William Rucker’s pressing challenge to revive British Land

William Rucker has racked up his step-count trekking around British Land’s developments in the capital this summer. The new chairman of the FTSE 100 property group found plenty to admire on his fact-finding mission around the schemes in the City, around Paddington station and next to Regent’s Park, which all boast modern offices, buzzy restaurants and a smattering of greenery.
However, beneath the appealing façade there are major challenges confronting Rucker, 63, as he steps into one of the most scrutinised roles in the property industry, in which his predecessors have failed to distinguish themselves. Not least among them is the need to convince sceptical investors that British Land will not continue to disappoint them.
Over the past decade, British Land and LandSec — for so long the two leading lights of Britain’s property industry — have failed to deliver any shareholder returns whatsoever, according to data from the investment bank Jefferies.
The failure of their highly paid executives to react to the growth of online shopping — which inflated the value of the nation’s warehouses and decimated the value of the pair’s shopping centres — has cast a long shadow. Now, uncertainty lingers over the value of their offices at a time when the world of work is being upended by remote working and the forthcoming adoption of artificial intelligence.
Rucker is walking into an organisation in flux. In June, Bhavesh Mistry, the finance director, quit to take the same job at the DIY group Kingfisher. Then last month, British Land announced that Darren Richards, the head of real estate, was jumping ship to become the chief investment officer at LondonMetric, the warehouse owner that capitalised spectacularly on the rise of online shopping.
Rucker and Simon Carter, British Land’s chief executive, are seeking to convince the market the company is getting back on the front foot. Last week they announced their latest splurge on retail parks. However, patience among some investors wore thin long ago.
“We have made it clear to the boards of both companies [British Land and LandSec] that the status quo is not working and is no longer acceptable,” one major British Land investor said. “They have traded at very large discounts to their asset values for a very long period of time and it is simply not good enough to continue along the same path. Both companies need to justify their existence.”
The catalyst for British Land’s rise to prominence came in 1970, when Sir John Ritblat, a property entrepreneur with a penchant for pinstriped suits and chauffeur driven Bentleys, bought the business — then practically a shell company — for £1 million. Ritblat was a canny financier but a difficult character with a tendency to clash with City analysts and corporate governance advisers as he built up the company with deal after deal.
When he retired, in 2006, Ritblat bequeathed his successors a portfolio of offices and shopping centres valued at £18 billion. But over the following 18 years, the value of British Land’s portfolio has crumbled to £8.7 billion and the company’s shares now trade at a discount of 24 per cent to the value of its assets. This suggests the market believes the values may decline in the future.
British Land’s stock market value has now been eclipsed by the warehouse owners Segro and LondonMetric, which was founded by the former British Land executive Andrew Jones, and the student housing provider Unite.
The company’s struggles are, in no small part, down to a 65 per cent drop in shopping-centre values between 2018 and 2023. Centres such as Old Market in Hereford and Drake Circus in Plymouth, both owned by British Land, have been in the eye of that storm.
In the 2010s, British Land’s executives, led at the time by chief executive Chris Grigg, sat on the sidelines as tectonic shifts upended the real estate market. The view they took was that they should stick with shopping centres and offices, where they believed they had a competitive advantage due to their size and expertise.
Meanwhile, sources said, they poured considerable effort into finessing the company’s public perception. One former executive recalled how, in the 2010s, they would conduct days of rehearsals in the auditorium at the London Stock Exchange before each results presentation. “It was all about coming up with the right buzzwords to say. The fact that the company was going down the wrong path and missing out on lucrative opportunities didn’t seem to matter.”
Grigg, a former Goldman Sachs banker, joined British Land from Barclays, where he was chief executive of the commercial bank. While he knew his way around public markets, he was less au fait with the cut-and-thrust of property and tended to heed the advice of his more experienced senior management team, according to executives who worked there at the time.
One insider said Grigg had initiated debates on the merits of pushing into logistics and other faster-growing sectors, but the directors running its office and retail divisions were resistant because it could divert capital away from the businesses they ran.
The current structure — which installed Richards, the executive now leaving for LondonMetric, as head of all real estate in 2019 — is reckoned to be better serving shareholders’ interests. Richards is effectively being replaced by Kelly Cleveland, an insider, who is taking on the expanded role of head of real estate and investment.
In 2020, there was a changing of the guard at both British Land and its rival LandSec, which was guilty of similar missteps in managing its portfolio. Grigg was succeeded by Carter, 49, his mild-mannered finance director, and LandSec appointed Mark Allan, an outsider who previously ran the student housing business Unite and went on to push St Modwen into logistics, as its chief executive.
Both executives believe sticking with retail and high-quality offices will prove a more successful strategy than it did for their predecessors.
“My sense is that British Land and LandSec both lost sight of what was going on with their customers and missed the most significant structural shift the sector had seen for a generation as a result,” Allan said. “But I think that shift is done. Now it’s not about whether you are in this sector or that sector; the driver of growth in real estate today is the quality of the assets.”
Allan and Carter are encouraged by the pace of rental growth for modern, more environmentally friendly offices, which are in short supply. Ken Griffin’s hedge fund Citadel, for example, agreed to lease 13 floors of British Land’s tower near Liverpool Street station, which is under construction, at a rent thought to be about £100 per square foot. Companies are clamping down on homeworking, too. Amazon has ordered staff back to the office five days a week from January.
When it comes to retail, Allan and Carter are placing their chips in different ways. Allan believes destination shopping centres such as Bluewater in Greenhithe, Kent — covered malls with restaurants, shops and cinemas —are set for a strong recovery, but has found few opportunities to buy at prices he deems palatable. Meanwhile, Carter has received backing from investors to plough £1.3 billion into buying 26 open-air retail parks.
Last week, British Land raised £300 million from shareholders to finance its latest foray: a £441 million purchase of seven retail parks from the private equity firm Brookfield. While the deal went down well in the City, the portfolio is almost identical to the one Brookfield paid £330 million for just three years ago.
Still, given that retailers such as Next and Marks & Spencer have gravitated towards retail parks, which offer free parking and affordable rents, Carter believes there is plenty of money still to be made.
“Five years ago, retailers were coming to British Land saying we have too many shops and the rents are too high. Now they are coming in and yelling at me for leasing a store to their competitors.”
In 2020 and 2021, Carter moved to do a series of deals in “urban logistics”, industry jargon for smaller warehouses closer to customers. The deals were priced at the top of the market and raised questions over Carter’s judgement.
However, there are signs the stock market is now warming to his work. Investors who bought British Land’s bombed-out shares a year ago — when they traded at a yawning 47 per cent discount to its asset value — have made a 53 per cent return.
Activity in real estate markets is beginning to pick up as central banks start cutting interest rates. During his first board meeting last month, Rucker told directors the company had got itself into a financial straitjacket and signalled he would be willing to accept higher leverage levels for the right deal.
Rucker, who ran Lazard’s investment banking business for 15 years, is also keen to beef up the real estate experience on the board and in the executive ranks. However, one major shareholder would like to see the new chairman take much more radical action to close the gap between British Land’s stock market value and the value of its assets.
“If William Rucker and the management team absolutely believe the book value of their assets is correct, then Rucker has got to put the company up for sale,” he said. “The boards and management teams of British Land and Land Securities have proved to be wholly ineffective over a long period of time. Simon Carter and Mark Allan are both smart guys, but the reality is the market doesn’t trust these companies.”
Rucker, it seems, will have his work cut out vanquishing the ghosts of British Land’s past.