Property developer looks to offload £244m retail assets, which have been hit by economic crisis in Spain and Portugal
The property developer British Land is looking to sell its £255m portfolio of retail properties in mainland Europe after the assets lost almost a fifth of their value on the back of the economic crisis in Spain and Portugal.
British Land said on Tuesday its mainland European properties, which account for 2.4% of its £10.5bn portfolio, fell 17% in value in the year to the end of March, hit by rental concessions and widening yields. “Looking forward, we consider Europe to be a subscale business for us and our intention is to exit over time,” the chief executive, Chris Grigg, said, adding that the company was not having active discussions with buyers at the moment.
“It could be a long haul, the market’s not that easy in Europe at the moment and we don’t expect any near-term announcement but this is a very clear statement of intent,” he said. British Land entered mainland Europe in 2005 with the purchase of Pillar Property, which had assets in Spain and Italy. It co-owns Spain’s biggest mall, the 200,000 sq metre (2.2m sq ft) Puerto Venecia shopping centre in Zaragoza, and owns a 65% share in the continental European property fund PREF.
Retail sales in the eurozone fell for the second month in a row in March, reflecting the bloc’s high jobless rate and restricted credit conditions, with the worst slump seen in Spain where retail sales fell 10.5% on an annual basis. Like its rivals Hammerson and Land Securities, British Land has been focusing on its core office and shopping centre businesses in London and key UK regions to combat the tough economic outlook facing property markets in Britain and Europe.
In March, it raised almost £1bn for new investments and developments via a share placement and sale of an office block in the City of London. The company, which is building the Cheesegrater skyscraper in the City, said its EPRA (European Public Real Estate Association) net asset value for the year to the end of March rose 0.2% to 596p per share, while profits before tax increased 1.9% to £274m. It also increased its dividend by 1.1% to 26.4p a share.
Shareholders want to see senior independent director following reports Alison Carnwath did not initially support Diamond bonus
Barclays shareholders are considering demanding a meeting with Sir Michael Rake, the senior independent director on the board, amid mounting concern about tension within the bank’s boardroom.
Following reports that Alison Carnwath, the Barclays director who heads the remuneration committee, had not initially supported the payment of a £2.7m bonus to the chief executive, Bob Diamond, shareholders are understood to want to hear from the senior independent director rather than the bank’s chairman, Marcus Agius.
Carnwath, a serial non-executive director who also chairs Land Securities, faced a protest vote of 20% at the Barclays annual meeting. More than 30% of investors failed to back the bank’s pay policies after Diamond was awarded the controversial bonus and the bank paid £5.7m of his taxes. Diamond received £17m in total.
Shareholders did not want to be identified but they now believe that Carnwath did not support the bonus payout – initially at least. When this speculation first surfaced, Agius said that the bank encouraged “a full and vigorous debate” but insisted that the pay deals were supported unanimously.
The Barclays annual meeting took place at the start of what has been dubbed the “shareholder spring”, when there was a wave of protests about executive pay.
Chris Grigg, the chief executive of British Land, the FTSE 100 property development firm behind the Lakeside shopping centre, is the latest to emerge as having a bumper pay rise last year. Grigg received a 50% boost to his pay packet this year to £3.4m, while his staff saw wages drop by an average of more than 5%.
Grigg received £1.9m in salary, bonus and benefits, plus a £280,000 cash allowance in lieu of a pension contribution in the year to March 2012. A golden hello of shares awarded “in order to facilitate [his] recruitment” in 2009 were also handed over, worth £1.19m.
British Land’s chief executive, a former investment banker, cashed in more than half of those shares, pocketing £622,000. In the previous year, he received £2m in salary, bonus and benefits, plus another £280,000 in lieu of a pension payment.
By contrast, employees were paid an average salary of £127,000 this year, compared with £134,000 last year. The company’s headcount increased slightly from 179 in the head office to 205 this year. The details were published in British Land’s annual report.
The value of British Land’s portfolio of office and retail property – which ranges from Cabot Circus in Bristol to Broadgate Circus in the City and Meadowhall shopping centre in Sheffield – rose by 2.6% to £10.3bn in the year to March.
The company, which is also developing the “Cheesegrater” skyscraper in the City, said London’s booming office rental market helped drive a 5% increase in pre-tax profits in the year to March.
Lord Turnbull, chairman of British Land’s remuneration committee, defended the pay scheme. “Pay plays an important retention role and hence needs to be competitive with alternative employment opportunities,” he wrote in the annual report. “This is particularly so as British Land’s expectations of staff are high and there is a scarcity value on proven performers.” As chief executive of a bank that is 82%-owned by the taxpayer, Hester now suffers even more scrutiny of his pay packet and was forced to waive a near £1m bonus this year after a political row.
Chief executive of FTSE 100 property developer Chris Grigg sees pay rise 50% to £3.4m
The chief executive of British Land, the FTSE 100 property developer behind the Lakeside shopping centre, has been rewarded with a 50% boost to his pay packet this year to £3.4m while his staff saw wages drop by an average of more than 5%.
Chris Grigg received £1.9m in salary, bonus and benefits, plus £280,000 in lieu of his pension allowance in the year to March 2012. Shares awarded “in order to facilitate [his] recruitment” in 2009 also vested this year with a notional gain of £1.19m. Grigg, a former investment banker, cashed in more than half of those shares, pocketing £622,000. In 2011, he received £2m in salary, bonus and benefits, plus another £280,000 in lieu of a pension payment.
By contrast, employees were paid an average salary of £127,000 this year, compared with £134,000 last year. Headcount increased slightly from 179 employees in head office to 205 this year. The details were published in British Land’s annual report.
British Land’s portfolio of office and retail property – from Broadgate Circus in the City to Meadowhall Shopping Centre in Sheffield – rose in value by 2.6% to £10.3bn in the year to March. The company, which is developing the “Cheesegrater” skyscraper in the City, said London’s booming office rental market helped drive a 5% increase in pre-tax profits in the year to March.
Lord Turnbull, chairman of British Land’s remuneration committee, defended the pay scheme. “Pay plays an important retention role and hence needs to be competitive with alternative employment opportunities,” he wrote in the annual report. “This is particularly so as British Land’s expectations of staff are high and there is a scarcity value on proven performers.”
Grigg left Barclays’ commercial banking arm to take over at British Land from Stephen Hester, who went in the other direction to rescue Royal Bank of Scotland in 2008. As chief executive of a bank that is 82%-owned by the taxpayer, Hester now suffers even more scrutiny of his pay packet and was forced to waive a near £1m bonus this year after a political row. However, his bank balance was not unduly affected as he still walked away with some £3.2m in salary, benefits, payments in lieu of pension and share awards that vested last year.
Details of Grigg’s pay packet were published in a week where shareholders voted against a 60% increase in the pay of WPP chairman Martin Sorrell, and follows a series of investor revolts over executive pay.
The row over executive pay has been reignited following a survey by Manifest/MM&K which showed FTSE 100 chief executive pay rose 12% in a year when the share index fell by 5%. The annual meeting season for the 2011 financial year currently underway has been dubbed the “shareholder spring” as a record six remuneration reports have been voted down. Premier Farnell suffered a 30% protest against its pay policies this week and further rebellions are expected as the AGM season continues.
Schemes are due to deliver 53m sq ft of office space in London by 2016 but a loss of confidence among tenants and problems securing funding are hampering some projects
A property consultancy has warned that more office developments could stall in the City of London as the eurozone debt crisis affects tenant demand and funding.
A report from EC Harris shows that the “notional” London office development pipeline contains 150 potential projects ready to deliver 53m square feet of office space by 2016, with a construction value of £12bn. However, difficulty securing pre-let tenants and external funding means that many may not come to fruition.
The City accounts for more than 60% of the total area (34m sq ft) and more than half the number of projects. The average size of a City project is 420,000 sq ft, nearly twice the size of those planned for the west end.
These projects are driven by a growing shortage of high-quality office space, with leases covering up to 70m sq ft to expire before 2017 in London. However, the eurozone crisis, diminishing tenant confidence and tighter funding markets are key reasons for tenants to stay and ride out the storm. Some are opting for refurbished space, rather than newly built offices.
Royal Bank of Scotland downscaled its investment bank with 3,500 job cuts last month – equivalent to 500,000 sq ft of office space. Property finance is also becoming scarcer as some banks such as Société Générale have pulled out of risky lending.
“What the crisis has done is put doubt in people’s minds,” Richard Taylor, head of commercial development at EC Harris and author of the report, told the Guardian. “Tenants are getting nervous – from media to solicitors – about pre-lets.”
Developer Hammerson suffered a blow last month when law firm CMS Cameron McKenna pulled out of a partial pre-let at Principal Place in the City. At about the same time, work on the £800m Pinnacle tower on Bishopsgate stalled again. Funding from a group of lenders including HSBC hinges on the developer, Arab Investments, pre-letting a large chunk of the planned 63-storey building.
Timing is crucial, said Simon Rawlinson, head of research at EC Harris. Land Securities and British Land, two of Britain’s largest property developers, look to have timed the completion of their new skyscrapers right – both the Walkie Talkie and the Cheesegrater, designed by Rafael Viñoly and Rogers Stirk Harbour + Partners respectively, are due to open in 2014 when most City office leases expire. By contrast, the nearby Heron Tower, which was completed last year, is “slightly early in the market and possibly a harder market sell than when you deliver in 2014/15,” said Rawlinson.
The advantage of office towers is that they tend to be occupied by several tenants, and are not reliant on one big pre-let. British Land has already signed up insurance broker AON for the lower floors of the Cheesegrater in Leadenhall Street. Land Securities is building the Walkie Talkie in Fenchurch Street in partnership with Canary Wharf Group, and both have strong client bases. Meanwhile, the Renzo Piano-designed Shard at London Bridge is backed by Qatari Diar, which has deep pockets.
“Tenants don’t want to commit two or three years in advance,” said Rawlinson. “Developers that don’t have a joint venture partner, are dependent on a pre-let or without alternative sources of funding will struggle most to get projects across the line.”
Sale by British Land and London & Stamford expected to attract CSC, Britain’s top mall operator, and foreign investors
A majority stake in the Meadowhall shopping centre in Sheffield is for sale, at a price likely to value the whole mall at £1.4bn or more.
British Land, one of Britain’s biggest property developers, is looking to put half its 50% stake in the 1.4m sq ft mall up for sale, at the same time that its joint venture partner, London & Stamford, is putting its 50% stake in Meadowhall on the market. London & Stamford hopes to wrap up a sale in the first half of this year.
Big centres like Meadowhall are coveted assets as they rarely come on the market and perform far better than high-street properties. The sale is likely to generate a lot of interest from companies such as Capital Shopping Centres (CSC), Hammerson, and Australia’s Westfield, as well as sovereign wealth funds from Singapore, Canada, Norway and the Middle East.
The Government of Singapore Investment Corporation’s real estate arm bought a 40% stake in Britain’s biggest mall, MetroCentre in Gateshead, in 2007. CSC, which is the country’s top operator with 14 shopping centres including Manchester’s Trafford Centre, retained a 50% stake in MetroCentre and still manages it.
British Land’s chief executive, Chris Grigg, declined to comment, but has said that when disposing of a property the group would consider retaining a minority stake if the buyer were prepared to pay a better price on the remaining stake in return for having the comfort that the developer remained invested.
“It would allow them [British Land] to recycle capital into some of their other schemes,” Peel Hunt analyst James Carswell told Reuters. “It’s a good opportunity, as Meadowhall has performed well.”
Meadowhall was valued at £1.4bn in British Land’s annual results last May. It is the company’s third-biggest property after the Broadgate office complex, which has been pre-let to Swiss bank UBS, and Regent’s Place in London. The developer bought Meadowhall for £1.17bn in 1999 and sold a half share to London & Stamford for £588m in 2009.
Both British Land and London & Stamford declined to comment.
Ministers could act over Stephen Hester, the most lavishly rewarded public servant of all – but will they?
How much would you pay the boss of RBS? No one in Westminster would be crass enough to put it like that, naturally; but that’s the fundamental question party leaders are addressing in their arguments about Stephen Hester’s bonus.
Except that when Ed argues that the chief executive shouldn’t get his annual top-up, and Nick coughs about the need for restraint and Dave tries to get everyone to look away by loosing the hounds on Fred Goodwin, they always leave out the most important bit: how Hester’s payout is taxpayer money. As chief executive of a bank that is 83% owned by taxpayers, Hester is as much a public-sector worker as anyone behind the desk at your local JobCentre. If ministers wanted to block his bonus, they could. Indeed, they could renegotiate all the salaries paid out to the board of RBS. The government could quite legitimately point that these sums are transfers from ordinary families, many of whom face redundancies and pay freezes. So let’s tweak the original question: how much should we pay Stephen Hester? This strikes me as a perfectly legitimate subject for democratic debate – especially under the coalition that a couple of years ago published the names and salaries of 300 top government officials
Well, we know how much the RBS boss got last year. The bank’s annual report shows his salary as £1.22m. Add in the benefits and pensions and the shares awarded as part of the company’s incentive scheme, and Hester was awarded a total of £5.85m last year. You may not have thought he was on so much, largely because the press normally quotes only the not-so-basic pay. But the rest would be what Harvard law professor and corporate-governance expert Lucian Bebchuk calls “camouflage” compensation – that is, payment expressly designed not to be noticed by the public and so not stir up outrage.
Some might look at that £5.85m and shrug that this is the price you pay for someone to turn around a failed bank. Bear in mind, though, that Hester is head of a public enterprise; in that sense his excessive pay is a burden on the business. On average, Britons contribute £5,280 each in income tax every year: so effectively, 1,107 individuals worked flat out for a year to pay for Hester.
This isn’t personal. I’m sure the RBS boss is as nice a chap as ever came through Credit Suisse’s investment bank, where he spent 20 years. Were I less happily caffeinated, I might dwell longer on the fact that Hester worked in finance during a historic bull market, before going on to British Land during an unprecedented property boom. Good or bad, we don’t know his true capabilities; but he sure knows how to pick his cash cows.
Still, the fundamental point is that this is public cash that might otherwise go into hospitals, schools, housing benefit for poor families – or back to you in tax cuts. Instead, it’s going to one man. Is he worth it? Hester’s total pay is 97 times the average RBS employee’s income and pension contribution. Let’s accept that he is a very able executive working in a gruelling environment – but is he really 97 times more brilliant or productive than the next man or woman?
“Whatever we decided to pay Stephen Hester, people would regard it as too much,” writes Alistair Darling in his memoirs. “Like it or not, bankers are paid a great deal of money, and if we were to salvage anything from RBS, I needed to get the best possible candidate and to pay him what was needed to do so.” With those sentences, the former chancellor neatly sums two of the main arguments for giving people at the top more money: that they are super-talented, and that without those sums they would simply leave.
Yet Hester isn’t some kind of super-banker. Pay-watchers One Society point out that in 2010, while Hester’s total remuneration went up 71%, the value of his bank rose 33%. And over the past year, RBS’s share price has nearly halved. Nor are British bosses hotly sought-after abroad. Indeed, the list of British heads of global businesses is short and not especially sweet: it includes Tony Hayward, who was drummed out of BP, and Martin Sullivan who was head of, um, AIG, recipient of the biggest corporate bailout in US history.
Announcing his proposals on executive pay today, Vince Cable went some way to distancing himself from the notion that executives are merely getting the going rate. Extra power for shareholders; more transparency on rewards: who could quibble with such policies? But it would have been better if he had broken the influence bosses have on their pay-setting boards. Not only should workers sit on remuneration committees, the same forum should discuss pay for the rank and file, as well as the top.
Over the past fortnight, residents of the Westminster bubble have jawed on about reforming capitalism. Politicians like that, as it allows them to gaze into the middle distance and use words like “responsible” and “moral”. The rest of us can judge whether any of this means anything by seeing what ministers do about RBS. We might remember the letter Warren Buffett sent to his investors in 2004: “In judging whether corporate America is serious about reforming itself, CEO pay remains the acid test.” The same goes for Westminster, too, and how it tackles the most lavishly rewarded public servant of all time.