10 Cornwall Terrace
British Land's opportunistic but risk-averse strategy seeks to achieve long-term growth in shareholder value by: focusing on prime assets in the office and retail sectors; creating exceptional long-term investments with strong covenants, long lease profiles and growth potential; enhancing property returns through active management and development; and maximising equity returns through optimal financing and joint ventures. The key to high returns is flexibility, both in terms of business organisation and financing to take advantage of shifts in the property market.
British Land Plc is the second largest property investment company in the United Kingdom, behind Land Securities Plc. British Land's company-owned portfolio, valued at nearly £9.4 billion at the end of 2002, includes much of London's City financial district, generating rents of more than £477 million. The company holds another £1.56 billion in assets through joint ventures with a number of other companies, including supermarket companies Sainsbury and Tesco, and department store group GUS, formerly known as Great Universal Stores. These joint ventures typically take the form of purchase and leaseback agreements. Although British Land has a general policy of avoiding high-profile development properties in favor of steady income properties such as pubs and supermarkets, its portfolio includes nearly all of the Broadgate office and retail complex in London. Office space accounts for 51 percent of British Land's portfolio; shopping centers represent another 22 percent of the company's assets, while supermarkets make up 20 percent of its portfolio. Once represented in such international markets as the United States, The Netherlands, France, Belgium, Sweden, and Australia, British Land has scaled back its geographic focus to the United Kingdom and Ireland. London is the site of half of the company's real estate holdings. Other important markets include northern England (21 percent) and southeastern England (11 percent). British Land has long been led by Chairman and CEO John Ritblat, who, at age 66, came under pressure at the end of 2002 to split his functions as part of clarifying his succession plan at the company. Yet Ritblat's son, Nick Ritblat, who has served with the company as an executive director since the late 1980s, appears to be favored for the British Land top spot.
Although British Land traced its origins to the mid-19th century, the development of the modern company stemmed primarily from the arrival of John Ritblat as its chairman and CEO in the 1970s. Until then, the British Land Company, as it was called, was a sleepy, small-sized property group, with assets of just £27 million.
In mid-19th-century England, the right to vote was reserved for landowners--effectively restricting access to the British government to the country's elite. In 1849, three members of the British parliament, John Bright, Richard Cobden, and Josiah Walmsley, met at the London Tavern in Bishopsgate to devise a plan to circumvent the voting restriction. The trio established the National Freehold Land Society, with the purpose of acquiring property and selling shares, at a cost of between £60 and £70 for each share. Freeholders were then able to claim property ownership, thus securing the right to vote.
The society, which later became known as the National Building Society and which ultimately became Abbey National, one of the United Kingdom's largest building societies, was not, however, legally allowed to own land. In 1856, Cobden and Bright established the British Land Company for this purpose. By 1878, British Land had paid off its debt to the National Building Society and become an independent and, eventually, publicly listed company. When universal suffrage was later granted in the United Kingdom, the need for British Land as an enfranchisement vehicle was eliminated. Nevertheless, the company remained in existence, gathering a modest, conservatively held property portfolio into the middle of the 20th century. The rising economy in the post-World War II era led British Land to begin acquiring new properties in the 1950s and 1960s. The company remained, however, a small concern.
In 1970, however, British Land acquired another company, the Union Property Group, in what was, in fact, a reverse takeover that placed Union Property's John Ritblat in place as British Land's chairman and managing director by 1971. Ritblat had entered business at the age of 17, working as an apprentice to property surveyor Edward Erdman. After earning his surveyor's license, Ritblat, then 23, left Erdman to found his own property agency, joining with partner Neville Conrad to establish the Conrad Ritblat company in 1959.
Conrad Ritblat quickly specialized in the growing retail property segment, particularly the country's high street urban shopping districts. Ritblat gained added expertise in that area during a stint as director of the property operations of the Debenhams department store group. By the end of the 1960s, however, Conrad Ritblat had been acquired by the Union Property Group. John Ritblat quickly became the rising star of that company; at the same time, the Conrad Ritblat company continued operations--with Ritblat as its head as well.
The reverse takeover of British Land gave Ritblat access to the booming British property development market, which had been expanding steadily through the 1960s and into the early 1970s. In 1971, the company made its first expansion move, acquiring two companies, Haleybridge Investment Trust Ltd. and Regis Property Holdings Ltd., which gave British Land control of London's Plantation House. The acquisition nearly tripled the company's asset base, to some £78 million. While that purchase proved a relatively long-term one--remaining a key piece of the group's portfolio into the next century--the spirit of the times tended especially toward short-term, rapid-turnover investments.
This trend was in part responsible for the great British real estate crash of 1973 and 1974, which saw the British government rush to rescue its fringe banking sector, reeling under a suddenly crushing bad debt load. The property market collapse caused the liquidation of a large number of the United Kingdom's developers and property groups. British Land also was caught in the downward spiral, and by 1974, with its stock price as low as 3.5 pence, the company faced bankruptcy. Ritblat backed down the company's bankers, however, and British Land remained in business, earning Ritblat an early reputation as a property market survivor.
Flexible Acquisition Strategies in the 1980s
Ritblat came away from the period having learned a number of lessons, especially, never to do a property deal that required reselling the property to turn a profit. At the same time, Ritblat turned away from the flashy new development projects that attracted the company's rivals, preferring instead the acquisition of what Ritblat described as "boring old" buildings, which the company could then renovate. The company's conservative acquisition policy helped it avoid taking on the huge debt needed to build such large-scale new developments as the Canary Wharf and Broadgate complexes.
Ritblat also displayed a knack for flexibility in leading British Land's property investment efforts, which enabled the company to adapt its portfolio to the prevailing economic climate. During the late 1970s, for example, British Land became an internationally oriented property group with investments in the United States, The Netherlands, Belgium, France, Sweden, and Australia, as well as in the United Kingdom and Ireland. The internationalization of British Land's portfolio placed it in a strong position to enjoy the global real estate boom of the 1980s. It also enabled the company to expand its portfolio, which reached a value of £250 million by the end of the 1970s.
In the early 1980s, British Land shifted its attention to acquiring industrial properties, which provided the company with strong cash flow. The influx of cash, in turn, allowed the company to continue building out its portfolio, which neared some £900 million in value by the end of the 1980s. Toward the middle of the 1980s, however, British Land changed investment strategies, selling off its industrial holdings--the last of which was sold in 1988--in favor of acquiring property portfolios from various institutional investment groups, such as Legal & General. The company complemented its new acquisition policy by selling other holdings, taking advantage of rising property values during the U.K. real estate sector's bull market of the late 1980s. Meanwhile, the company continued to avoid investment in the large-scale new developments that were transforming British skylines at the end of the 1980s and beginning of the 1990s.
Despite the company's expanding portfolio, British Land's share price continued to lag at the end of the 1980s. As a means of stepping up the group's share value, Ritblat and other executives proposed a complex restructuring scheme that would split the company into two--and, effectively, would give Ritblat himself a 30 percent stake in the proposed New British Land. (Ritblat's share position in the larger British Land company amounted to less than 0.5 percent.) The deal was ultimately rejected by the company's shareholders in 1989.
Instead, Ritblat steered the company on a new acquisition drive, designed once again to bring in steady cash flow. British Land now turned to the retail sector, buying up high street properties, spending some £500 million at the beginning of the decade. As part of its acquisition drive, the company began negotiating with the United Kingdom's major supermarket groups, which had tied up large amounts of capital in property purchases. British Land began setting up joint ventures with retailers, in a series of sale-leaseback arrangements that gave British Land long-term leasing agreements. Sainsbury and Gateway were among the first of British Land's joint venture partners in 1990 and 1991.
Real Estate Leader for the New Century
Although British Land was expanding, the rest of the British property market had collapsed, entering a protracted recession that would see British Land's more conservative expansion strategy vindicated. By the mid-1990s, British Land had not merely survived the industry downturn, it had emerged as one of the leading U.K. property groups. British Land's retail holdings gave it a steady stream of rental income; in 1993 the company also teamed up with financial giant George Soros, who provided backing for the company's continued expansion into the middle of the decade, before the two parties ended their relationship in 1994.
By the mid-1990s, British Land had decided to refocus its portfolio on the United Kingdom, which was not only emerging from the recession but once again showing signs of a new property boom, centered especially around London's status as the world's financial capital. By 1996, the company had sold off the last of its international properties.
Instead, the company stepped up its retailer relationships. In 1996, the company announced the creation of a joint venture company with supermarket group Tesco, called BLT Properties, which established a portfolio based on some £175 million in properties from both Tesco and British Land. In 1998, Tesco and British Land launched a second joint venture, with £330 million in Tesco properties. By then, British Land had created another joint venture, BL Universal, with GUS, formerly known as Great Universal Stores, taking over GUS's £960 million property portfolio in 1997. In that year, as well, British Land created a joint venture with Rank Group, to acquire and lease back a number of leisure properties operated by Rank. Another deal came in 1999 when the company formed a joint venture with retail group House of Fraser to acquire that company's 15 department stores for £171 million.
British Land, meanwhile, had been expanding on another front. In 1994, the company gained a 30 percent stake in Stanhope, one of the developer partners in the massive Broadgate real estate complex. By 1995, British Land had succeeded in gaining full control of Stanhope's 50 percent share of Broadgate, and Ritblat now set the company's sights on gaining full control of the 15-building complex. The company moved on the second Broadgate developer partner, Rosebaugh, which had gone bankrupt in 1992. In 1995, British Land paid £121.4 million to acquire Rosebaugh's share of Broadgate, giving it control of 13 of the buildings in the complex. In 1998, British Land continued to step up its position in the complex, paying £140 million to take over the ground interests in the site held by Railtrack.
The Broadgate purchase, which gave British Land a significant share of the London financial district's property base, opened the way to a number of other high-profile property moves. At the end of 1998, the company announced the launch of a £400 million joint venture with Railtrack to develop a 700,000-square-foot property over Railtrack's Liverpool Street Station.
The following year, British Land completed another acquisition, paying £1.17 billion to acquire the 1.5 million-square-foot Meadowhall shopping complex in Sheffield. In that year, the company continued to add to its Broadgate holding, acquiring another piece of the complex from SBC Warburg for £240 million, and completed its control of the complex with a £203 million purchase from a consortium led by Prudential. The completion of the Broadgate acquisition boosted British Land to the number two rank in the United Kingdom's property group market, and also earned John Ritblat the Ernst & Young Master Entrepreneur of the Year award for 1999.
The company's acquisitions had enabled it to build up a portfolio valued at nearly £10 billion in company-owned properties, and more than £11 billion including properties held in joint ventures. But not all of British Land's expansion attempts were successful. In 2000, the company failed in its hostile takeover attempt of South Africa's Liberty International, a top competitor in the U.K. market. Meanwhile, the company's share price, which peaked in 1998, had begun to slip again at the turn of the new century. Part of the reason for the share decline was growing concerns over Ritblat's dual role as chairman and CEO of the company, and issues surrounding his succession as he approached the mandatory retirement age of 70.
By 2002, British Land appeared to be giving in to pressures, announcing its intention to split the roles of chairman and CEO into two separate positions. Such a move was not scheduled to take place, however, until late 2003, with Ritblat's plans for retirement. Yet the Ritblat name was expected to remain central to British Land's future. Ritblat's son, Nick Ritblat, was widely tipped as the likely successor to lead the property powerhouse built up by his father over the past 30 years.
Principal Subsidiaries: Adamant Investment Corporation Limited; Bayeast Property Company Limited; The British Land Corporation Limited; British Land Developments Limited; British Land Financing Limited; British Land Investments Netherlands B.V.; British Land Properties Limited; British Land Property Management Limited; Broadgate Property Holdings Limited; City Wall (Holdings) Limited; Clarendon Property Company Limited; Cleartest Limited; Derby Investment Holdings Limited; The Equitable Debenture & Assets Corporation Limited; Exchange House Holdings Limited; Firmount Limited; Jason Estates Limited; London & Henley Holdings Ltd (50%); Meadowhall Investments Limited; Real Property & Finance Corporation Limited; Sealhurst Properties Limited; Union Property Corporation Limited.
Principal Competitors: Land Securities Plc; Taylor Woodrow PLC; Singer and Friedlander Group PLC; ARRIVA PLC; ARVAL PHH Ltd.; Jarvis plc; M J Gleeson Group PLC; Birse Group PLC; Enterprise Inns PLC; Ascot PLC; Slough Estates PLC.