British Land Share Discussion Threads

[williamcooper104] 28/8/2020 16:44

The secular adjustment hopefully swings into a normal cyclical swing by huge amounts of office space being converted into residential

[williamcooper104] 28/8/2020 16:42

Totally agree Last cycle it was much easier even if it did seem like the economy was going to be toast for a long time Far far harder to call WFH/covid Ultimately it's probably just yet another extreme cycle in what's always been an extremely cyclical market The better investors/operators like DLN/GPOR have almost no debt - so they will likely do well out of it - but if you invest in them now you need to be comfortable with what's likely to be volatile ride

[essentialinvestor] 28/8/2020 16:36

William, this is the most challenging time to make a call on London office

that I can remember. Cyclical swings are easier to read than potential

secular adjustments.

[williamcooper104] 28/8/2020 16:29

It can - there was simply just too much of it PE backed chains rolled out mega expansion plans and signed up for high rents They all based their business rates on the then much lower level ratable values and forgot that rates would be rebased to almost 50 percent of the rents they signed up to

[shieldbug] 28/8/2020 15:28

yesterday I walked from Aldgate through the city to Aldwych yesterday. Stand out feature was that there are two large construction projects progressing in Leadenhall Street. Surreal considering the whole city is almost empty.

8 Bishopsgate - Stanhope - 770,000 sq ft - 50 storey tower
40 Leadenhall Street - MandG 905,000 sq ft office complex

[shieldbug] 28/8/2020 15:05

William Cooper - Thanks for your points about what they thought about retail. I hadn't seen that before.

Casual dining seems to me to have failed though bad management as much as anything. But I do think it can work very well in shopping centre food courts.

[williamcooper104] 27/8/2020 19:13

DLNs performance has been excellent They were great at buying secondary assets in then fringe location and then redeveloping/repositioningBrexit may well be a disaster but it's not really impacted on central London office demand - however Covid/wfh could well be hugely challenging If WFH stays then could see 20-30 percent less office space - redundant office space will be converted into resi but before that happens office rental and capital values are likely to tank The other issue with DLN is that the previous management team is retiring g

[williamcooper104] 27/8/2020 19:09

They all thought that retail would shrink to the top 50 locations So so long as you owned those centres you'd see rental growth They also thought that casual dining would replace retail (which it did until it didn't) Casual dining expansion drove up rental values

[essentialinvestor] 27/8/2020 18:32

shield, both DLN and HLCL have very significant exposure to London office,

So you would need to be convinced of the future success of that asset class

to consider either. And without getting in to any interminable B word discussion,

that is also arguably a significant factor for those two businesses (at leadt from a sentiment perspective).


Good fortune with your holdings.

[shieldbug] 27/8/2020 18:06

Essential - Completely agree with what you say about executive pay.

It doesn't alter the fact that Grigg arrived in January 2009 and had equity raise 2 months later. Its not just about elevated prices pre-GFC, its about debt. Elevated prices combined with excess leverage can suddenly turn negative equity when prices drop.

I can't judge Grigg or the current team on their performance over the GFC - they just weren't there at the time.

You can judge Grigg on his record since - and it was mediocrity.

I can see the historic attraction to retail, the yield was much higher than London offices. They did know in 2009 that online retail was eating into bricks n mortar retail and they didn't change strategy.

Thanks for your points about Derwent and Helical - I'll take a look there too.

[williamcooper104] 25/8/2020 18:15

I remember a board director of one of those (or similar) companies boasting privately that they spent so much on cabs so as to create a "saving" by getting themselves the chauffeur

[williamcooper104] 25/8/2020 18:13

The big difference is that BL (as was with Riblats) Helical and Derwent have all had management teams/families with huge equity participations

[williamcooper104] 25/8/2020 18:09

Hard call CEO was a disaster And CFO was Nicky lesson on swaps

[essentialinvestor] 25/8/2020 17:27

Property prices may have been elevated pre GFC, but it has not stopped Derwent(DLN)
approx doubling their NAV since 2007 - and they are London office, not industrial.

It's also not prevented Helical reporting a NAV well in excess of 2007 peak cycle levels.

Helical also had some significant regional retail, however they anticipated some
of what was to come and began selling those assets 4 years ago, completing their
last retail sale about 18 months ago.


BOD's and in particular CEO's of large REITS are highly paid individuals. It's not just
base salary, it's usually bonuses, options packages, pension top ups, medical insurance, life insurance, critical illness and very likely the use of a chauffeur driven car.

You expect results given this. Not mediocrity.

[jonwig] 25/8/2020 17:16

SGRO's fundraising in 2009 was in order to buy Brixton, not forced upon them. (Absent that, a smaller fundraising might have been called, yes.)

I remember that as I was an unhappy Brixton shareholder: the behavious of its CEO was disgraceful.

[williamcooper104] 25/8/2020 16:30

Sergo also bought Brixton at the bottom of the market And they didn't raise equity AND gift assets BL and Land both gifted assets and raised equity at thumbing discounts

[shieldbug] 25/8/2020 16:25

Essential - It would seem pretty pointless to analyse British Land's NAV performance through the GFC. Property prices were inflated on banker's-bonus fuelled securitised property debt and the market crashed.

If you look at the equity raise that Segro were forced into in 2009 it was horrendous. They raised £500m at an 86% discount to the share price.

So Segro should be scoffed at even today for that - but who cares now?

I think we need to judge property companies on how they fared since that time and where indeed they are headed. Clearly Segro has a much more attractive trajectory than British Land.

[williamcooper104] 25/8/2020 16:22

From memory the cash on cash returns where 40 something percent So Blackstone would have had their money back out in not long over 2 years It was literally gifted LandSec similarly gifted Trillium to the Pears May not have been most institutionally friendly - but worst thing that happened to BL was getting rid of the Ritblats (see success of Delancey since that happened)

[shieldbug] 25/8/2020 16:13

For what its worth below is from RNS Sept 18th 2009. This deal was vote on and unanimously supported by shareholders at the time.

"Under the terms of the Joint Venture, the real estate funds Blackstone Real
Estate Partners Europe III and Blackstone Real Estate Partners VI (the
"Blackstone Partners") will acquire a 50 per cent interest in Broadgate valued
at £1.07 billion. The Blackstone Partners' share of the gross attributable value
includes £987 million of third party debt, being 50 per cent of the debt secured
against the assets of Broadgate, and the net consideration paid for their 50 per
cent interest in Broadgate valued at £77 million."

[essentialinvestor] 18/8/2020 13:18

sheild, fwiw that looks a good plan.
A pointer to quality, or otherwise, is to look at the difference between
the 2007 and 2009 NAV, if possible.

[ericshunn] 18/8/2020 13:07

The sale of Broadgate to Blackstone was not the greatest property deal for BLND equity holders. From memory BL received about £30 odd m in cash for a 50% share in Broadgate.

[williamcooper104] 18/8/2020 12:53

Made a charitable donation to Blackstone would be a more accurate description than "sale"

[shieldbug] 18/8/2020 12:39

Essential - Looks to me as though APG and GIC both profited handsomely from the equity raise in 2009 - or at least they increased holdings during the financial crash. APG have been increasing their holding again in recent months.

In the same year Grigg also sold 50% of Meadowhall and Broadgate in Sept 2009 to reduce debt. Both of which now have stable JV partners.

Completely agree about the damage an equity raise would do which is why I am digging into the past to glean a better understanding of the present.

[shieldbug] 18/8/2020 12:21

Anyone know anything about Vicinitee - apparently it is a British Land owned software platform?

hxxps://www.vicinitee.com/