3.3 | 2.4 | 2.4 | |||||||||||||
2.3 | 1.5 | ||||||||||||||||
1.0 | 1.3 | 1.2 | |||||||||||||||
OFFICE | London retail | Regional retail | Outlets | Retail parks | RETAIL | SPECIALIST | TOTAL | ||||||||||
PORTFOLIO |
Units in administration | ||||||||||||||
31 Mar 2019 | ||||||||||||||
31 Mar 2020 | ||||||||||||||
3.4 | 2.8 | |||||||||||||
2.0 | 1.9 | |||||||||||||
- | - | 0.1 0.3 | 1.1 | 0.8 | 0.3 | 0.9 | 0.2 0.1 | 0.4 | 0.8 | |||||
OFFICE | London retail | Regional retail | Outlets | Retail parks | RETAIL | SPECIALIST | TOTAL | |||||||
PORTFOLIO |
Like-for-like occupancy in the portfolio was 97.7% at 31 March 2020, 98.1% at 31 March 2019
Landsec ─ Appendices
Financial history
Adjusted diluted earnings per share and dividend per share
Pence 60.0
50.0
45.7 | 48.3 | |||||||||||||||
40.0 | 40.5 | 41.5 | ||||||||||||||
30.0 | 34.1 | 28.0 | 36.3 | 28.2 | 38.5 | 29.0 | 36.8 | 29.8 | 30.7 | 31.9 | 35.0 | 38.6 | ||||
20.0 | Mar 2010 | Mar 2011 | Mar 2012 | Mar 2013 | Mar 2014 | Mar 2015 | Mar 2016 | Mar 2017 | ||||||||
Adjusted diluted EPS | Dividend per share | |||||||||||||||
23
59.7 55.9
53.1
44.2 | 45.6 |
23.2 | ||
Mar 2018 | Mar 2019 | Mar 2020 |
Landsec ─ Appendices | 24 |
Cash flow and adjusted net debt(1)
£m
(3,737)
(3,926)
(342)
452
(217) | |||||||||
(36) | 65 | (59) | |||||||
(16) | (36) | ||||||||
Opening adjusted | Net cash | Dividends | Development/ | Settlement | Acquisitions | Disposals | Premium on | Other | Adjusted |
net debt | generated from | paid | other capital | of redemption | redemption | net debt at | |||
31 March 2019 | operations | expenditure | liability | of MTNs | 31 March 2020 |
(1) On a proportionate basis
Landsec ─ Appendices | 25 |
Financial history
Adjusted diluted net assets per share and Group LTV
Pence | % | |||||||||||||||||||||
1,550 | 45 | |||||||||||||||||||||
1,400 | 1,367 | 1,434 | 1,408 | 1,417 | 1,432 | 1,422 | 1,411 | |||||||||||||||
1,250 | 1,293 | 1,348 | 1,306 | 40 | ||||||||||||||||||
1,100 | 1,129 | 1,192 | ||||||||||||||||||||
950 | 1,013 | 35 | ||||||||||||||||||||
937 | ||||||||||||||||||||||
800 | 826 | 863 | 863 | 864 | 903 | 30 | ||||||||||||||||
737 | ||||||||||||||||||||||
650 | 691 | |||||||||||||||||||||
500 | 25 | |||||||||||||||||||||
350 | ||||||||||||||||||||||
200 | Mar | Sept | Mar | Sept | Mar | Sept | Mar | Sept | Mar | Sept | Mar | Sept | Mar | Sept | Mar | Sept | Mar | Sept | Mar | Sept | Mar | 20 |
2010 | 2010 | 2011 | 2011 | 2012 | 2012 | 2013 | 2013 | 2014 | 2014 | 2015 | 2015 | 2016 | 2016 | 2017 | 2017 | 2018 | 2018 | 2019 | 2019 | 2020 |
Adjusted diluted net assets per share (LHS)(1) | Group LTV (RHS)(2) | |
- March 2018 onwards represents EPRA net tangible assets
- On a proportionate basis
Landsec ─ Appendices | 26 |
Expected debt maturities (nominal)
Year(s) ending 31 March
£m 3,000
2,500
2,000
1,500
1,000
500
0
693
1,897 | ||||||||||||
1,000 | ||||||||||||
810 | ||||||||||||
427 | 78 | 131 | ||||||||||
47 | ||||||||||||
2021 | 2022 | 2023 | 2024 | 2025-29 | 2030-34 | 2035+ | ||||||
Undrawn bank facilities | Drawn bank debt | Bond debt | ||||||||||
Landsec ─ Appendices | 27 |
Financing
Significant headroom and a favourable debt structure
- Security Group has a tiered covenant structure. We can borrow with limited operating restrictions up to 65% LTV and whilst ICR is greater than 1.45x
- To allow for a shock to either metric, we can continue to borrow up to 80% LTV (if ICR remains above 1.45x) and we can continue to borrow whilst ICR is greater than 1.2x (if LTV remains below 65%)
- Using March 2020 valuation numbers, we can withstand a valuation fall of 59% or a Security Group EDITDA reduction of £430m before our LTV or ICR covenants prevent further bank drawings
Tiered covenant
LTV % | ICR X | |
Tier 1 | ≤55 | ≥1.85 |
Tier 2 | 56-65 | ≥1.45 |
Initial Tier 3 | 66-80 | ≥1.2 |
Operating environment - key points
Few operational restrictions
Liquidity facility required for senior interest payments
Debt to be amortised
Property manager appointed to make property recommendations below ICR 1.25x
Final Tier 3 | >80 | ≥1.0 | Property manager recommendations to be followed in all material respects | |
Administrative receiver could be appointed purely to sell assets (>85% LTV) | ||||
Default | >100 | <1.0 | Default which allows the secured creditors to instruct the Trustee to enforce security | |
and if appropriate accelerate | ||||
Landsec ─ Appendices | 28 |
The Security Group
Summary
Our Security Group funding arrangements provide flexibility to buy and sell assets, develop a significant pipeline and raise debt via a wide range of sources. This is subject to covenant tiering which progressively increases operational restrictions in response to higher gearing levels or lower interest cover.
Covenant tiering
Valuation | Incremental | ||
Operating | Key | tolerance | debt from current |
from current | position | ||
Tier | restrictions | position | £bn |
Tier 1 | Minimal | Current | Current |
restrictions | |||
Tier 2 | Additional liquidity | -41% | +2.7 |
facilities | |||
Initial | Payment restrictions | -50% | +4.0 |
Tier 3 | Debt amortisation | ||
Final | Disposals to pay | -59% | +5.8 |
Tier 3 | down debt | ||
Potential appointment of | |||
property manager |
Control framework
- There are covenants to protect security effectiveness, limit portfolio concentration risk and control churn of the portfolio
-
The structure, which is overseen by a Trustee, is designed
to flex with the business and broadly the covenants can be altered in three ways(1): - Trustee discretion - if the change is not materially prejudicial to the interests of the most senior class of debt holders
- Rating affirmation - that the change will not lead to a credit rating downgrade
- Lender consent
- An example of how sector and regional concentration limits have changed to reflect the shape of the business is shown on the next slide
(1) Please refer to our most recent Base Prospectus (which is on our website) for full details of the Security Group's terms and conditions
Landsec ─ Appendices | 29 |
The Security Group
Portfolio concentration limits
30 September 2012 | 31 March 2020 |
Sector concentration | £bn | % | ||
(% of collateral value) | ||||
Office | 3.9 | 44 | ||
Shopping centres and shops | 3.0 | 33 | ||
Retail warehouses | 1.1 | 13 | ||
Industrial | - | 1 | ||
Residential | 0.1 | 1 | ||
Leisure and hotels | - | - | ||
Other | 0.8 | 8 | ||
Regional concentration | £bn | % | ||
(% of collateral value) | ||||
London | 5.5 | 62 | ||
Rest of South East and Eastern | 1.0 | 11 | ||
Midlands | 0.2 | 3 | ||
North | 1.2 | 13 | ||
Wales and South West | 0.5 | 5 | ||
Scotland and Northern Ireland | 0.5 | 6 | ||
Non-UK | - | - | ||
Maximum permitted | Sector concentration | £bn | % | Maximum permitted | Acquisition headroom | |||||
% | (% of collateral value) | % | £bn | |||||||
60 | Office | 6.4 | 52 | 85 | 26 | |||||
60 | Shopping centres and shops | 4.2 | 35 | 100 | n/a | |||||
55 | Retail warehouses | 0.4 | 4 | 55 | 14 | |||||
35 | Industrial | - | - | 20 | 3 | |||||
35 | Residential | - | - | 20 | 3 | |||||
- | Leisure and hotels | 1.1 | 9 | 25 | 3 | |||||
15 | Other | - | - | 15 | 2 | |||||
Maximum permitted | Regional concentration | £bn | % | Maximum permitted | Acquisition headroom | |||||
% | (% of collateral value) | % | £bn | |||||||
75 | London | 8.5 | 70 | 100 | n/a | |||||
40 | Rest of South East and Eastern | 1.8 | 15 | 70 | 22 | |||||
40 | Midlands | 0.1 | 1 | 40 | 8 | |||||
40 | North | 1.0 | 8 | 40 | 6 | |||||
40 | Wales and South West | 0.4 | 3 | 40 | 7 | |||||
40 | Scotland and Northern Ireland | 0.3 | 3 | 40 | 8 | |||||
5 | Non-UK | - | - | 5 | 1 | |||||
Portfolio concentration limits have been amended over time to reflect the changing shape of the business.
Landsec ─ Appendices | 30 |
Development programme returns
21 Moorfields, EC2 | 105 Sumner Street, SE1 | Nova East, SW1(1) | Lucent, W1 | ||||||
Status | Fully committed; pre-let | Building to grade; speculative; | Building to grade; speculative; | Building to grade; speculative; | |||||
option to pause | option to pause | option to pause | |||||||
Pre-Covid-19 estimated completion date(2) | March 2022 | March 2022 | July 2022 | October 2022 | |||||
Indicative impact of Covid-19 on completion date | +1-2 months(3) | +1-2 months(4) | +1-2 months(4) | +1-2 months(4) | |||||
Description of use | Office - 100% | Office - 100% | Office - 100% | Office - 77% | |||||
Retail - 21% | |||||||||
Residential - 2% | |||||||||
Landsec ownership | % | 100 | 100 | 50 | 100 | ||||
Size | Sq ft (000) | 564 | 140 | 166 | 144 | ||||
Letting status | % | 100 | - | - | - | ||||
Market value | £m | 421 | 40 | 13 | 83 | ||||
Net income/ERV | £m | 38 | 10 | 6 | 14 | ||||
Total development cost (TDC) to date | £m | 285 | 36 | 16 | 100 | ||||
Forecast TDC(1) | £m | 576 | 140 | 101 | 239 | ||||
Gross yield on cost(5) | % | 6.5 | 6.8 | 6.4 | 5.8 | ||||
Valuation surplus/(deficit) to date | £m | 132 | 4 | (3) | (16) | ||||
Market value + outstanding TDC | £m | 712 | 144 | 98 | 223 | ||||
Gross yield on market value + | % | 5.3 | 6.6 | 6.6 | 6.2 | ||||
outstanding TDC(2) | |||||||||
- All £m figures are at Landsec's 50% share for Nova East, SW1
- Before the impact ofCovid-19 on programme and assuming full commitment
- The full impact ofCovid-19 on 21 Moorfields, EC2's practical completion will be dictated by productivity which is currently around 50% but improving
- Assuming we do not exercise option to pause
- Based on ERV to the nearest £0.1m
Landsec ─ Appendices | 31 |
Impact of Covid-19 on development programme
All speculative schemes already had optionality as we built to grade
Work is continuing but we are maintaining that optionality for at least six months
Current status
Next steps
Covid-19 response
Indicative impact on completion date
Total development cost to date
Unspent contractual commitment
New commitments made since March 2020
TDC not yet contractually committed
Future capitalised interest cost
Forecast total development cost
Next 12 months' cash flow (approx.)
21 Moorfields, EC2
Progressing; construction contract
in-place
Continue construction of superstructure
Construction continues with reduced workforce on site
+1-2 months(2)
£m
285
273
n/a
n/a
18
576
139
105 Sumner Street, SE1
On site building to grade
Continue subterranean works
Construction management
approach has added flexibility:
tendering long lead time packages
+1-2 months(3)
£m
36
7
15
79
3
140
47(2)
Nova East, SW1(1)
On site building to grade
Complete subterranean works and negotiate main construction contract
Negotiating break points to the contract to give flexibility to pause
+1-2 months(3)
£m
16
5
10
68
2
101
18(2)
Lucent, W1
On site building to grade
Enter main construction contract
Break points included in contract
to give flexibility to pause
+1-2 months(3)
£m
100
21
8
104
6
239
26(2)
- All £m figures are at Landsec's 50% share for Nova East, SW1
- The full impact ofCovid-19 on 21 Moorfields, EC2's practical completion will be dictated by productivity which is currently around 50% but improving
- Assuming we do not exercise option to pause
Landsec ─ Appendices | 32 |
Optionality in the development programme
We continue to progress while deferring full commitments for at least six months
- 21 Moorfields the only fully committed scheme
- The remaining three schemes already had optionality as we built to grade; we are now building further break points into our construction plans while continuing to progress design/ground works
- Expected capex for 2020/21 £230m(1)out of total unspent on programme of £590m
Unspent contractual | New commitments | Total | Commitment | Remaining unspent | 12-month | ||||
commitment at | made since | commitment | deferred until future | development | cash flow(1) | ||||
31 March(2) | 31 March(2) | to date | break points(2) | expenditure(2) | (approximate) | ||||
Fully committed: | |||||||||
£m | £m | £m | £m | £m | |||||
21 Moorfields, EC2 | 273 | - | 273 | n/a | 273 | 139 | |||
Building to grade: | |||||||||
105 Sumner Street, SE1 | 7 | 15 | 22 | 79 | 101 | 47 | |||
Nova East, SW1 (50%) | 5 | 10 | 15 | 68 | 83 | 18 | |||
Lucent, W1 | 21 | 8 | 29 | 104 | 133 | 26 | |||
Total on site | 306 | 33 | 339 | 251 | 590 | 230 | |||
- Assuming we do not exercise our option to stop and that there are no further delays on site
- Excludes future capitalised finance cost
Landsec ─ Appendices | 33 |
Pipeline of office-led development opportunities
Potential to bring another 1.0m sq ft of office-led schemes to market within 4½ years, with a total development cost of c.£1.1bn
Portland House, SW1 | Lavington Street, SE1 | Red Lion Court, SE1 | |||||
Status | Planning consent granted | Planning application submitted | Progressing design | ||||
Earliest start date | August 2020 | October 2020 | October 2021 | ||||
Pre-Covid-19 estimated completion date | February 2023 | October 2023 | September 2024 | ||||
Indicative impact of Covid-19 on completion date | 5-7 months delay as commitment deferred | No significant delay expected | No significant delay expected | ||||
Description of use | Office - 90% | Office - 96% | Office - 96% | ||||
Retail - 10% | Retail - 4% | Retail - 3% | |||||
Landsec ownership | % | 100 | 100 | 100 | |||
Current annualised rental income | £m | - | - | 4 | |||
Current size | Sq ft (000) | 310 | 141 | 128 | |||
Proposed size | Sq ft (000) | 400 | 378 | 237 | |||
£m | £m | ||||||
Market value at 31 March 2020 | 209 | 85 | |||||
Indicative future development expenditure | 233 | 281 | |||||
Indicative future capitalised interest cost | 9 | 14 | |||||
Indicative total development cost | 450 | 380 | |||||
Landsec ─ Appendices | 34 |
Pipeline of retail re-purposing development opportunities
Masterplanning continues at four London sites for c.£3.5bn of mixed use developments including c.7,000 homes
Exploring re-purposing in regional cities
Shepherd's Bush, W12
Finchley Road, NW3
The Lewisham Centre
Southside, Wandsworth
One Dundas Square, Glasgow
Buchanan Galleries, Glasgow
Status
Stage 2 design underway
Masterplanning under way
under a newly expanded scope
Site assembly and
masterplanning under way
Masterplanning under way
Planning submitted for 120,000 sq ft office opportunity adjacent to Buchanan Galleries
Masterplanning wider residential and office opportunity
Landsec
ownership
%
100
100
100
50
100
100
Current use
Retail & Leisure
Sq ft (000)
302
310
330
600
n/a
592
Indicative use
Office | Retail & Leisure | |
Homes | Sq ft (000) | Sq ft (000) |
650 | 150 | 80 |
2,000 | 50 | 100 |
2,250 | 190 | 100 |
2,000 | - | 400 |
- | 110 | 10 |
350 | 100 | 330 |
Earliest | Earliest completion | |
start | ||
on site | Phase 1 | Masterplan |
2023 | 2025 | 2031 |
2023 2027 2034
2023 2027 2038
2024 2027 2036
2021 n/a 2023
2023 n/a 2028
Property All Index Monthly MSCI Bloomberg, Source:
Mar 89
Sep 89
Mar 90
Sep 90
Mar 91
Sep 91
Mar 92
Sep 92
Mar 93
Sep 93
Mar 94
Sep 94
Mar 95
Sep 95
Mar 96
Sep 96
Mar 97
Sep 97
Mar 98
Sep 98
Mar 99
Sep 99
Mar 00
Sep 00
Mar 01
Sep 01
Mar 02
Sep 02
Mar 03
Sep 03
Mar 04
Sep 04
Mar 05
Sep 05
Mar 06
Sep 06
Mar 07
Sep 07
Mar 08
Sep 08
Mar 09
Sep 09
Mar 10
Sep 10
Mar 11
Sep 11
Mar 12
Sep 12
Mar 13
Sep 13
Mar 14
Sep 14
Mar 15
Sep 15
Mar 16
Sep 16
Mar 17
Sep 17
Mar 18
Sep 18
Mar 19
Sep 19
Mar 20
6- | 4- | 2- | 0 | 2 | 4 | 6 | 8 | 10 | 12 | % 14 |
Spread
EY Property
gilt year-10
Property/gilt | Appendices ─ Landsec |
spread yield |
35
Landsec ─ Appendices | 36 |
Central London investment market
2019 transaction levels were down 36% on 2018 with Q1 2020 levels the lowest seen since Q1 2010
Investment volumes | Office capital inflow by region |
£bn 25
20
15
Q4
10
Q3
5
Q2
Q1
0
1987 | 1991 | 1995 | 1999 | 2003 | 2007 | 2011 | 2015 | 2019 |
Source: CBRE; shows calendar years
UK | Rest of Europe | |
Asia | Germany | |
Middle East / North Africa | US / Canada | |
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1984- 1990- 2000- | 2010- | 2013- 2016 2017 2018 2019 | Q1 | ||
1989 | 99 | 09 | 12 | 15 | 2020 |
Landsec ─ Appendices | 37 |
Central London office market - take-up
A decade of rental growth and seven years of stable take-up
m sq ft | 131.5% | 99.3% | 39.8% | 65.1% | ||||||||||||||||||||||||||||||||||||||||||
rental growth | rental growth | rental growth | rental growth | |||||||||||||||||||||||||||||||||||||||||||
(18.3% CAGR) | (9.0% CAGR) | (8.7% CAGR) | (5.1% CAGR) | |||||||||||||||||||||||||||||||||||||||||||
24 | -55.9% | -25.1% | -25.0% | |||||||||||||||||||||||||||||||||||||||||||
rental decline | rental decline | rental decline | ||||||||||||||||||||||||||||||||||||||||||||
22 | (-18.5% CAGR) | (-13.4% CAGR) | (-13.4% CAGR) | |||||||||||||||||||||||||||||||||||||||||||
20 | ||||||||||||||||||||||||||||||||||||||||||||||
18 | ||||||||||||||||||||||||||||||||||||||||||||||
16 | ||||||||||||||||||||||||||||||||||||||||||||||
14 | ||||||||||||||||||||||||||||||||||||||||||||||
12 | ||||||||||||||||||||||||||||||||||||||||||||||
10 | ||||||||||||||||||||||||||||||||||||||||||||||
8 | ||||||||||||||||||||||||||||||||||||||||||||||
6 | ||||||||||||||||||||||||||||||||||||||||||||||
4 | ||||||||||||||||||||||||||||||||||||||||||||||
2 | ||||||||||||||||||||||||||||||||||||||||||||||
0 | ||||||||||||||||||||||||||||||||||||||||||||||
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 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||
Take-up (all grades) | 10-year average take-up | |||||||||||||||||||||||||||||||||||||||||||||
Source: CBRE, MSCI Annual Index ; shows calendar years
Landsec ─ Appendices | 38 |
Central London rolling 12-monthtake-up
Rolling annual take-up reached 12.7m sq ft as of Q1 2020; marginally below the long-term average for the first time since mid 2017
m sq ft 16
14
12
10
8
6
4
2
0
2008 Q1 | 2008 Q2 | 2008 Q3 | 2008 Q4 | 2009 Q1 | 2009 Q2 | 2009 Q3 | 2009 Q4 | 2010 Q1 | 2010 Q2 | 2010 Q3 | 2010 Q4 | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 | 2012 Q4 | 2013 Q1 | 2013 Q2 | 2013 Q3 | 2013 Q4 | 2014 Q1 | 2014 Q2 | 2014 Q3 | 2014 Q4 | 2015 Q1 | 2015 Q2 | 2015 Q3 | 2015 Q4 | 2016 Q1 | 2016 Q2 | 2016 Q3 | 2016 Q4 | 2017 Q1 | 2017 Q2 | 2017 Q3 | 2017 Q4 | 2018 Q1 | 2018 Q2 | 2018 Q3 | 2018 Q4 | 2019 Q1 | 2019 Q2 | 2019 Q3 | 2019 Q4 | 2020 Q1 |
Secondhand | New completed | Pre-let | Serviced office | 10-year average | ||||
Source: CBRE
Landsec ─ Appendices | 39 |
Central London availability and vacancy rate
Availability increased by c.11% in Q1, the first rise since 2018, and the vacancy rate was up to 4.5% (compared to the long-term average of 4.1%)
m sq ft | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
35 | 16 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
30 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
25 | 12 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
20 | 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
15 | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10 | 4.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Q1 1991 | Q3 1991 | Q1 1992 | Q3 1992 | Q1 1993 | Q3 1993 | Q1 1994 | Q3 1994 | Q1 1995 | Q3 1995 | Q1 1996 | Q3 1996 | Q1 1997 | Q3 1997 | Q1 1998 | Q3 1998 | Q1 1999 | Q3 1999 | Q1 2000 | Q3 2000 | Q1 2001 | Q3 2001 | Q1 2002 | Q3 2002 | Q1 2003 | Q3 2003 | Q1 2004 | Q3 2004 | Q1 2005 | Q3 2005 | Q1 2006 | Q3 2006 | Q1 2007 | Q3 2007 | Q1 2008 | Q3 2008 | Q1 2009 | Q3 2009 | Q1 2010 | Q3 2010 | Q1 2011 | Q3 2011 | Q1 2012 | Q3 2012 | Q1 2013 | Q3 2013 | Q1 2014 | Q3 2014 | Q1 2015 | Q3 2015 | Q1 2016 | Q3 2016 | Q1 2017 | Q3 2017 | Q1 2018 | Q3 2018 | Q1 2019 | Q3 2019 | Q1 2020 |
Availability | Rolling annual total take-up excl. pre-let | Vacancy rate (RHS) |
Source: CBRE, MSCI Monthly Index
-
Availability represents the total net lettable floor space in existing properties, which is being actively marketed, either for lease, sublease, and assignment or for sale for owner occupation as at the end of the survey period. Availability includes space that is being marketed and is physically vacant or occupied. Space that is physically vacant, but not being marketed or is not available for occupation is excluded from availability.
Space that is Under Construction and will become ready to occupy within 12 months is included within availability.
Landsec ─ Appendices | 40 |
Central London secondhand supply vs rental value growth
The increase in availability was largely driven by a rise in smaller secondhand units but rental growth remained broadly stable
m sq ft | Rental value growth % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
20 | 30 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
18 | 20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
14 | 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | -10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6 | -20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | -30 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0 | -40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Q1 1991 | Q3 1991 | Q1 1992 | Q3 1992 | Q1 1993 | Q3 1993 | Q1 1994 | Q3 1994 | Q1 1995 | Q3 1995 | Q1 1996 | Q3 1996 | Q1 1997 | Q3 1997 | Q1 1998 | Q3 1998 | Q1 1999 | Q3 1999 | Q1 2000 | Q3 2000 | Q1 2001 | Q3 2001 | Q1 2002 | Q3 2002 | Q1 2003 | Q3 2003 | Q1 2004 | Q3 2004 | Q1 2005 | Q3 2005 | Q1 2006 | Q3 2006 | Q1 2007 | Q3 2007 | Q1 2008 | Q3 2008 | Q1 2009 | Q3 2009 | Q1 2010 | Q3 2010 | Q1 2011 | Q3 2011 | Q1 2012 | Q3 2012 | Q1 2013 | Q3 2013 | Q1 2014 | Q3 2014 | Q1 2015 | Q3 2015 | Q1 2016 | Q3 2016 | Q1 2017 | Q3 2017 | Q1 2018 | Q3 2018 | Q1 2019 | Q3 2019 | Q1 2020 |
Availability - Secondhand space | MSCI Central London rental value growth (12m to quarter) | |
Source: CBRE, MSCI Monthly Index
- Secondhand space is space which is being marketed having been previously occupied in its current state. Current state can include a minorre-decoration, but not a comprehensive refurbishment.
- Availability represents the total net lettable floor space in existing properties, which is being actively marketed, either for lease, sublease, and assignment or for sale for owner occupation as at the end of the survey period. Availability includes space that is being marketed and is physically vacant or occupied. Space that is physically vacant, but not being marketed or is not available for occupation is excluded from availability.
Space that is Under Construction and will become ready to occupy within 12 months is included within availability
Landsec ─ Appendices | 41 |
London Office market availability - Grade A vs. secondhand space
The majority of availability in London is secondhand space with the proportions between prime and secondary continuing to diverge, indicating a bifurcation of the market
Proportion of total 80%
72%
70%
60%
50% | 50% |
40%
30%
28%
20%
10%
0%
Q2 2008 | Q3 2008 | Q4 2008 | Q1 2009 | Q2 2009 | Q3 2009 | Q4 2009 | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 | Q1 2011 | Q2 2011 | Q3 2011 | Q4 2011 | Q1 2012 | Q2 2012 | Q3 2012 | Q4 2012 | Q1 2013 | Q2 2013 | Q3 2013 | Q4 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 |
Share of secondhand space | Share of | Grade A space | |||||||||||||||||||||||||||||||||||||||||||||
Source: CBRE
(1) Grade A space here is defined as newly-completed space and space that is under construction and will become ready to occupy within 12 months.
Landsec ─ Appendices | 42 |
Central London supply as at 31 March 2020
13.5m sq ft currently under construction and a further 15m sq ft could complete by 2024
m sq ft | Vacancy rate % | |||||||||||||||||||||||||||||||||||||||
18 | 16 | |||||||||||||||||||||||||||||||||||||||
16 | 14 | |||||||||||||||||||||||||||||||||||||||
14 | 12 | |||||||||||||||||||||||||||||||||||||||
12 | 10 | |||||||||||||||||||||||||||||||||||||||
10 | 8 | |||||||||||||||||||||||||||||||||||||||
8 | ||||||||||||||||||||||||||||||||||||||||
6 | 4.5% | 6 | ||||||||||||||||||||||||||||||||||||||
4 | 4 | |||||||||||||||||||||||||||||||||||||||
2 | 2 | |||||||||||||||||||||||||||||||||||||||
0 | 0 | |||||||||||||||||||||||||||||||||||||||
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 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
Completed | Under construction | Definite/likely | Average completions (1984-2019) | (RHS) Vacancy rate (all grades) | ||||
Source: CBRE, Knight Frank, Landsec; shows calendar years
- Completions/under construction includes fringe (White City,Non-Core Docklands, Stratford, Nine Elms, Hammersmith). Vacancy rate as at March 2020. From 2017, supply pipeline monitors schemes above 20,000 sq ft
- Landsec estimated future supply based on data from CBRE and Knight Frank. However, to reflect theCOVD-19 impact, Landsec have applied a 3-month delay to all schemes (under construction or definite/likely)
- "Definite/likely" are proposed schemes where it is reasonable to expect delivery in that year based on, inter alia: planning,pre-let, funding, vacant possession, demolition, construction contract
- Grade A space is brand new or comprehensively refurbished space, with high specification and prominent market image
- Vacancy rate is expressed as vacant space as a percentage of total stock
- Total Stock represents the total completed space (occupied and vacant) in the private and public sector recorded as the net lettable area
Landsec ─ Appendices | 43 |
Central London supply as at 31 March 2020
45% of space under construction is already pre-let as flight to quality continues
Under Construction pipeline split into pre-let and speculative
Covid-19 has caused material uncertainty around the shape of the pipeline with further delays possible along with a potential reduction in construction starts
Speculative pipeline only
m sq ft | Vacancy rate % | m sq ft | Vacancy rate % | ||||||||||||
12 | 10 | 12 | 10 | ||||||||||||
10 | 8 | 10 | 8 | ||||||||||||
8 | c.45%of space | 8 | Material uncertainty over | ||||||||||||
under construction is pre-let | future construction starts | ||||||||||||||
6 | 4.5% | 6 | 6 | 4.5% | 6 | ||||||||||
4 | 4 | 4 | 4 | ||||||||||||
2 | 2 | 2 | 2 | ||||||||||||
0 | 0 | 0 | 0 | ||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
Completed | U/C pre-let | U/C speculative | Definite/likely | Average speculative completions | Average completions | (RHS) Vacancy rate | |||||||
Source: CBRE, Knight Frank, Landsec; shows calendar years | (2010-2019) | (1984-2019) | (all grades) | ||||||||||
- Completions/under construction includes fringe (White City,Non-Core Docklands, Stratford, Nine Elms, Hammersmith). Vacancy rate as at March 2020. From 2017, supply pipeline monitors schemes above 20,000 sq ft
- Landsec estimated future supply based on data from CBRE and Knight Frank. However, to reflect theCOVD-19 impact, Landsec have applied a 3-month delay to all schemes (under construction or definite/likely)
- "Definite/likely" are proposed schemes where it is reasonable to expect delivery in that year based on, inter alia: planning,pre-let, funding, vacant possession, demolition, construction contract
- Grade A space is brand new or comprehensively refurbished space, with high specification and prominent market image
- Vacancy rate is expressed as vacant space as a percentage of total stock
- Total Stock represents the total completed space (occupied and vacant) in the private and public sector recorded as the net lettable area.
Landsec ─ Appendices | 44 |
Central London office market
Development completions, vacancy and rental and capital growth
m sq ft | -55.9% rental growth | -25.1% rental growth | -25.0% rental growth | % |
18 | (-18.5% CAGR) | (-13.4% CAGR) | (-13.4% CAGR) | 36 | ||||||||||||||||||||||||||||||||||||
16 | 32 | |||||||||||||||||||||||||||||||||||||||
14 | 28 | |||||||||||||||||||||||||||||||||||||||
12 | 24 | |||||||||||||||||||||||||||||||||||||||
10 | 20 | |||||||||||||||||||||||||||||||||||||||
8 | 16 | |||||||||||||||||||||||||||||||||||||||
6 | 12 | |||||||||||||||||||||||||||||||||||||||
4 | 8 | |||||||||||||||||||||||||||||||||||||||
2 | 4 | |||||||||||||||||||||||||||||||||||||||
0 | 0 | |||||||||||||||||||||||||||||||||||||||
-2 | -4 | |||||||||||||||||||||||||||||||||||||||
-4 | -8 | |||||||||||||||||||||||||||||||||||||||
-6 | -12 | |||||||||||||||||||||||||||||||||||||||
-8 | -16 | |||||||||||||||||||||||||||||||||||||||
-10 | -20 | |||||||||||||||||||||||||||||||||||||||
-12 | -24 | |||||||||||||||||||||||||||||||||||||||
-14 | 131.5% rental growth | 99.3% rental growth | 39.8% rental growth | 65.1% rental growth | -28 | |||||||||||||||||||||||||||||||||||
-16 | -32 | |||||||||||||||||||||||||||||||||||||||
(18.3% CAGR) | (9.0% CAGR) | (8.7% CAGR) | (5.1% CAGR) | |||||||||||||||||||||||||||||||||||||
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 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
Development completions | Forecast(1) | Capital value growth (RHS) | Rental value growth (RHS) | Vacancy rate (RHS) | ||||
Source: CBRE, Knight Frank, MSCI Annual Index, Landsec; shows calendar years
(1) Landsec forecast based on data from CBRE and Knight Frank
Landsec ─ Appendices | 45 |
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 expressed or implied by such forward-looking statements.
Any forward-looking statements made by or on behalf of Landsec 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.
Landsec does not undertake to update forward-looking statements to reflect any changes in Landsec's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.
Information contained in this presentation relating to Landsec or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.
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Land Securities Group plc published this content on 11 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 May 2020 07:44:06 UTC