REG - British Land Co PLC - Final Results- Part 1 <Origin Href="QuoteRef">BLND.L</Origin> - Part 3
16/05/2016 07:05
- Part 3: For the preceding part double click ID:nRSP2773Yb
Political outlook Significant political events (including the pending EU referendum) and policies, bring risks both in terms of uncertainty until the outcome is known and the impact of policies introduced principally in two areas:· reluctance of investors and businesses to make investment decisions whilst the outcome remains uncertain; and· on determination of the outcome, the impact on the case for investment in the UK, and on specific policies and regulation introduced, particularly those which directly impact real estate. · Whilst we are not able to influence the outcome of significant political events, we do take the uncertainty related to such ↑ Uncertainty remains as to the outcome of the pending referendum on the UK's membership of the EU. We maintain support for remaining in the EU. There is uncertainty over the new Mayor's approach to planning and housing. The geo-political environment remains unstable with immigration issues resulting from the ongoing unrest in the Middle East putting pressure on state resources in Europe.
events and the range of possible outcomes into account when making strategic investment and financing decisions.· We engage
public affairs consultants to ensure that we are properly briefed on the potential policy and regulatory implications of
political events. Where appropriate, we act with other industry participants to influence the debate on these policies.
Commercial property investor demand Reduction in investor demand for UK real estate may result in falls in asset valuations and could arise from variations in:· the health of the UK economy;· the attractiveness of investment in the UK;· availability of finance;· relative attractiveness of other asset classes. · The Risk Committee reviews the property market quarterly to assess whether any changes to the market outlook present risks ↑ There has continued to be a high level of investor demand for UK commercial property, both from domestic and international investors during the year. However, since the turn of the year, there has been a slowdown in transactions in part due to heightened global uncertainty and investors' concerns over the pending EU referendum. The market for the most attractive assets remained highly liquid, however investors are becoming increasingly discerning with some softening in demand for more secondary assets, particularly in retail.
and opportunities which should be reflected in the execution of our strategy. The Committee considers indicators such as margin
between property yields and borrowing costs and property capital growth forecasts which are considered alongside the Committee
members' knowledge and experience of market activity and trends.· We focus on prime assets and sectors which we believe will
deliver outperformance over the medium term, benefiting from continuing occupier demand and investor appetite.· Strong
relationships with agents and direct investors active in the market.
Development cost inflation Cost inflation presents a risk to the profitability of our development projects and has the potential to adversely affect our cash position and overall return on investment. · For each project we make a judgement about apportionment of construction risk. Where we retain this risk we aim to fix costs ↓ There are signs that construction cost inflation is moderating, reflecting lower raw material costs. However, tender prices still reflect the limited capacity in the industry with contractors seeking to rebuild margins and limit their risk exposure. We factor cost inflation into our development appraisals and for our projects under construction substantially all our costs are fixed.
early in the process, subject to other market factors, with key contractors subject to financial covenant review.· We factor in
construction cost inflation for our projects as part of the investment appraisal process to assess the viability of each
development.· We are working with our supply chain on initiatives to address skills shortages and to understand how resource
constraints that could impact development costs in the long term.
Occupier demand and tenant default Underlying income, rental growth and capital performance could be adversely affected by weakening occupier demand and occupier failures resulting from variationsin the health of the UK economyand corresponding weakening of consumer confidence, business activity and investment. Changing consumer and business practices (including the growthof internet retailing, flexible working practices, and demand for energy efficient buildings), new technologies, new legislation and alternative locations may resultin earlier than anticipated obsolescence of our buildings if evolving occupier and regulatory requirements are not met. · The Risk Committee reviews indicators of occupier demand quarterly including consumer confidence surveys, employment and ERV ↔ The London occupational market has remained strong through the period with healthy take-up and record low vacancy rates; occupiers are increasingly thinking about requirements several years in advance. The market has, however, slowed since the turn of the year, as occupiers delay decisions until after the pending EU referendum. Looking forward the development pipeline indicates that office supply will remain constrained in the near-term, and potentially longer, if proposed developments continue to be delayed. In retail, the occupational market remains robust with increasing requirements from new entrants and for new store formats, particularly at the most attractive locations. Retailers are continuing to focus their portfolios on fewer, better stores which suits their omni-channel strategies. Challenges to retailer profitability include the Living Wage, business rates revaluation and the increasing cost of omni-channel platforms, including distribution.
growth forecasts, alongside the Committee members' knowledge and experience of occupier plans, trading performance and leasing
activity in guiding execution of our strategy.· We have a diversified occupier base and monitor concentration of exposure to
individual occupiers or sectors. We perform rigorous occupier covenant checks on an ongoing basis so that we can be proactive in
managing exposure to weaker occupiers.· Ongoing engagement with our occupiers. Through our Key Occupier Account programme we
work together with our occupiers to find ways to best meet their evolving requirements.· Our sustainability strategy links
action on occupier health and wellbeing, efficiency, community and sustainable design to our business strategy. Our social and
environmental targets help us comply with new legislation and respond to customer demands; for example, we expect all office
developments to be BREEAM Excellent.
Availability and cost of finance Reduced availability of property finance may adversely impact ability to refinance debt and drive up cost. This may also result in weaker investor demand for real estate.· Increasing finance costs would reduce Underlying Profits. · Market borrowing rates and real estate credit availability and activity are monitored by the Risk Committee quarterly and ↑ There continues to be good overall market appetite for real estate finance, depending on quality of the borrower, project and specific lender requirements. Overall, while there has been market volatility, financing costs remained relatively low. However, macro-economic uncertainties could adversely impact future liquidity and pricing.
reviewed regularly in order to guide our financing actions in executing our strategy.· We maintain good relationships with our
key financing partners and advisors.· We maintain a diverse range of sources of finance to provide access to funding as
required. We aim always to have a good level of undrawn, committed, unsecured revolving facilities to ensure we have adequate
financing availability to support business requirements and opportunities.· We work with industry bodies and other relevant
organisations to participate in any debate of emerging banking regulations where our interests are affected.
Catastrophic business event An external event such as a civil emergency, including a large-scale terrorist attack, cyber crime, extreme weather occurrence or environmental disaster could severely disrupt global markets (including property and finance) and cause significant damage and disruption to British Land's portfolio and operations. We maintain a comprehensive crisis response plan across all business units as well as a head office business continuity plan.· ↔ The Home Office threat level from international terrorism remains 'severe'. Our business continuity plans and asset emergency procedures have been reviewed and enhanced where appropriate. During the year, we introduced an enhanced Information Security Policy with the aim of providing greater protection of British Land's electronic data by mandating increasingly secure processes, appropriate controls and operations and promoting awareness of cyber security.
The Risk Committee monitors the Home Office terrorism threat levels and we have access to security threat information services.·
Asset emergency procedures are regularly reviewed and scenario tested. Physical security measures are in place at properties
and development sites.· Asset risk assessments are carried out (e.g. security, flood, environmental, health and safety).· Our
- More to follow, for following part double click ID:nRSP2773YdRecent news on British Land
See all newsREG - Takeover Panel - Disclosure Table
AnnouncementREG - BlackRock Group British Land Co PLC - Form 8.3 - British Land Company plc
AnnouncementREG - Morgan Stanley & Co. British Land Co PLC - Form 8.5 (EPT/RI) - Replacement of British Land
AnnouncementREG - Glazer Capital, LLC British Land Co PLC - Form 8.3 - British Land Company plc, The
AnnouncementREG - Threadneedle AM Hdgs British Land Co PLC Life Science REIT - Form 8.3 British Land Company plc
Announcement