British Land targets retail future based on parks model
After an “extraordinary year” and some trading figures to forget, British Land’s CEO Simon Carter said Wednesday the UK property giant was now fully focusing on the “strong progress we have made across the priority areas I set out in November”.
And one of the key priorities is retail parks. “We see a value opportunity in retail parks, reflecting increased yields and a more stable occupational outlook. We have been further encouraged by how strongly footfall and sales have rebounded in recent weeks”, Carter noted.
And while its peer Landsec said earlier this month is was planning to exit the sector, British Land is set to "build on our market-leading position in high-quality, out-of-town retail parks, which already play a key role in retailers' fulfilment models”.
As yet, we have no idea what its expansion/acquisition plans are for the sector, but British Land said it sees “a clear value opportunity in this space… having already acquired £197 million of high quality retail parks”, and now accounts for 53% of its retail portfolio.
This includes acquiring the outstanding interest in Hercules Unit Trust, which operates 10 retail parks, for £148m, and the £49m acquisition of The A1 Retail Park in Biggleswade.
And to support its parks priority, it noted: “In the period since reopening, footfall and sales on our Retail portfolio were 88% and 104% of pre-pandemic levels respectively; 100% and 109% for retail parks”.
British Land added: “[Retail parks] are increasingly preferred by retailers, because they are affordable and support an online offer by facilitating click & collect, returns and ship-from-store. They are also preferred by business which are more online resilient. We see a clear value opportunity in this space to leverage our asset management expertise to deliver attractive returns as rents and values stabilise”.
So that’s the future. What about the past and its performance for the year ended 31 March?
“Covid-19 has clearly impacted our performance” it said, noting its portfolio value has fallen 10.8% in the 12 months. Retail value was down 24.7%, "with the rate of decline slowing in retail parks”. Underlying profit also fell 34.3%, "primarily reflecting an increase in provisions for rent receivables”.
Operationally, British Land said it drove rent collection and leasing activity which, “at 1.7m sq ft in Retail was our highest ever”. It noted 83% of FY21 rent had been collected, including 71% in retail.
It also added it continues to have a strong balance sheet, having sold £1.2bn of assets, mostly office space, with £556 million of retail assets sold since April 2020, 7% ahead of book value.
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