REG - British Land Co PLC - Final Results
17/05/2023 07:17
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RNS Number : 6498Z British Land Co PLC 17 May 2023
Operationally strong year despite challenging macroeconomic ENVIRONmENT
17 May 2023
Simon Carter, CEO said: "I'm pleased we have delivered a good operational
performance despite the challenging macroeconomic backdrop. We leased 3.4m sq
ft of space, 15% ahead of ERV and portfolio occupancy is now 96.7%. Our focus
on sectors with strong occupational fundamentals drove like-for-like net
rental growth of 6% which, combined with a firm grip on costs, increased
Underlying Profit by 7%.
In line with our strategy, we continue to actively recycle capital. We made
disposals totalling £746m mainly at Paddington Central which crystallised
total property returns of 9% p.a. Recently, we acquired over £200m of high
quality retail park, life sciences and London Urban Logistics assets at
attractive prices.
Higher interest rates have inevitably had an impact on property market yields
and, as a result, the value of our portfolio declined by 12.3%. Whilst we
remain mindful of ongoing macroeconomic challenges, the upward yield pressure
appears to be easing and there are early signs of yield compression for retail
parks.
Ultimately, value in real estate is created over the medium to long term. We
like to invest in supply constrained segments with pricing power, where we can
be market leaders and leverage our competitive strengths to generate
attractive returns. We already lead in campuses, where we continue to see
strong demand for best in class space and are increasing our focus on life
sciences and innovation sectors. We are consolidating our position as the
largest owner and operator of retail parks where scale is an advantage, and we
are building a unique portfolio of centrally located and highly sustainable
urban logistics schemes in London.
We have high quality assets, a best in class platform, a strong balance sheet,
and we continue to see significant opportunities for future value creation
through both development and capital recycling."
Financial
- Underlying Profit growth of 6.9%
- Excellent cost control: administrative costs flat year on year and EPRA
cost ratio 19.5% significantly lower than 25.6% in FY22
- Underlying EPS of 28.3p up 4.8% and full year dividend of 22.64p per
share up 3.3%(1), final dividend to be paid on 28 July 2023
Lettings
- Strong leasing with 3.4m sq ft leased, 15.1% ahead of ERV and 914,000 sq
ft under offer, 18.4% ahead of ERV
- 1.0m sq ft of Campus leasing, 11.0% ahead of ERV; further 106,000 sq ft
under offer, 8.6% ahead of ERV
- 2.4m sq ft Retail & London Urban Logistics leasing, 18.8% ahead of
ERV; further 808,000 sq ft under offer, 19.5% ahead of ERV
Portfolio
- ERV growth of 2.8%: Campuses +2.6%, Retail Parks +2.8% and London Urban
Logistics +29.4%
- Yields +71 bps to 5.8% NEY: Campuses +70 bps to 5.0%, Retail and London
Urban Logistics +72 bps to 6.8%
- Values down 12.3% with Campuses down 13.1% and Retail & London Urban
Logistics down 10.9%; outperformed MSCI by 310 bps
- EPRA Net Tangible Assets (NTA) down 19.5% to 588p and Total Accounting
Return of -16.3%
Developments
- High quality development pipeline to deliver 11.8m sq ft with £1.7bn of
profit to come
- On site with 1.8m sq ft of net zero carbon developments across our
Campuses; 94% of costs fixed for committed developments
Capital activity
- Sales of £746m mainly the sale of 75% of majority of Paddington Central
crystallising total property returns of 9% p.a.
- Acquired £203m of retail parks, life sciences and London Urban
Logistics assets at attractive prices
Balance sheet
- Financing of £1.4bn (£515m H1, £875m H2) on favourable terms, at
margins in line with in place facilities
- Strong liquidity, £1.8bn of undrawn facilities, no requirement to
refinance until early 2026
- Group Net Debt to EBITDA 6.4x(2), proportionally consolidated Net Debt
to EBITDA 8.4x and LTV 36.0% (FY22: 32.9%)
- Weighted average interest rate 3.5%; debt 97% hedged for FY24, with 76%
of projected debt hedged on average over the next 5 years
- Fitch affirmed our senior unsecured credit rating at 'A' with stable
outlook
Sustainability
- Portfolio well on track to be compliant with 2030 legislation, with 45%
rated EPC A or B up from 36% as at 31 March 2022
- 5 star GRESB rating on Developments and 4 star GRESB rating on Standing
Investments
- Created a £25m Social Impact Fund to provide education, employment and
affordable space in the communities in which we operate
Outlook
- ERV guidance, next 12 months: 2-4% growth in Campuses, 2-4% growth in
Retail Parks and 4-5% in London Urban Logistics
- Upward yield pressure appears to be easing and there are early signs of
yield compression for retail parks.
Summary performance
Year ended 31 March 2023 31 March 2022(3) Change
Income statement
Underlying Profit4 £264m £247m 6.9%
Underlying earnings per share4 28.3p 27.0p 4.8%
IFRS (loss) / profit after tax £(1,039)m £965m
IFRS basic earnings per share (112.0)p 103.8p
Dividend per share 22.64p 21.92p 3.3%
Total accounting return(4) (16.3)% 14.6%
Balance sheet
Portfolio at valuation (proportionally consolidated)(5) £8,898m £10,467m (12.3)%5
EPRA Net Tangible Assets per share(4) 588p 730p (19.5)%
IFRS net assets £5,525m £6,768m
Net Debt to EBITDA (Group) (2, 6) 6.4x 7.9x
Net Debt to EBITDA (proportionally consolidated) (6) 8.4x 9.7x
Loan to value (proportionally consolidated) (6, 7) 36.0% 32.9%
Fitch senior unsecured credit rating A A
Operational Statistics
Lettings and renewals over 1 year 2.6m sq ft 2.9m sq ft
Total lettings and renewals 3.4m sq ft 3.9m sq ft
Committed and recently completed development 1.8m sq ft 2.1m sq ft
Sustainability Performance
MSCI ESG AAA rating AAA rating
GRESB (Standing Investments / Developments) 4* / 5* 5* / 5*
1. The growth in the dividend is lower than the Underlying EPS growth
due to the impact of the rental concession restatement in the prior year.
2. Net Debt to EBITDA on a Group basis excludes non-recourse and joint
venture borrowings, and includes distributions from non-recourse companies and
joint ventures.
3. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits (as disclosed in
Note 1 of the condensed financial statements).
4. See Note 2 to the condensed financial statements for definition and
calculation.
5. Valuation movement during the year (after taking account of capex) of
properties held at the balance sheet date, including developments (classified
by end use), purchases and sales.
6. See Note 14 to the condensed financial statements for definition,
calculation and reference to IFRS metrics.
7. EPRA Loan to value is disclosed in Table E of the condensed financial
statements.
Results Presentation and Investor Conference Call
A presentation of the results will take place at 9.00am on 17 May 2023 at Peel
Hunt, 100 Liverpool Street, Broadgate and will be broadcast live via webcast
(Britishland.com) and conference call. The details for the conference call and
weblink are as follows:
UK Toll Free Number: 0808 189 0158
International: +44 20 3936 2999
Access code: 438144
Click for access: Audio weblink (https://streamstudio.world-television.com/927-1254-35508/en)
A dial in replay will be available later in the day for 7 days. The details
are as follows:
Replay number: 020 3936 3001
Passcode: 215453
Accompanying slides will be made available at Britishland.com
(https://www.britishland.com/) just prior to the event starting.
For Information Contact
Investors
Sandra Moura, British Land 07989 755535
Lizzie King, British Land 07808 912784
Media
Charlotte Whitley, British Land 07887 802535
Guy Lamming/Gordon Simpson, Finsbury 020 7251 3801
britishland@finsbury.com (mailto:britishland@finsbury.com)
Chief Executive's review
Overview
The past 12 months have been volatile in terms of the economic and political
landscape. Although more recently the outlook for the UK economy is improving,
sentiment remains fragile. Against this backdrop, our business is performing
well operationally. We leased 3.4m sq ft of space, 15.1% ahead of ERV and
portfolio occupancy is high at 96.7%.
In line with our strategy, we continue to actively recycle capital. We made
disposals of £746m mainly from the sale of 75% of the majority of Paddington
Central crystallising total property returns of 9% p.a. Acquisitions of £203m
increased our exposure to retail parks, life sciences and London urban
logistics.
Higher interest rates have had an impact on property yields. As a result, the
value of our portfolio declined by 12.3%, and our total accounting return was
negative 16.3% for the year. Whilst we remain mindful of ongoing
macro-economic challenges, the upward yield pressure appears to be easing and
there are early signs of compression for retail parks.
Ultimately, value in real estate is created over the medium to long term. We
like to invest in supply constrained segments with pricing power, where we can
be market leaders and leverage our competitive strengths to generate
attractive returns. We already lead in campuses, where we continue to see
strong demand for best in class space and are increasing our focus on life
sciences and innovation sectors. We are consolidating our position as the
largest owner operator of retail parks where scale is an advantage and we are
building a unique portfolio of centrally located and highly sustainable urban
logistics schemes in London.
We have high quality assets, a best in class platform, a strong balance sheet,
and through both development and capital recycling we continue to see
significant opportunities for future value creation.
Financial performance
Our focus on sectors with strong occupational fundamentals drove 5.9%
like-for-like net rental growth. This growth combined with a firm grip on
costs and increased fee income, partly offset by higher financing costs,
resulted in Underlying Profit growth of 6.9%.
Underlying EPS was 28.3p, up by 4.8%, as strong Underlying Profit growth was
partly offset by the impact of a tax credit in the prior year. In line with
our dividend policy of paying 80% of Underlying EPS the proposed full year
dividend is 22.64p, a 3.3% increase. The growth in the dividend is lower than
Underlying EPS growth due to the £4m impact of the rental concession
restatement in the prior year.
Lettings
We maintained strong leasing momentum this year and leased 3.4m sq ft, 15.1%
ahead of ERV, and as a result, the occupancy across our portfolio is high at
96.7%.
In Campuses we leased 1.0m sq ft in the year and occupancy is now 96.2%. Long
term deals were 11.0% ahead of March 22 ERV, 18.2% above previous passing and
a further 106,000 sq ft are under offer. This performance reflects the
continued demand for best in class sustainable buildings located on our
campuses and includes significant renewals to Meta and Credit Agricole, a
pre-let to Virgin Media as well as 146,000 sq ft of deals in Storey our
serviced offices product.
In our Retail & London Urban Logistics segment we had a record year of
leasing with 2.4m sq ft of new lettings and renewals in the year, 18.8% ahead
of ERV and 8.8% below previous passing rent. In Retail Parks, which account
for the majority of this segment, occupancy increased to 98.8% due to the
attractive occupational fundamentals. Retail Park leasing was 1.2m sq ft,
19.5% above ERV, and although it was 9.7% below previous passing rents this is
a significant improvement to leasing in the prior year which was 20.2% below
previous passing rents. We have an additional 808,000 sq ft under offer, 19.5%
ahead of ERV, 9.6% below previous passing rent. The majority of this is at
retail parks reflecting the strong demand for the format due to its
affordability and omni-channel compatibility.
Portfolio
Portfolio ERV growth was 2.8% in FY23. In Campuses ERV growth was 2.6% in the
middle of our guidance range of 2-4%, reflecting particularly strong growth at
Regents Place. In Retail Parks, strong demand for the format, combined with
high occupancy rates resulted in ERV growth of 2.8% at the upper end of our
guidance range. In London Urban Logistics, ERV grew by 29.4% significantly
above our guided range of 4-5%, reflecting the acute undersupply and continued
strong demand for last mile logistics assets in London.
Rising market interest rates caused a repricing of all real estate assets and
as a result, the net equivalent yield of our portfolio increased by 71 bps to
5.8%. Although this was partially offset by the 2.8% growth in ERV, the value
of the portfolio declined by 12.3%. Campuses saw yields increase by 70 bps to
5.0% while, in Retail Parks yields were up by 71 bps to 6.6%. London Urban
Logistics saw a larger yield increase of 187 bps to 4.6%. These assets are
primarily valued on an investment rather than development basis. We are
still expecting attractive development IRRs of c.15% as our original
appraisals assumed some of the outward yield shift we have now seen and there
has been very strong rental growth over the past year.
Our portfolio outperformed the quarterly MSCI All Property total return index
by 310 bps over the year. Our Central London Campuses outperformed the
quarterly MSCI benchmark for All Offices by 40 bps, with Central London
outperforming Regional Offices in the period. Our Retail and London Urban
Logistics portfolio outperformed the MSCI All Retail benchmark by 290 bps due
to our exposure to Shopping Centres and Retail Parks, which outperformed other
MSCI Retail subsectors.
Developments
Developments are a key driver of long term value creation. We have an 11.8m sq
ft development pipeline with over £1.7bn of profit to come.
Our committed pipeline is 1.8m sq ft and is focused on our Campuses. It is 38%
pre-let or under offer of which office space is 46%. Costs to come are £488m
of which 94% have been fixed. We have made one new commitment this year for
the refurbishment of 3 Sheldon Square at Paddington and the building is
already 65% pre-let. Our largest onsite projects are at 1 Broadgate, Norton
Folgate, Aldgate and Phase 1 at Canada Water.
At Canada Water, we are on site at the first three buildings covering 578,000
sq ft of mixed use space. The Founding (previously A1) is a 35 storey tower,
including 186 homes and 121,000 sq ft of workspace, The Dock Shed which
includes 181,000 sq ft of workspace as well as a new leisure centre and
Roberts Close which comprises 79 affordable homes.
We are on site with a 83,000 sq ft life sciences development at The Priestley
Centre in Guildford which will be a mix of office and lab space. This year we
also signed a Memorandum of Understanding with Cambridge Biomedical Campus Ltd
to be a Partner in Masterplanning at the campus.
Our near term pipeline consists of projects yet to be committed. It includes 2
Finsbury Avenue which will deliver best in class sustainable office space at
Broadgate, and the Peterhouse Western Expansion, adjacent to the Peterhouse
Technology Park, which will deliver Innovation and lab enabled space in
Cambridge. Importantly, it also includes our first three London Urban
Logistics developments. The Box at Paddington will be one of London's most
centrally located and sustainable urban logistics assets while our
developments at Verney Road and Mandela Way will be multistorey urban
logistics facilities.
Our medium term pipeline, includes several other developments, the largest of
which are the redevelopment of Euston Tower at Regent's Place and the future
phases of the Canada Water Masterplan.
Strategy
We invest in supply constrained segments with pricing power, where we can be
market leaders and leverage our competitive strengths to generate attractive
returns.
Our competitive strengths are:
- Portfolio of high quality assets Our portfolio of campuses is mainly
located in London, a truly global city which appeals to a broad range of
businesses. We are the largest owner and operator of retail parks in the UK
and we are building a unique portfolio of centrally located and highly
sustainable urban logistics schemes in London.
- Best in class platform We have a long-standing team with deep experience
across the real estate value chain from design, planning, development and
construction through to asset and property management.
- London expertise The depth of our relationships with planning
authorities, contractors and other stakeholders in London, combined with our
extensive construction experience gives us an unparalleled ability to unlock
value through development.
- Sustainability Our developments, refurbishments, sustainability targets
and reporting are all industry leading.
- Partnerships with investors We have strong relationships with sovereign
wealth funds such as Norges and GIC as well as large pension funds like
AustralianSuper and Allianz which give us an important ability to crystalise
value through asset sales and joint ventures.
- Financial strength and discipline We have a strong balance sheet, use
leverage appropriately and we have a disciplined approach to capital
allocation to deliver returns through the property cycle.
Business model
We have a diversified approach and invest in schemes where we can leverage our
competitive strengths to create value. We are developers and asset managers
with a value-add strategy and our medium-term objective is to deliver a total
accounting return (TAR) of 8-10% through the cycle.
Our aim is to create value for all our stakeholders and our approach is as
follows:
- Source value-add opportunities We target value acquisitions and
development opportunities. This is underpinned by a strong balance sheet and a
disciplined approach to risk management.
- Develop and actively manage We create and manage modern, high quality
and sustainable space that meets our customers needs and that direct
investors, such as sovereign wealth funds and pension funds, want to own.
- Recycle capital We rotate out of assets where we have delivered the
business plan to crystalise returns and reinvest capital into opportunities in
our chosen strategic themes where we can drive strong returns through
development or asset management.
- Sustainability From FY21 new developments have been net zero carbon, and
we target BREEAM Outstanding and EPC A. We forge strong relationships with
local communities and authorities and have a good track record of creating
opportunities for employment at our places.
Strategic themes
We like to focus on strategic themes that have strong fundamentals. Currently,
we see opportunities in:
Developments on our campuses
Our campus model offers our customers high quality sustainable workspace with
great transport infrastructure, beautiful public realm, world class retail and
engaging amenities. In addition, it provides our customers with flexibility
and allows for clustering of complementary businesses.
- Best in class sustainable offices We continue to see strong demand for
the modern, sustainable offices on our campuses. Occupiers are looking for the
best space for their business to help them attract and retain staff in a
competitive jobs market while at the same time helping them meet their
net-zero goals. Furthermore, at around 10% of salary costs, rents are
affordable. Costar research shows that net absorption rates of new best in
class buildings has been strongly positive in the past 5 years in both the
City and the West End. As a result, given the low vacancy rates, rents for
modern sustainable buildings are showing strong growth based on recent
transactions.
We are seeing this come through in the strong demand for our developments. We
have a 8.9m sq ft development pipeline to deliver best-in-class sustainable
buildings on our campuses. We target a BREEAM(1) outstanding certification in
our developments and JLL research(2) shows that offices with a BREEAM
certification have an average c.12% premium on rents and an average capital
value premium of c.20%.
- Life Sciences and innovation We are increasingly focussed on delivering
new space for customers in high growth life sciences and innovation sectors in
London and across the Golden Triangle (London, Oxford and Cambridge) where
supply is constrained. Our campus at Regents Place, in the centre of the
Knowledge Quarter in London, is uniquely positioned to unlock exciting growth
opportunities in this segment given the importance of proximity to research
and education organisations. Canada Water has the potential to be another
significant innovation cluster, while our acquisition of Peterhouse Technology
Park, and the land adjacent to it, is our first campus in Cambridge.
By the end of the year we will have delivered 190,000 sq ft of lab enabled
buildings across the portfolio and our total pipeline will deliver 1.9m sq ft
over the next 7 years. In addition, we have recently established an Innovation
Advisory Council to support our growth in this area and advise on customer
requirements, provide insight on future trends, help the business build
connections and underwrite new acquisitions.
Retail Parks
Retail parks are retailers' preferred format, as they are large and compatible
with the way people shop, supporting retailers' omni-channel strategy,
allowing for click and collect, ship from store and in-store returns.
Importantly, they are affordable and have an occupancy cost ratio of 9%.
Retail parks account for less than 10% of the UK's total retail space and
there is limited new supply expected, given the market price per sq ft is
below replacement cost and it is difficult to obtain planning consent. Given
this lack of new supply, the growing customer demand is driving high occupancy
rates, especially in the best locations, reflected in the 98.8% occupancy of
our retail park portfolio.
We like the retail park format and will continue to look for acquisition
opportunities where we can create value by leveraging our scale and our
expertise in asset management. Most of our leasing deals are with national
retailers who are increasing their presence in the best located retail parks
while at the same time reducing their exposure to the high street and
secondary shopping centres. We have actively targeted a broad range of
customers including general retailers, grocers, discounters and value
retailers to increase the resiliency of our occupier base.
London Urban Logistics
There is an acute shortage of logistics space within London's M25. Demand is
strong due to the long term growth of e-commerce combined with rising consumer
expectations for priority delivery, and as a result vacancy in Greater London
is 2.3% and 0.4% in Zone 1. This acute supply-demand imbalance underpins the
attractiveness of this market segment.
We have a development led approach and our pipeline has a gross development
value of £1.3bn. Our strategy is to deliver best in class, environmentally
sustainable multistorey and Zone 1 last mile urban logistics schemes that will
appeal to a range of occupiers. Last mile logistics solutions that allow the
use of e-bikes for delivery to the end customer have up to 90% lower carbon
emissions, are 1.6x faster than vans in traffic and support the net zero
objectives of local authorities.
Strategy in action
We create value by actively recycling capital out of assets where we have
delivered the business plan, and into opportunities where we can leverage our
competitive strengths in asset management, development and placemaking to
drive returns.
Since April 2022, we have made disposals of £746m mainly from the sale of 75%
of the majority of Paddington Central where we had created considerable value
through development, asset management and place making and were able to
crystallise a total property return of 9% p.a. We will continue to recycle out
of mature assets that have completed their business plans or are non core to
British Land.
Since April 2022, we made acquisitions totalling £203m. We acquired £148m of
retail parks with a blended net initial yield of 8.1% to further increase our
market leading position. Our acquisition of Peterhouse Western Expansion for
£25m extended our ownership at the Peterhouse Technology Park, our first life
sciences and innovation campus in Cambridge. We also acquired Mandela Way a
development site for a multi-storey urban logistics facility for £22m. The
site is located in Southwark, the same borough as our Canada Water
development, where we have strong relationships with the local council.
1. Building Research Establishment Environmental Assessment Method
BREEAM standards aim to minimise harmful carbon emissions, improve water usage
and reduce material waste. The rating enables comparability between projects
and provides assurance on performance, quality and value of the asset.
2. JLL Report on sustainability and value January 2023
We spent £262m on developments in the year. This includes spend to deliver
best in class sustainable offices at 1 Broadgate, where the office space is
fully let (or under option), Norton Folgate, which is 33% pre-let and Phase 1
of Canada Water.
As we look ahead, we will remain disciplined as we continue to execute our
strategy. We will make acquisitions that align with our strategic themes and
where we can best deploy our competitive strengths. That means we will
continue to acquire retail parks where we see attractive assets that will
further consolidate our market leading position. We will also consider life
sciences and innovation opportunities in Oxford and Cambridge as well as
suitable London urban logistics sites. Good demand for our development
pipeline underpins our returns expectations and we will opportunistically
recycle out of mature office assets as well as non core assets such as
shopping centres.
Balance sheet
We have a strong balance sheet which, combined with capital recycling, allows
us to execute our strategy of investing in development opportunities and
making acquisitions. Group Net Debt to EBITDA was 6.4x and, on a
proportionally consolidated basis, Net Debt to EBITDA and LTV ratios were 8.4x
and 36.0% respectively. We have significant liquidity with £1.8bn of undrawn
facilities, and no requirement to refinance until early 2026.
We maintain good relationships with debt providers across a range of financing
markets. This year, we completed £1.4bn total financing on favourable terms,
including margins in line with our in place facilities; £1.2bn of this was
new debt raised with existing and new bank relationships. A loan of £515m was
arranged for Paddington Central in the first half of the year, alongside
completion of the new joint venture, and in the second half of the year in
volatile market conditions we signed £875m of facilities.
For British Land, we agreed three new revolving credit facilities totalling
£375m, with ESG linked targets aligned to our sustainability strategy. For
Canada Water, in March 2023 we arranged a £150m Green development loan for
Phase 1 of the project.
Our weighted average interest rate at 31 March 2023 was 3.5%, in line with
September 2022. The interest rate on our debt for the year to 31 March 2024 is
97% hedged, and 76% of our projected debt is hedged on average over the next
five years.
Sustainability
We launched our current Sustainability Strategy in 2020, committing to
achieving a net zero carbon portfolio by 2030 with a clear set of targets to
reduce both the embodied carbon in our developments and the operational carbon
across our portfolio. This year we have evolved our Sustainability Strategy
further by grouping it in to three key pillars: Greener Spaces, Thriving
Places and Responsible Choices which map to the environmental, social and
governance elements.
Our Greener Spaces pillar includes our ambitious 2030 Net Zero targets for
both our developments and our standing portfolio. We are pleased with the
continued progress we are making, as sustainability becomes even further
embedded in the day-to-day running of our business. Average embodied carbon
across our office development pipeline is 646 kg CO2e per sqm, tracking ahead
of the glidepath to our 2030 target of 500kg CO2e per sqm. Across our managed
portfolio the majority of our assets have a net zero plan and 45% of our
portfolio is now rated EPC A or B. This is up from 36% as at March 2022,
whilst 50% of our offices are EPC A or B rated, up from 46% as at 31 March
2022.
The Thriving places pillar of our strategy reflects our commitment to making a
long-lasting, positive social impact in our communities by collaboratively
addressing local priorities. We were delighted to launch a £25m Social Impact
Fund in March 2023 to provide education, employment and affordable space in
the communities in which we operate. We have also introduced targets for 2030
which focus on the areas where we can have the greatest impact: education,
employment and affordable space. This year, for the first time, we have
reported the value created by our core projects and the Canada Water
development, which totalled £10.6m, combined with our provisions of £1.9m of
affordable space, whereby in total we generated £12.5m of social value. Next
year, coverage will be expanded across all our community activities.
Responsible Choices is about making responsible choices across all areas of
our business and we encourage our customers, partners, and suppliers to do the
same. This year we were pleased to be ranked the top property company and
16(th) overall in the Social Mobility Foundation's Index of the top 75 UK
employers taking action to improve social mobility in the workplace. Our
overall sustainability performance has been recognised in international
benchmarks including GRESB, where we achieved a GRESB 5 star rating for
Developments, the highest in Europe in our sector, and a 4 star rating for
Standing Investments. We also retained our MSCI AAA rating and improved our
ranking in the FTSE4Good index by 7 percentage points to rank just outside the
top decile.
Outlook
Although more recently the outlook for the UK economy has improved, continued
macroeconomic uncertainty remains our central case for the next twelve months.
The upward yield pressure appears to be easing and there are early signs of
compression for retail parks. However, liquidity in the investment market
remains low so there is still some uncertainty on the outlook.
In terms of rental growth, we expect Campuses to continue to outperform as
demand gravitates towards best in class sustainable space and the disparity
between "the best vs the rest" continues to widen. As a result, we expect 2-4%
ERV growth for our assets. In Retail Parks, the affordability of the format
combined with its omni-channel compatibility, will continue to drive high
occupancy. These strong occupational fundamentals underpin our upgraded
expectations of 2-4% ERV growth for our retail parks. In London Urban
Logistics we expect the acute shortage of supply to drive ERV growth of 4-5%.
We are performing well operationally and delivering well against the factors
we can control. We have high quality assets, a best in class platform, a
strong balance sheet, and through both development and capital recycling we
continue to see significant opportunities for future value creation.
Market
Macro-economic backdrop
The macroeconomic backdrop in the UK was volatile in the period. Geopolitical
tensions, high inflation and successive Bank of England interest rate rises
since early 2022 have resulted in lower GDP growth forecasts. The UK has thus
far avoided a recession, consumer confidence has been resilient and labour
markets remain robust with unemployment at 3.8%. However, sentiment is fragile
and the outlook remains uncertain.
London office market
Central London office occupational markets have remained robust with take up
of 8.2m sq ft across the City and West End over the year. Banking &
finance, professional services and creative industries were the largest
sources of take up with consolidation in some sectors (notably legal) an
important factor. As businesses evaluate their workspace requirements, demand
continues to gravitate towards the very best space, with an emphasis on
sustainability, shared and flexible space and excellent transport connections.
This 'flight to quality' in offices helps occupiers attract and retain staff
in a competitive jobs market, as well as helping them meet their net zero
goals. Recent research from CoStar highlights net absorption rates of best in
class, sustainable space has been positive with vacancy rates falling and
rents climbing. In contrast net absorption rates for older offices have been
strongly negative since the pandemic began, with far more tenants leaving than
moving in, widening the gap between 'the best and the rest'.
Investment markets were subdued in the financial year with investors pausing
to assess the impact of rising interest rates and inflation. Consequently,
volumes have been relatively light at c.£10bn across the City and West End
compared to £17bn in FY22.
Life sciences market
Life sciences fundamentals remain strong, with take up across the Golden
Triangle totalling 1.4m sq ft in 2022 (calendar year), the highest figure in
five years. Venture capital funding also remained positive in 2022, with
volumes behind record levels achieved in 2021 but still 22% ahead of 2020,
further driving demand for space. Meanwhile, vacancy in London and Cambridge
is below 1% highlighting the constraint in supply. This supply and demand
imbalance has resulted in growing rents, which is expected to continue.
Investment volumes for the year reached £2.1bn. This is below record 2021
levels, but ahead of prior years. As a result of macroeconomic factors, Golden
Triangle prime yields shifted outwards by 25 bps to 4.25% at the end of the
year. In contrast to historic investment trends in the life sciences sector,
2022 saw more value add, development and repurposing activity, demonstrating
the lack of available stock.
Retail market
Occupational markets have continued to strengthen over the year despite
macroeconomic headwinds. In the aftermath of Covid-19, retailers that have
established more resilient business models with a successful omni channel
strategy, are performing well and increasingly looking to take space on retail
parks. The format appeals to a wide range of retailers from Marks &
Spencer and Next to value retailers such as Lidl, Aldi and B&M. Across the
market, retailers are also facing higher costs and margin pressures. To help
manage this and stimulate more impulse purchases to increase the average
basket size, more are incentivising shoppers to complete fulfilment instore
which is the most cost effective solution. This combined with lower occupancy
costs on retail parks, plays well to the retail park proposition.
Retail parks investment volumes in the financial year were £3.2bn compared to
£4.5bn in FY22, and yields moved out 75-100 bps. However, since January 2023,
retail parks have experienced a repricing driven by limited supply and the
emergence of new investors, who are attracted by low rents, attractive income
returns and positive growth fundamentals, targeting the sector. As a result,
prime market yields have moved in 25 bps to 5.75%. Shopping Centre volumes
were low at £0.9bn, as investors wait for more clarity on pricing. Limited
availability of debt, few transactions and pricing uncertainty has led to a
lack of new stock coming to market.
Logistics market
In London, the occupational market remained strong. Take up year to date
(calendar 2022) was 1.5m sq ft and rents continue to grow with prime rent now
£35 psf. This reflects the strength of demand for very centrally located
space driven by the growth of e-commerce and increased expectations for
priority delivery, requiring closer proximity to the customer. As a result,
vacancy in Greater London is very low at 2.3% and 0.4% in Zone 1.
However, as a very low yielding sector, sentiment across the wider UK
logistics market has been impacted by rising interest rates. Investment
activity reduced over the period with a slowdown in stock coming to market as
sellers choose to delay sales where they have optionality.
Business review
Key metrics
Year ended 31 March 2023 31 March 2022
Portfolio valuation £8,898m £10,467m
Occupancy(1) 96.7% 96.5%
Weighted average lease length to first break 5.7 yrs 5.8 yrs
Total property return (9.5)% 11.7%
- Yield shift +71 bps (42) bps
- ERV movement 2.8% (1.2)%
- Valuation movement (12.3)% 6.8%
Lettings/renewals (sq ft) over 1 year 2.6m 2.9m
Lettings/renewals over 1 year vs ERV +15.1% +4.5%
Gross capital activity £1,297m £1,479m
- Acquisitions £203m £747m
- Disposals £(746)m £(486)m
- Capital investment £348m £246m
Net investment/(divestment) £(195)m £507m
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
1. Where occupiers have entered CVA or administration but are still
liable for rates, these are treated as occupied. If units in administration
are treated as vacant, then the occupancy rate would reduce from 96.7% to
96.4%.
Portfolio performance
At 31 March 2023 Valuation Valuation movement ERV movement Yield shift Total property return Net equivalent yield
£m
%
%
bps
%
%
Campuses 5,650 (13.1) 2.6 +70 (11.9) 5.0
Central London 5,103 (12.9) 2.7 +71 (11.6) 5.0
Canada Water & other Campuses 456 (17.4) (0.2) +43 (16.6) 5.5
Retail & London Urban Logistics 3,248 (10.9) 3.0 +72 (5.0) 6.8
Retail Parks 1,976 (10.2) 2.8 +71 (4.1) 6.6
Shopping Centres 746 (7.6) 1.2 +39 (0.3) 7.9
London Urban Logistics 263 (24.2) 29.4 +187 (22.4) 4.6
Total 8,898 (12.3) 2.8 +71 (9.5) 5.8
See supplementary tables for detailed breakdown
The value of the portfolio was down 12.3% driven by yield expansion of 71 bps
across the portfolio. This was partially offset by positive ERV growth of
2.8%.
Campus valuations were down 13.1%, with our West End portfolio down 11.3% and
City portfolio down 14.8%, reflecting yield expansion of 72 bps and 69 bps
respectively. While macroeconomic uncertainty has impacted investment markets,
occupational demand has remained robust, particularly for new buildings with
strong sustainability credentials. We saw ERV growth of 2.6% across Campuses,
driven by the West End where ERVs were up 4.0% reflecting our successful
leasing activity and tighter supply.
The value of our Retail Park portfolio fell by 10.2% in the year, as yields
increased by 71 bps to reflect rising interest rates. Encouragingly Retail
Parks saw positive ERV growth for the first time in five years, up 2.8%. The
value of our Shopping Centres fell by 7.6%, with ERVs now growing for the
first time in over five years, up 1.2%.
In London Urban Logistics, values have declined by 24.2%, despite a strong
occupational market. This was driven by yield expansion of 187 bps as a result
of rising interest rates. The combination of strong occupational demand and
acute undersupply of the right kind of space in core London locations drove
ERV growth of 29.4%. These assets are primarily valued on an investment rather
than development basis. We are still expecting attractive development IRRs
of c.15% as our original appraisals assumed some of the outward yield shift we
have now seen and there has been very strong rental growth over the past year.
Capital activity
From 1 April 2022 Campuses Retail & London Urban Logistics Total
£m
£m
£m
Purchases 33 170 203
Sales (711) (35) (746)
Development Spend 255 7 262
Capital Spend 45 41 86
Net Investment (378) 183 (195)
Gross Capital Activity 1,044 253 1,297
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
The total gross value of our capital activity since 1 April 2022 was £1.3bn.
The most significant transaction was the sale of a 75% interest in the
majority of our assets at Paddington Central to GIC for £694m in July 2022.
This was 1% below September 2021 book value and represented a net initial
yield (NIY) of 4.5%. As part of the transaction agreement, GIC were given
options over two further assets at Paddington Central, the development site at
5 Kingdom Street and the Novotel at 3 Kingdom Street. The option at 5 Kingdom
Street has now lapsed and the option at 3 Kingdom Street, which enables GIC to
acquire the asset at prevailing market value via the first joint venture, is
available for five years. British Land continues to act as the development and
asset manager for the campus, for which we earn fees.
We have progressed innovation opportunities including the £25m purchase of
the Peterhouse Western Expansion site to the west of our holding on the
Peterhouse Technology Park, with consent for a 90,000 sq ft office and lab
building. This acquisition represents an opportunity to deliver space in
Cambridge, a market which is structurally undersupplied and where we expect
strong rental growth.
We continue to consolidate our position as the UK's largest owner and operator
of Retail Parks. Since April 2022, we've acquired three Retail Parks including
Capitol Retail and Leisure Park in Preston for £51.5m (NIY 8.4%), Solartron
Retail Park in Farnborough for £34.8m (NIY 7.7%), and Westwood Retail Park in
Thanet for £54.5m (NIY 8.1%). All are dominant retail parks within their
catchment, let to a strong mix of retailers and benefit from excellent
accessibility. In addition, we acquired the DFS unit in Cambridge for £7.4m
(NIY 7.1%), which sits immediately adjacent to the B&Q we acquired last
year. This purchase offers a secure income stream with the potential for
longer-term life sciences and innovation redevelopment in a strategic
location.
We also disposed of non core assets including old Debenhams stores in Chester
and Cardiff for £4.2m, our 50% stake in Deepdale Retail Park for £30.3m (NIY
7.5%) and 126-134 Baker Street, a mature standalone office asset, for £17.3m
(NIY 4.7%).
In London Urban Logistics, we acquired a site in Mandela Way for £22m, our
second urban logistics location in Southwark, following the acquisition of
Verney Road for £31m in February 2022. Mandela Way is an excellent location
for a multi-storey, urban logistics scheme, close to the Old Kent Road, the
City and London Bridge, and in an area that is popular with a range of third
party logistics providers.
Campuses
Key metrics
Year ended 31 March 2023 31 March 2022
Portfolio Valuation £5,650m £6,967m
Occupancy 96.2% 96.7%
Weighted average lease length to first break 7.2 yrs 7.0 yrs
Total property return (11.9)% 8.5%
- Yield shift +70 bps (11) bps
- ERV growth 2.6% 0.0%
- Valuation movement (13.1)% 5.4%
Total lettings/renewals (sq ft) 1,037,000 1,654,000
Lettings/renewals (sq ft) over 1 year 777,000 1,388,000
Lettings/renewals over 1 year vs ERV +11.0% +5.4%
Like-for-like income(1) +6.5% +2.5%
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
1. Like-for-like excludes the impact of surrender premia, CVAs &
admins and provisions for debtors and tenant incentives.
Campus operational review
Campuses were valued at £5.65bn, down 13.1%. This was driven by 70 bps yield
expansion partly offset by ERV growth of 2.6%. Lettings and renewals totalled
1.0m sq ft, with deals over one year 11.0% ahead of ERV. Like-for-like income
was up 6.5%, driven primarily by strong leasing, particularly in Storey where
we saw 146,000 sq ft of leasing activity including 61,000 sq ft of renewals,
representing a 76% retention rate. Across our Campuses, we are under offer on
a further 106,000 sq ft, 8.6% ahead of ERV. In addition, we had 491,000 sq ft
of rent reviews agreed 2.6% ahead of passing rent.
Across our standing portfolio, we benefit from a diverse group of high quality
customers focused on financial, corporate, science, health, technology and
media sectors. Occupancy is 96.2% and we have collected 100% of our rent for
the year. Our recent customer satisfaction survey was strong: we scored 4.3
out of 5 stars and 79% say we are "the best" or "better than most" other
office providers based on a survey of 53 office facilities managers.
Broadgate
Leasing activity at Broadgate covered 378,000 sq ft (excluding Storey), of
which 248,000 sq ft were long term deals, completed on average 2.6% ahead of
ERV. Broadgate occupancy is 94.9%.
The most significant deal was a regear to Credit Agricole at Broadwalk House,
covering 116,550 sq ft, which extended their lease by five years to 2030. In
this case, we have worked closely with the customer to deliver energy
efficient interventions which progress our net zero plans and generate
efficiencies for Credit Agricole, which is particularly important in the
context of higher energy prices. We are underway with significant asset
management initiatives at 199 Bishopsgate totalling £35m where we have taken
the opportunity to incorporate energy efficient interventions at little
incremental cost since they are part of the wider refurbishment.
We have made some exciting additions to our food and beverage offer with Los
Mochis, a pan-Pacific concept opening a 14,000 sq ft flagship restaurant on
the rooftop of 100 Liverpool Street. New additions such as this encourages
footfall to our campus which is benefitting from the opening of the Elizabeth
Line.
One of our key social impact initiatives on the Campus was New Diorama Theatre
(NDT) Broadgate, which ran for 18 months and ended in July 2022. It provided
over 20,000 sq ft of creative space free to independent and freelance artists.
Over 8,800 artists used the space, making more than 250 new shows, and an
independent economic impact report found it generated £40m of additional
gross revenue for the UK economy, supporting over 1,000 full time jobs. In
addition, Broadgate Connect, an ongoing employment initiative on the Campus
supported 138 local job seekers this year with 44 placed into work. In
connection with the Young Readers Programme partnering with the National
Literacy Trust, 372 school children participated in activities across the
campus.
The Campus saw a valuation decline of 16.5% driven by outward yield shift of
69 bps, partially offset by ERV growth of 1.6%.
Regent's Place
At Regent's Place (excluding Storey), we have completed 195,000 sq ft of
leasing, all of which were long term, averaging 19.8% ahead of ERV. The most
significant deal was the regear to Meta at 10 Brock Street covering 146,000 sq
ft. Occupancy at the Campus is now 96.0%.
Regent's Place is gaining momentum as a life sciences and innovation hub. We
have already this year delivered c.15,000 sq ft of lab space across two floors
at 338 Euston Road of which 5,300 sq ft was let to Relation Therapeutics. In
addition one floor (33,000 sq ft) at 20 Triton Street will be delivered in
July 2023. We have similar opportunities at other buildings on the Campus and
are aiming to deliver 62,000 sq ft of lab space at Regent's Place by the end
of 2023 and c.700,000 sq ft by 2030. We are having positive discussions with
key life sciences and innovation organisations in the Knowledge Quarter to
partner with them on delivering our plans. This is in addition to our current
innovation customers such as FabricNano, the General Medical Council and the
NHS.
The second phase of our public realm improvement programme was delivered at
the end of 2022. Our social programmes at Regent's Place have included
partnering with the Rebel Business School, with 58 participants attending a
training programme on how to start their own business. We also supported 16
local residents into employment with service partners on the Campus. Through
the Young Readers Programme, in partnership with the National Literacy Trust,
199 school children participated in activities across the Campus.
The Campus saw valuation declines of 14.1%, driven by outward yield shift of
76 bps offset by ERV growth of 3.8%.
Paddington Central
Leasing activity at Paddington Central (excluding Storey) covered 150,000 sq
ft, on average 2.3% ahead of ERV. Occupancy on the Campus remains very high at
99.4%.
The most significant letting in the year was 83,000 sq ft to Virgin Media O2
at 3 Sheldon Square, which will become their new UK Headquarters. The building
is currently undergoing an all-electric refurbishment, and the deal with
Virgin Media 02 takes the building to 65% pre-let, ahead of completion in
February 2024.
Following the sale of 75% of the majority of assets at the Campus to GIC,
Paddington Central is now held in a joint venture with GIC owning 75% and
British Land owning the remaining 25% with the partners having joint control.
We are part of the Paddington Life Science Partnerships Group led by Imperial
NHS Trust and are delighted that they have chosen to locate their innovation
centre on the Campus at 1a Sheldon Square. We have provided space to the
Ukrainian Institute London language school to teach English. The classes have
benefitted 627 displaced Ukrainians , with 427 individuals gaining English
qualifications. Working with the National Literacy Trust, 259 local children
visited Paddington Central as part of their Young Readers Programme, taking
part in sustainability workshops with Square Mile Farms, an urban farming
business on the campus.
Paddington Central saw valuation decline of 5.8% driven by significant outward
yield shift of 57 bps which was partially offset by strong ERV growth of 9.7%
reflecting the improving rental tone in the wider Paddington area.
Storey: our flexible workspace offer
Storey is part of our Campus model and is currently operational across 313,000
sq ft on all of our Campuses and in two standalone buildings. Storey provides
occupiers with the flexibility to expand and contract depending on their
requirements. The quality of the space, central location and access to Campus
amenities make the space appealing to scale up businesses. Customers on our
Campuses also benefit from access to ad hoc meeting and events space at Storey
Club and this service is an increasingly important factor when making
workspace decisions.
We exchanged 146,000 sq ft of leasing in the year, 61,000 sq ft of these deals
are renewals, representing a 76% retention rate. This demonstrates that
existing customers like the space and want to commit to stay for longer.
Storey occupancy is 93% up from 86% at Q4 FY22, reflecting continued success
in securing renewals and minimising void periods between customers.
In H2, we launched 23,000 sq ft of Storey space at 155 Bishopsgate, which has
been let in its entirety to Levin Group for its new London Headquarters. The
deal was Levin Group's third upsize at Broadgate, having initially taken space
at 1 Finsbury Avenue before taking additional space in the neighbouring unit
and at 100 Liverpool Street.
Canada Water
Following the sale of 50% of the Canada Water Masterplan in March 2022, this
Campus is now held in a 50:50 joint venture with AustralianSuper, Australia's
largest superannuation fund. The joint venture is committed to developing
Phase 1 of the Masterplan covering 578,000 sq ft and to progressing subsequent
phases of the development, with equity funding split equally between British
Land and AustralianSuper.
The total development cost of the entire project is £4.1bn. It is expected to
complete in 2031 and should deliver a total development value of £6.3bn of
which the commercial element accounts for £3.8bn and residential the
remainder. British Land is targeting development returns in the low teens for
the whole project.
We have outline planning permission for the entire scheme and are on site with
Phase 1, which comprises a mix of workspace, retail, leisure and residential
as set out below. We are targeting rents on the workspace of over £50 psf and
a capital value of around £1,000 psf on the residential, which are both
attractive relative to competing schemes. Residential sales for The Founding
launched in January and current reservations are above targeted pricing
levels.
Sq ft Workspace Retail & leisure No. residential homes Total
1-3 Deal Porters Way (A1); The Founding (residential) 121,000 8,000 186 270,000
The Dock Shed (A2) 181,000 65,000 - 246,000
Roberts Close (K1) - - 79 62,000
Total 302,000 73,000 265 578,000
The London Borough of Southwark held an initial 20% interest in the scheme and
have the ability to participate in the development up to a maximum of 20% with
returns pro-rated accordingly. Although they have elected not to fully
participate in Phase 1 they are pre-purchasing the 79 affordable homes at
Roberts Close (K1) and have part funded the 55,000 sq ft leisure centre in The
Dock Shed (A2).
In July 2022, we were pleased that Southwark Council granted detailed planning
permission for the Printworks, in Zone H of the Masterplan. Reflecting its
success as a cultural destination, we are now working with the operators to
explore retaining a cultural venue to capitalise on the popularity of the
offer. In the same month, Southwark Council also granted planning permission
to develop Zones F and L, adjacent to the Printworks. Together these will
deliver 647 homes including 174 affordable homes, as well as workspace and
retail space. We have also submitted a Reserved Matters Application for Zone G
of the Masterplan, which includes a replacement Tesco store, 419 homes of
which 61% are affordable housing and some smaller flexible retail space.
Together, these developments represent the next phases of the Canada Water
Masterplan.
Building on the success of the TEDI modular campus we are onsite with a 33,000
sq ft modular innovation campus on the site, which completes in June 2023. We
are under offer with CheMastery, a startup aiming to increase the efficiency
of chemical research and manufacturing, to take some of that space.
The valuation of Canada Water declined 19.7%, driven by a 30 bps outward yield
shift on offices, which has amplified the impact on the land value. Given that
we are early into a 10-12 year programme, we still expect to deliver
significant profits.
Retail & London Urban Logistics
Key metrics
Year ended 31 March 2023 31 March 2022
Portfolio valuation £3,248m £3,500m
- Of which Retail Parks £1,976m £2,114m
- Of which Shopping Centres £746m £800m
- Of which London Urban Logistics £263m £319m
Occupancy1 97.3% 96.3%
Weighted average lease length to first break 4.6 yrs 4.6 yrs
Total property return (5.0)% 19.1%
- Yield shift +72 bps (97) bps
- ERV growth 3.0% (2.8)%
- Valuation movement (10.9)% 9.9%
Total lettings/renewals (sq ft) 2,395,000 2,196,000
Lettings/renewals (sq ft) over 1 year 1,808,000 1,523,000
Lettings/renewals over 1 year vs ERV +18.8% +2.8%
Like-for-like income(2) +5.3% (0.8)%
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
1. Where occupiers have entered CVA or administration but are still
liable for rates, these are treated as occupied. If units in administration
are treated as vacant, then the occupancy rate for Retail would reduce from
97.3% to 96.8%.
2. Like-for-like excludes the impact of surrender premia, CVAs &
admins and provisions for debtors and tenant incentives.
Retail & London Urban Logistics operational review
Operational performance
We have achieved record leasing volumes this year with 2.4m sq ft of deals
signed, of which half was at our Retail Parks. Deals completed over the year
were 18.8% ahead of ERV and 8.8% below previous passing rent. Occupancy is
high at 97.3% and 98% of FY23 rent was collected. Like-for-like income was up
5.3%.
Weighted average lease length remained at 4.6 years. We had 375,000 sq ft of
rent reviews that were agreed 1.0% above passing rent. In total, we have
808,000 sq ft of deals under offer, 19.5% above March 2022 ERV. Our recent
customer satisfaction survey was strong: we scored 4.4 out of 5 stars and 75%
say we are "the best" or "better than most" other retail providers based on a
survey of 725 retail store managers.
Retail Parks
We completed 1.2m sq ft of leasing deals across our Retail Park portfolio, on
average 9.7% below previous passing rent and 19.5% above ERV. Retail Parks
occupancy is 98.8%, the highest level in twelve years, reflecting strong
leasing activity and like-for-like income was up 6.2%.
Notable deals included 37,000 sq ft to Inditex (Zara) at Glasgow Fort, where
they doubled their footprint and 28,800 sq ft to Poundland across two retail
parks at Speke and Denton. We continue to lease well to Aldi, with 40,000 sq
ft let at Woking and Farnborough. In addition, we have introduced new brands
at our Retail Parks, including Pets Corner at Whiteley and Black Sheep Coffee
at Broughton, who are due to open their first ever store on a retail park.
Shopping Centres
We continue to actively manage our Shopping Centres improving occupancy and
driving rents forward. We have completed 991,000 sq ft of deals across this
part of the portfolio, on average 7.7% below previous passing rent but 18.5%
ahead of ERV.
Notable recent deals have included 9,300 sq ft to Watches of Switzerland
across Meadowhall and Southgate, Bath. In addition, Inditex (Zara) and the Gym
Group also signed 32,000 sq ft and 10,000 sq ft respectively at Southgate. At
Old Market, Hereford, we leased 18,700 sq ft of space to Mountain Warehouse
and MandM Direct signed part of the former Debenhams unit, totalling 48,500 sq
ft, which will be repurposed into office space for their new Headquarters.
Footfall and sales are now close to pre-pandemic levels as set out below:
3 April 2022 - 26 March 2023
% of 2019(1) Benchmark outperformance2
Footfall
- Portfolio 95.6% 858 bps
- Retail parks 99.9% 284 bps
Sales
- Portfolio 108.4% n/a
- Retail parks 109.1% n/a
1. Compared to the equivalent weeks in 2019
2. Footfall benchmark: Springboard
London Urban Logistics
In London Urban Logistics we've built a 2.9m sq ft pipeline with a GDV of
£1.3bn. We've made good progress in the year, with 2.1m sq ft in planning,
including planning consent achieved at The Box at Paddington post year end.
Developments
At 31 March 2023 Sq ft Current Value Cost to complete ERV ERV
'000
£m
£m
£m
Let & under offer
£m
Committed 1,817 648 488 65.7 25.1
Near term 1,800 245 947 85.0 -
Medium term 8,194
Total pipeline 11,811 893 1,435 150.7 25.1
On a proportionally consolidated basis including the Group's share of joint
ventures (except area which is shown at 100%)
Development pipeline
Value accretive developments are a key driver of returns for British Land. We
target IRRs of 10-12% on our Campuses and around 15% on our London Urban
Logistics developments. Altogether, we expect our development pipeline to
deliver profits of around £1.7bn. Our experience has demonstrated that some
of our best performing developments are those which were progressed during
periods of uncertainty because they delivered into supply constrained markets.
Against a backdrop of rising inflation and given broader market uncertainty,
development valuations were down 15.7% driven primarily by outward yield shift
and the disproportionate impact that this has on residual land valuations.
Construction cost inflation has moderated and we expect it to be 3-4% this
year as construction capacity is increasing due to development projects being
deferred or cancelled. We regularly review inflation drivers to ensure our
contingencies and cost plans are robust to deal with the market fluctuations.
We have been able to place contracts competitively and 94% of costs are fixed
on committed developments. We have built up excellent relationships with Tier
1 contractors and throughout our supply chain so we are confident of placing
mutually attractive contracts for our near term developments.
We are currently on site with 1.8m sq ft of space, which will target BREEAM
Outstanding (for offices) and Excellent (for retail) delivering £65.7m of ERV
with 38% already pre-let or under offer. Excluding build to sell residential
and retail space which we will let closer to completion, we are 46% pre-let or
under offer by ERV. Total development exposure is now 5.5% of portfolio gross
asset value with speculative exposure at 6.0% (which is based on ERV and
includes space under offer), within our internal risk parameter of 12.5%.
Committed developments
Our committed pipeline stands at 1.8m sq ft with one new commitment made this
year at 3 Sheldon Square. The committed pipeline is focused on our Campuses,
including 1 Broadgate and Norton Folgate in London. 1 Broadgate (544,000 sq
ft) is on track to be both BREEAM Outstanding and NABERS 5*(1). The office
space is fully pre-let or under option to JLL and Allen & Overy, four
years ahead of practical completion, demonstrating the heightened demand for
best in class, sustainable buildings. Norton Folgate (335,000 sq ft) is on
track to complete later this year and we have let 114,000 sq ft to Reed Smith,
which is one-third of the total office space. 3 Sheldon Square is currently
undergoing a full refurbishment, significantly reducing the embodied carbon of
the development by retaining and reusing the existing structure and materials.
The building will be all electric, including the installation of air source
heat pumps, which will reduce operational energy demand by over 40%. The
building is already 65% let to Virgin Media O2, which signed 83,000 sq ft for
their UK Headquarters in February 2023.
At Canada Water, we are on site at the first three buildings covering 578,000
sq ft. The Founding (previously A1) is a 35 storey tower, including 186 homes
and 121,000 sq ft of workspace; practical completion is targeted for Q4 2024.
The Dock Shed includes 181,000 sq ft of workspace as well as a new leisure
centre and Roberts Close comprises 79 affordable homes. We are targeting
BREEAM Outstanding on all the commercial space, BREEAM Excellent on retail and
a minimum of HQM One 4*(2) for private residential. The London Borough of
Southwark will take ownership of Roberts Close on completion and have
part-funded the leisure centre in A2.
Phase 2 at Aldgate Place is our first build to rent residential scheme. It
comprises 159 premium apartments with 19,000 sq ft of office space and 8,000
sq ft of retail and leisure space. It is well located, adjacent to Aldgate
East and between the Crossrail stations at Liverpool Street and Whitechapel.
Completion is expected in Q2 2024.
We are on site with an 83,000 sq ft development at The Priestley Centre in
Guildford, which will be a mix of innovation and lab enabled space. The site
is located on the University of Surrey Research Park, home to a number of well
established technology and engineering businesses and close to the Royal
Surrey County Hospital.
1. NABERS measures the energy efficiency, water usage, waste management
and indoor environment quality of a building or tenancy and its impact on the
environment.
2. The Home Quality Mark is an independently assessed certification
scheme for new homes, with a simple star rating based on a home's design,
construction and sustainability. Every home with an HQM certificate meets
standards that are significantly higher than minimum standards such as
Building Regulations.
Committed Developments
As at 31 March 2023 Sector BL Share 100% sq ft PC Calendar Year ERV Forecast IRR Rebased IRR
%
'000
£m(1)
%(3)
%(4)
The Priestley Centre Life Sciences 100 83 Q4 2023 3.2 14 21
Norton Folgate Office 100 335 Q4 2023 23.8 5 14
3 Sheldon Square Office 25 140 Q1 2024 2.5 16 17
Aldgate Place, Phase 2 Residential 100 137 Q2 2024 6.4 6 10
1 Broadgate Office 50 544 Q2 2025 20.7 7 12
Canada Water(2)
Roberts Close (Plot K1) Residential 50 62 Q3 2023 - blended blended
10 13
1-3 Deal Porters Way (Plot A1) Mixed Use 50 270 Q4 2024 3.6
The Dock Shed (Plot A2) Mixed use 50 246 Q4 2024 5.5
Total Committed 1,817 65.7
1. Estimated headline rental value net of rent payable under head leases
(excluding tenant incentives).
2. The London Borough of Southwark has confirmed they will not be
investing in Phase 1, but retain the right to participate in the development
of subsequent plots up to a maximum of 20% with their returns pro-rated
accordingly.
3. Forecast IRRs reflect the land value at the point of commitments.
4. Rebased IRRs reflect current site values.
We target IRRs of 10-12% on our Campuses and around 15% on our London Urban
Logistics developments. The recent increase in yields has impacted the
forecast IRRs on our committed schemes which reflected the land value at the
point of commitment. However, rebased IRRs using current site values are at or
above our target range.
Near Term pipeline
Our near term pipeline covers 1.8m sq ft. The largest scheme is 2 Finsbury
Avenue, where we have planning consent for a 747,000 sq ft best in class,
sustainable office building at Broadgate. Although the development is not
committed, we have commenced demolition and basement works to maintain
optionality. In addition, The Peterhouse Western Expansion, adjacent to the
Peterhouse Technology Park, has consent for 96,000 sq ft of innovation and lab
enabled space and we expect to commence start on site in the next few months.
Our near term pipeline also includes our first three London Urban Logistics
developments. We recently achieved planning consent for a new 121,000 sq ft
underground urban logistics hub at Paddington Central called The Box, which we
expect to commence in Q4 2023. The scheme has a further 211,000 sq ft of
consented office space above it. We also submitted planning for two
multi-storey, last mile logistics hubs at Mandela Way and Verney Road in
Southwark, totalling 344,000 sq ft. These schemes have IRRs of above 20% and
will provide flexible space for a range of customers.
Medium Term Pipeline
Our medium term pipeline covers 8.2m sq ft, the largest of which are the
future phases of the Canada Water Masterplan, which accounts for 4.2m sq ft
and Euston Tower, totalling 571,000 sq ft, where we have an exciting
opportunity to deliver a highly sustainable innovation and lab enabled
building in London's Knowledge Quarter.
London Urban Logistics opportunities account for 2.9m sq ft of near and medium
term opportunities. This includes Thurrock, where we have submitted plans for
a 644,000 sq ft two-storey logistics scheme east of London and Enfield where
we have submitted plans for a similar two-storey logistics scheme totalling
437,000 sq ft. At Hannah Close in Wembley, there is potential to deliver
668,000 sq ft of well located, multi-storey urban logistics space, within the
M25 and we will be submitting planning for a last mile logistics hub at
Finsbury Square in the City of London later this year.
Finance review
Year ended 31 March 2023 31 March 2022(1)
Underlying Profit2,3 £264m £247m
Underlying earning per share2,3 28.3p 27.0p
IFRS (loss)/profit after tax £(1,039)m £965m
Dividend per share 22.64p 21.92p
Total accounting return2 (16.3)% 14.6%
EPRA Net Tangible Assets per share2,3 588p 730p
EPRA Net Disposal Value per share2,3 606p 706p
IFRS net assets £5,525m £6,768m
LTV4,5,6 36.0% 32.9%
Net Debt to EBITDA (Group)4,7 6.4x 7.9x
Net Debt to EBITDA (proportionally consolidated)4,5 8.4x 9.7x
Weighted average interest rate5 3.5% 2.9%
Fitch unsecured credit rating A A
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits (as disclosed in
Note 1 of the condensed financial statements).
2. See Note 2 within condensed financial statements for definition and
calculation.
3. See Table B within supplementary disclosures for reconciliations to
IFRS metrics.
4. See Note 14 within condensed financial statements for definition,
calculation and reference to IFRS metrics.
5. On a proportionally consolidated basis including the Group's share of
joint ventures and excluding non-controlling interests.
6. EPRA Loan to value is disclosed in Table E of the condensed financial
statements.
7. Net Debt to EBITDA on a Group basis excludes non-recourse and joint
venture borrowings, and includes distributions from joint ventures and
non-recourse companies.
Overview
Operational performance continued to improve driven by strong like-for-like
rental growth and our focus on cost control. Underlying Profit was up 6.9% at
£264m, while Underlying earnings per share (EPS) was up 4.8% at 28.3p. Based
on our policy of setting the dividend at 80% of Underlying EPS, the Board has
proposed a final dividend of 11.04p per share, resulting in a full year
dividend of 22.64p, up 3.3%. The growth in the dividend is lower than
Underlying EPS growth due to the impact of the rental concession restatement
in the prior year.
IFRS loss after tax for the year was £1,039m, compared with a profit after
tax for the prior year of £965m. The movement year-on-year primarily reflects
the downward valuation movement on the Group's properties and those of its
joint ventures as property values adjusted to the higher rate environment,
offset by the mark-to-market movement on the derivatives hedging the interest
rate on our debt.
Overall valuations have fallen by 12.3% on a proportionally consolidated
basis, resulting in a decrease in EPRA NTA per share of 19.5%. Including
dividends of 23.20p per share paid during the year, total accounting return
was -16.3%.
Loan to value (LTV) on a proportionally consolidated basis increased by 310
bps from 32.9% at 31 March 2022 to 36.0% at 31 March 2023, reflecting the
valuation declines noted above and capital expenditure on our committed
pipeline. This was partially offset by the sale of a 75% interest in the
majority of our assets in Paddington Central, which completed in July 2022.
Group Net Debt to EBITDA decreased by 1.5x to 6.4x, and Net Debt to EBITDA on
a proportionally consolidated basis decreased by 1.3x to 8.4x, improving as a
result of net divestment made in the year and growth in underlying earnings.
We completed £1.4bn (£0.9bn British Land share) of financing activity in the
year on favourable terms, at margins in line with our in place facilities,
with banks whom we have longstanding relationships and two which are new
relationships to the Group and its joint ventures. For British Land, we agreed
£375m of new revolving credit facilities (RCF), all for initial 5 year terms,
as well as the extension of a further £100m RCF, and agreed with Homes
England the continuation of the £100m loan facility to fund specified
infrastructure works at Canada Water following the formation of the joint
venture. For this joint venture we completed a £150m Green development loan
facility for Canada Water, Phase 1 and for the Paddington joint venture we
completed a £515m loan for Paddington Central.
Our weighted average interest rate at 31 March 2023 was 3.5%, a 60 bps
increase from 31 March 2022. This increase was primarily due to the repayment
of our lower cost bank RCFs with the proceeds of the Paddington transaction,
as well as the impact of rising market rates. The impact on our interest costs
is limited by our hedging which includes swaps to fixed rate and caps where
the strike rates are now below current SONIA. The interest rate on our debt is
97% hedged for the next year and 76% of our projected debt is hedged on
average over the next 5 years.
Our financial position remains strong with £1.8bn of undrawn facilities as at
31 March 2023. Based on our current commitments and facilities, we have no
requirement to refinance until early 2026.
We retain significant headroom to our debt covenants, meaning the Group could
withstand a fall in asset values across the portfolio of 36% prior to taking
any mitigating actions.
Fitch Ratings, as part of their annual review in August 2022, affirmed all our
credit ratings with a Stable Outlook, including the senior unsecured rating at
'A'.
Underlying Profit
£m
Underlying Profit for the year ended 31 March 2022(1) 247
Like-for-like net rent 21
CVAs, administrations and provisions for debtors and tenant incentives -
Net divestment (11)
Developments 12
Net finance costs & fee income (5)
Underlying Profit for the year ended 31 March 2023 264
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions (as disclosed in Note 1 of the
condensed financial statements).
Underlying Profit increased by £17m, due to strong like-for-like net rents,
as well as the benefit of recently completed developments, partially offset by
the impacts of net divestment and increased financing costs primarily due to
rising market rates.
Net capital activity decreased earnings by £11m in the year. This reflects a
£20m decrease from the £1.2bn disposal of mature assets (primarily the sale
of a 75% interest in the majority of our assets in Paddington Central) over
the last 24 months, offset by the £0.9bn of acquisitions in Retail Parks,
Urban Logistics, and innovation opportunities which resulted in a £9m
increase to earnings.
Proceeds from sales have been deployed into our development pipeline and value
accretive acquisitions. Our committed schemes are expected to generate an ERV
of £65.7m, of which 38% is already pre-let or under offer.
Presentation of financial information and alternative performance measures
The Group financial statements are prepared under IFRS (UK-adopted
International Accounting Standards) where the Group's interests in joint
ventures are shown as a single line item on the income statement and balance
sheet and all subsidiaries are consolidated at 100%.
Management considers the business principally on a proportionally consolidated
basis when setting the strategy, determining annual priorities, making
investment and financing decisions and reviewing performance. This includes
the Group's share of joint ventures on a line-by-line basis and excludes
non-controlling interests in the Group's subsidiaries. The financial key
performance indicators are also presented on this basis.
A summary income statement and summary balance sheet which reconcile the Group
income statement and balance sheet to British Land's interests on a
proportionally consolidated basis are included in Table A within the
supplementary disclosures.
Management uses a number of performance metrics in order to assess the
performance of the Group and allow for greater comparability between periods,
however, does not consider these performance measures to be a substitute for
IFRS measures.
Management monitors Underlying Profit as it is an additional informative
measure of the underlying recurring performance of our core property rental
activity and excludes the non-cash valuation movement on the property
portfolio when compared to IFRS metrics. It is based on the Best Practices
Recommendations of the European Public Real Estate Association (EPRA) which
are widely used alternate metrics to their IFRS equivalents, with additional
Company adjustments when relevant (see Note 2 in the condensed financial
statements for further detail).
Management monitors EPRA NTA as this provides a transparent and consistent
basis to enable comparison between European property companies. Linked to
this, the use of Total Accounting Return allows management to monitor return
to shareholders based on movements in a consistently applied metric, being
EPRA NTA, and dividends paid.
Loan to value (proportionally consolidated) and Net Debt to EBITDA are
monitored by management as key measures of the level of debt employed by the
business to meet its strategic objectives, along with a measurement of risk.
It also allows comparison to other property companies who similarly monitor
and report these measures. The definitions and calculations of Loan to value
and Net Debt to EBITDA are shown in Note 14 of the condensed financial
statements.
Income statement
1.1 Underlying Profit
Underlying Profit is the measure that we use to assess income performance.
This is presented below on a proportionally consolidated basis. No company
adjustments were made in the current year to 31 March 2023. In the year to 31
March 2022, a £29m surrender premium payment and a £12m reclassification of
foreign exchange differences were excluded from the calculation of Underlying
Profit (see Note 2 of the condensed financial statements). There was no tax
effect of this Company adjusted item.
Year ended Section 31 March 2023 31 March 2022(1)
£m
£m
Gross rental income 493 493
Property operating expenses (47) (68)
Net rental income 1.2 446 425
Net fees and other income 18 13
Administrative expenses 1.3 (89) (89)
Net financing costs 1.4 (111) (102)
Underlying Profit 264 247
Underlying tax (1) 4
Non-controlling interests in Underlying Profit 1 2
EPRA and Company adjustments(2) (1,303) 712
IFRS (loss)/profit after tax 2 (1,039) 965
Underlying EPS 1.1 28.3p 27.0p
IFRS basic EPS 2 (112.0)p 103.8p
Dividend per share 3 22.64p 21.92p
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions (as disclosed in Note 1 of the
condensed financial statements).
2. EPRA adjustments consist of investment and development property
revaluations, gains/losses on investment and trading property disposals,
changes in the fair value of financial instruments, associated close out
costs and related deferred tax. Company adjustments consist of items which are
considered to be unusual and/or significant by virtue of their size or nature.
These items are presented in the 'capital and other' column of the
consolidated income statement.
1.2 Underlying EPS
Underlying EPS was 28.3p, up 4.8%. This reflects the Underlying Profit
increase of 6.9%, offset by the £5m increase in Underlying tax charge
compared to the prior year. This reflects a £1m Underlying tax charge in the
year compared to a one-off £4m tax credit in the prior year.
1.3 Net rental income
£m
Net rental income for the year ended 31 March 2022(1) 425
Disposals (25)
Acquisitions 12
Developments 13
Like-for-like net rent 21
CVAs, administrations and provisions for debtors and tenant incentives -
Net rental income for the year ended 31 March 2023 446
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions (as disclosed in Note 1 of the
condensed financial statements).
Disposals of income producing assets over the last 24 months reduced net rents
by £25m in the year, this primarily relates to the sale of a 75% interest in
the majority of our assets in Paddington Central. The proceeds from sales are
being reinvested into value accretive acquisitions and developments.
Acquisitions have increased net rents by £12m, primarily as a result of the
purchase of retail parks in Farnborough, Thurrock and Reading Gate.
Developments have increased net rents by £13m, driven by the completion of 1
Triton Square. The committed development pipeline is expected to deliver
£65.7m of ERV in future years.
Like-for-like net rental growth across the portfolio was 5.9% in the year,
adding £21m to net rents.
Campus like-for-like net rental growth was 6.5% in the year. This was driven
by strong letting activity across our Storey spaces, at 100 Liverpool Street
and Orsman Road which are now fully let; lettings at our newly refurbished
buildings, including Braze at Exchange House; as well as the impact of rent
reviews with dentsu at 10 Triton and Meta at 10 Brock Street. Like-for-like
net rental growth for Retail Parks was 6.2% and 2.6% for Shopping Centres.
This reflects strong leasing and improved occupancy on our Retail Parks, and
solid operational performance for Shopping Centres.
Provisions made against debtors and tenant incentives decreased by £5m
compared to the prior year, with a net £6m credit recognised in the year.
We've made good progress on prior year debtors; the £72m of tenant debtors
and accrued income as at 31 March 2022 now stands at £23m, primarily driven
by cash collection and negotiations with occupiers. As of 31 March 2023,
tenant debtors and accrued income totalled £48m of which £36m (or 75%) is
provided for.
The impact of CVA and administrations was £5m in the year, primarily relating
to various retail CVAs from prior periods.
1.4 Administrative expenses
Administrative expenses are flat year on year at £89m as a result of our
continued focus on cost control. The Group's EPRA operating cost ratio
decreased to 19.5% (March 2022: 25.6%) driven by like-for-like rental growth,
increased occupancy reducing void costs, tight cost control and a higher fee
income from the new Canada Water and Paddington joint ventures.
1.5 Net financing costs
£m
Net financing costs for the year ended 31 March 2022 (102)
Net divestment 2
Developments (1)
Market rates (8)
Financing activity (2)
Net financing costs for the year ended 31 March 2023 (111)
Net financing costs increased overall by £9m in the year. Net divestment
reduced financing costs by £2m; disposals of £1.2bn over the last 24 months
reduced costs by £5m, partially offset by acquisitions made over the same
period. Developments increased financing costs by £1m, as interest is no
longer capitalised on funds drawn for developments completed in the prior
year.
Rising market interest rates during the year increased financing costs by
£8m. Over the year to 31 March 2023, the interest rate on all our debt was
hedged by fixed rates and interest rate swaps and caps. As market rates
(SONIA) continued to rise throughout the year, the strike rates on our caps
were reached, thereby limiting the impact on our financing costs, particularly
over the second half of the year.
We are 97% hedged on our debt for the year to March 2024. At 31 March 2023, we
were fully hedged and over the next five years, on average and with a
gradually declining profile, we have hedging on 76% of our projected debt.
2. IFRS loss after tax
The main differences between IFRS loss after tax and Underlying Profit are
that IFRS includes the valuation movements on investment properties, fair
value movements on financial instruments and associated deferred tax, capital
financing costs and any Company adjustments. In addition, the Group's
investments in joint ventures are equity accounted in the IFRS income
statement but are included on a proportionally consolidated basis within
Underlying Profit.
The IFRS loss after tax for the year was £1,039m, compared with a profit
after tax for the prior year of £965m. IFRS basic EPS was (112.0)p, compared
to 103.8p in the prior year. The IFRS loss after tax for the year primarily
reflects the downward valuation movement on the Group's properties of £798m,
the capital and other loss from joint ventures of £559m, net capital finance
income of £88m (primarily the mark-to-market movement on the derivatives
hedging the interest rate on our debt) and the Underlying Profit of £264m.
The Group valuation movement and capital and other income profit from joint
ventures was driven principally by outward yield shift of 71 bps offset by ERV
growth of 2.8% in the portfolio resulting in a valuation loss of 12.3%.
The basic weighted average number of shares in issue during the year was 927m
(2021/22: 927m).
3. Dividends
Our dividend is semi-annual and calculated at 80% of Underlying EPS based on
the most recently completed six-month period. Applying this policy, the Board
are proposing a final dividend for the year ended 31 March 2023 of 11.04p per
share. Payment will be made on Friday 28 July 2023 to shareholders on the
register at close of business on Friday 23 June 2023. The dividend will be a
Property Income Distribution and no SCRIP alternative will be offered.
Balance sheet
As at Section 31 March 2023 31 March 2022(1)
£m
£m
Property assets 8,907 10,476
Other non-current assets 141 104
9,048 10,580
Other net current liabilities (290) (316)
Adjusted net debt 6 (3,221) (3,458)
Other non-current liabilities (50) -
EPRA Net Tangible Assets 5,487 6,806
EPRA NTA per share 4 588p 730p
Non-controlling interests 13 15
Other EPRA adjustments2 25 (53)
IFRS net assets 5 5,525 6,768
Proportionally consolidated basis
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits (as disclosed in
Note 1 of the condensed financial statements).
2. EPRA Net Tangible Assets NTA is a proportionally consolidated measure
that is based on IFRS net assets excluding the mark-to-market on derivatives
and related debt adjustments, the carrying value of intangibles, the
mark-to-market on the convertible bonds, as well as deferred taxation on
property and derivative valuations. The metric includes the valuation surplus
on trading properties and is adjusted for the dilutive impact of share
options. Details of the EPRA adjustments are included in Table B within the
supplementary disclosures.
4. EPRA Net Tangible Assets per share
pence
EPRA NTA per share at 31 March 2022(1) 730
Valuation performance (147)
Underlying Profit 28
Dividend (23)
EPRA NTA per share at 31 March 2023 588
1. Prior year comparative has been restated for a change in accounting
policies in respect of rental concessions and tenant deposits (as disclosed in
Note 1 of the condensed financial statements).
The 19.5% decrease in EPRA NTA per share reflects a valuation decrease of
12.3% compounded by the Group's gearing. The decrease in valuations was driven
by yield expansion as a result of rising interest rates.
Campus valuations were down 13.1%, driven by yields moving out 70 bps, but
offset by ERV growth of 2.6% reflecting our successful leasing activity.
Valuations in Retail & London Urban Logistics were down 10.9% overall,
with outward yield shift of 72 bps and ERVs up 3.0%. Retail Parks fell by
10.2% in the year, driven by yield expansion of 71 bps, although offset by
positive ERV growth, up 2.8%. Shopping Centres yields expanded by 39 bps
whilst ERVs were up 1.2%. London Urban Logistics saw yield expansion of 187
bps but the combination of strong occupational demand and acute undersupply of
space has driven ERV growth of 29.4%.
5. IFRS net assets
IFRS net assets at 31 March 2023 were £5,525m, a decrease of £1,243m from 31
March 2022. This was primarily due to the IFRS loss after tax of £1,039m and
dividends payable in the year of £215m.
Cash flow, net debt and financing
6. Adjusted net debt1
£m
Adjusted net debt at 31 March 2022 (3,458)
Disposals 732
Acquisitions (173)
Developments (276)
Capex (asset management initiatives) (51)
Net cash from operations 240
Dividend (213)
Other (22)
Adjusted net debt at 31 March 2023 (3,221)
1. Adjusted net debt is a proportionally consolidated measure. It
represents the principal amount of gross debt, less cash, short term deposits
and liquid investments and is used in the calculation of proportionally
consolidated LTV and Net Debt to EBITDA. A reconciliation between the Group
net debt as disclosed in Note 14 to the condensed financial statements and
adjusted net debt is included in Table A within the supplementary disclosures.
Disposals net of acquisitions decreased debt by £532m whilst development
spend totalled £276m with a further £51m on capital expenditure related to
asset management on the standing portfolio. The value of committed
developments is £648m, with £488m costs to come. Speculative development
exposure is 6.0% of ERV (includes space under offer). There are 1.8m sq ft of
developments in our near term pipeline with anticipated cost of £947m.
7. Financing
Group Proportionally consolidated
31 Mar 2023 31 Mar 2022 31 Mar 2023 31 Mar 2022
Net debt / adjusted net debt1,2 £2,065m £2,504m £3,221m £3,458m
Principal amount of gross debt £2,250m £2,562m £3,448m £3,648m
Loan to value(3) 27.4% 26.2% 36.0% 32.9%
Net Debt to EBITDA (Group)(3,4)
Net Debt to EBITDA (proportionally consolidated)(3) 6.4x 7.9x 8.4x 9.7x
Weighted average interest rate 2.9% 2.4% 3.5% 2.9%
Interest cover 5.4x 5.6x 3.4x 3.5x
Weighted average maturity of drawn debt 5.6 years 6.6 years 5.9 years 6.9 years
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions and tenant deposits (as disclosed in
Note 1 of the condensed financial statements).
2. Group data as presented in Note 14 of the condensed financial
statements. The proportionally consolidated figures include the Group's share
of joint ventures' net debt and represents the principal amount of gross debt,
less cash, short term deposits and liquid investments.
3. Note 14 of the condensed financial statements sets out the
calculation of the Group and proportionally consolidated LTV and Net Debt to
EBITDA.
4. Net Debt to EBITDA on a Group basis excludes non-recourse and joint
venture borrowings, and includes distributions from non-recourse companies and
joint ventures.
At 31 March 2022, our proportionally consolidated LTV was 36.0%, up from 32.9%
at 31 March 2022. Disposals in the year, primarily the sale of a 75% interest
in the majority of our assets in Paddington Central, decreased LTV by 490 bps.
This was more than offset by the impact of valuation movements which added 490
bps, development spend which added 200 bps and acquisitions in the year which
added 110 bps.
Our proportionally consolidated Net Debt to EBITDA was 8.4x, reduced by 1.3x
since March 2022, driven by net disposals in the year and growth in underlying
earnings. For the Group, the Net Debt to EBITDA ratio decreased from 7.9x to
6.4x.
Our weighted average interest rate at 31 March 2023 was 3.5%, the same level
as September 2022, up from 2.9% at March 2022. The increase during the first
half of the year was primarily due to disposals, including the new Paddington
joint venture in July, with the proceeds being used to repay our revolving
credit facilities which were then at a market rate lower than our average cost
of debt. In the second half of the year, as market rates (SONIA) continued to
rise, our interest rate caps limited the additional impact on our cost of
debt.
We maintain good long term relationships, and seek to develop new
relationships, with debt providers across the markets. During recent volatile
market conditions, we have continued to raise funds on good terms for both
British Land and joint ventures. During the year our total financing activity
was £1.4bn, of which £1.2bn was new finance raised, on favourable terms
including margins in line with our in place facilities.
For British Land, we arranged several new and extended bilateral unsecured
revolving credit facilities (RCF) during the last six months: in October we
renewed a £100m RCF; in November, we signed a £150m RCF with a bank which is
new to our unsecured relationships; and in March we signed a further £125m
RCF. All these RCFs were for new initial 5 year terms and have provisions for
extensions of up to a further two years. In line with these provisions, we
also extended another £100m RCF for a further year to mature in 2028. In
March, we agreed with Homes England the continuation of the £100m loan
facility to fund specified infrastructure works at Canada Water following the
formation of the joint venture.
A £150m Green loan facility to support the development costs of Canada Water
Phase 1 completed in March this year for our joint venture. National
Westminster Bank and Crédit Agricole Corporate & Investment Bank provided
the loan and the related interest rate hedging, and acted as Mandated Lead
Arrangers and Green Loan Advisers. The loan for three years is secured on the
mixed-use Phase 1 project. The offices are targeting BREEAM Outstanding and
the private residential is targeting HQM One 4*, enabling the loan and hedging
to be designated as 'Green'.
Sustainability targets apply to all these new and extended RCFs, aligned with
our other ESG linked RCFs and linked to our sustainability strategy. Together
with the £150m Green development loan facility for the Canada Water joint
venture, we have raised £525m of 'Green' and ESG linked finance this year.
Earlier in the year, we completed a £515m 5 year loan for the Paddington
joint venture, secured on its assets. A club of three banks, DBS Bank Ltd.,
London Branch, Oversea-Chinese Banking Corporation Limited, and SMBC Bank
International PLC and affiliates provided the loan and the related interest
rate hedging which completed in July.
As a result of all of this activity, at 31 March 2023, we had £1.8bn of
undrawn facilities. Based on our current commitments and facilities, the Group
has no requirement to refinance until early 2026.
We retain significant headroom to our debt covenants, meaning the Group could
withstand a fall in asset values across the portfolio of 36% prior to taking
any mitigating actions.
Fitch Ratings, as part of their annual review in August 2022 affirmed all our
credit ratings, with a stable outlook; senior unsecured credit rating 'A',
long term IDR 'A-' and short term IDR 'F1'.
Our strong balance sheet, established and new lender relationships, access to
different sources of finance and flexible liquidity enable us to deliver on
our strategy.
Bhavesh Mistry
Chief Financial Officer
About British Land
Our portfolio of high quality UK commercial property is focused on London
Campuses and Retail & London Urban Logistics assets throughout the UK. We
own or manage a portfolio valued at £13.0bn (British Land share: £8.9bn) as
at 31 March 2023 making us one of Europe's largest listed real estate
investment companies.
We create Places People Prefer, delivering the best, most sustainable places
for our customers and communities. Our strategy is to leverage our best in
class platform and proven expertise in development, repositioning and active
management, investing behind two key themes: Campuses and Retail & London
Urban Logistics.
Our three Campuses at Broadgate, Paddington Central and Regent's Place are
dynamic neighbourhoods, attracting growth customers and sectors, and offering
some of the best connected, highest quality and most sustainable space in
London. We are delivering our fourth Campus at Canada Water, where we have
planning consent to deliver 5m sq ft of residential, commercial, retail and
community space over 53 acres. Our Campuses account for 63% of our portfolio.
Retail & London Urban Logistics accounts for 37% of the portfolio and is
focused on retail parks which are aligned to the growth of convenience, online
and last mile fulfilment. We are complementing this with urban logistics
primarily in London, focused on development-led opportunities.
Sustainability is embedded throughout our business. Our approach is focused on
three key pillars where British Land can create the most benefit: Greener
Spaces, making our whole portfolio net zero carbon by 2030, Thriving Places,
partnering to grow social value and wellbeing in the communities where we
operate and Responsible Choices, advocating responsible business practices
across British Land and throughout our supply chain, and maintaining robust
governance structures. Further details can be found on the British Land
website at www.britishland.com (http://www.britishland.com)
Risk management and principal risks
Risk Management
We have an established risk management and control framework that enables us
to effectively identify, assess and manage the range of financial and
non-financial risks facing our business, including those principal risks that
could threaten solvency and liquidity, as well as identifying emerging risks.
Our approach is not intended to eliminate risk entirely, but instead to manage
our risk exposures within our appetite for each risk, whilst at the same time
making the most of our opportunities.
Our integrated risk management approach combines a top-down strategic view
with a complementary bottom-up operational process. Whilst ultimate
responsibility for risk rests with the Board, the effective day to day
management of risk is integral to the way the Group conducts business. In
summary, our approach to risk management is centred on being risk-aware,
clearly defining our risk appetite, responding quickly to changes in our risk
profile and having a strong risk management culture amongst all employees with
clearly defined roles and accountability.
The Group's risk profile has remained elevated during the year, due to the
volatile geopolitical environment and a deterioration in macroeconomic
conditions, although the risks associated with the Covid-19 pandemic have
lessened. The key macroeconomic challenges this year include rapidly rising
interest rates, heightened inflation compounded by the impact of the on-going
war in the Ukraine and the risk of recession. The Board and key committees
have overseen the Group's response to the impact of these challenges on our
business and their wider impacts on our markets, portfolio strategy,
development programme and our customers, with business resilience and risk
management at the core of our approach. We are proactively managing our
business by taking a risk-managed approach in terms of capital allocation and
maintaining a strong financial position. In particular, we are managing our
development risk by fixing costs and taking a measured approach to progress
our pipeline as and when the time is right. Also, we are actively managing our
financing risk, and maintain access to a diverse range of sources of finance
with a spread of repayment dates, along with the use of hedging to mitigate
against rising interest rates.
We have set out in the principal risks table overleaf the main adverse impacts
of these challenges and the actions we have taken to mitigate them. These
include operational and financial challenges for our occupiers, reduced demand
for our assets in the investment market, increased difficultly for us to
continue to execute our portfolio and development strategy at pace, and rising
financing costs, which impact property values and could in time impact our
rental income. Despite these challenges, our business has continued to show
resilience, with our robust risk management approach continuing to protect the
business through this challenging economic environment and enabling us to be
flexible to adjust and respond to these external risks as they evolve.
The Board has undertaken a robust assessment of the principal and emerging
risks facing the Group, including those that would threaten its business
model, future performance, solvency or liquidity, as well as the Group's
strategic priorities, and do not consider that the fundamental principal risks
and uncertainties facing the Group have changed during the year. However,
our assessment of the principal risks has been adversely impacted by the
volatile UK economic and political landscape in the year and consequently,
several principal risks have increased compared to FY22; largely in their
likelihood, and to a lesser extent their potential impact on our business due
to mitigating actions we have taken. These include Macroeconomic, Political,
Legal and Regulatory, Campus and Urban Logistics Property Markets external
risks, as well as our Portfolio Strategy, Customer and Financing risks. At the
same time, the Major Events and Business Disruption and People and Culture
risks have lessened. Recently, there have been signs that the macroeconomic
headwinds that have driven the increase are subsiding which we anticipate will
lower the elevated risk assessment of several principal risks looking forward,
albeit is too early to conclude this at this stage and we will continue to
actively monitor.
Our principal external and internal risks are summarised below, including an
assessment of how the risks have changed in the year. As usual, a more
comprehensive explanation of the Group's approach to risk management will be
included in the 2023 Annual Report and Accounts.
External Principal Risks
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
0B0B0B1. Macroeconomic Risks
The UK economic climate and changes to fiscal and monetary policy present - The Board, Executive Committee and Risk Committee regularly assess the ↑ The macroeconomic risk outlook was volatile during the year. It increased
risks and opportunities in property and financing markets and to the Company's strategy in the context of the wider macroeconomic environment in during the first half of the fiscal year and subsided in the second half. We
businesses of our customers which can impact both the delivery of our strategy which we operate to assess whether changes to the economic outlook justify a consider it our most significant risk with a high potential impact and medium
and our financial performance. reassessment of our strategic priorities, our capital allocation plan and the to high probability reflecting the prospect of recession in the UK, high
risk appetite of the business. inflation (albeit signs this is moderating) and interest rate rises which
impact our portfolio strategy, our markets and our customers.
- Our strategy team prepares a regular dashboard for the Board, Executive
and Risk Committees which tracks key macroeconomic indicators both from The Board and key Committees have overseen the Group's response to the impact
internal and independent external sources (see KRIs), as well as central bank of the macroeconomic environment on our business during the year, and whilst
guidance and government policy. the outlook for the UK economy has improved more recently, we remain mindful
of the ongoing macroeconomic challenges. In response, we have increased the
- Regularly stress testing our business plan against a downturn in regularity of our economic outlook assessments to assess their consequences on
economic outlook to ensure our financial position is sufficiently flexible and our strategy and are taking actions which we deem appropriate. We are
resilient. proactively managing our business by taking a risk-managed approach in terms
of capital allocation and maintaining a strong financial position. In
- Our business model is focused on a prime, high quality portfolio aligned particular, we are managing our development risk by fixing costs and taking a
to key trends in our markets where we have pricing power and active capital measured approach to progress our pipeline as and when the time is right.
recycling to maintain a strong financial position, which helps to protect us Also, we are actively managing our financing risk, and maintain access to a
against adverse changes in economic conditions. diverse range of sources of finance with a spread of repayment dates, along
KRIs with the use of hedging to mitigate against rising interest rates.
- Forecast GDP growth, inflation and interest rate forecasts.
Opportunity
The strength of our balance sheet, quality of our assets and the experience of
- Consumer confidence and unemployment rates. our Board and management team put us in a strong position to help us to
navigate through these near term challenges and take advantage of
- Stress testing for downside scenarios to assess the impact of differing opportunities as they arise, including continued investment in assets that are
market conditions. aligned to our strategic themes and our development pipeline.
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
1B1B1B2. Political, Legal and Regulatory Risks
Significant political events and regulatory changes, including the impact of - Whilst we cannot influence the outcome of significant political events, ↑ The political, legal and regulatory risk outlook has also increased over the
government policy, bring risks principally in four areas: the risks are taken into account when setting our business strategy and when year reflecting an uncertain economic environment, continued geopolitical
making strategic investment and financing decisions. tensions and increased Government regulation, with both a medium to high
- Reluctance of investors and businesses to make investment and
impact and probability.
occupational decisions whilst the outcome remains uncertain. - Internally we review and monitor proposals and emerging policy and
legislation to ensure that we take the necessary steps to ensure compliance, Political uncertainty has reduced following the appointment of a new Prime
- The impact on the case for investment in the UK, and specific policies if applicable. Additionally, we engage public affairs consultants to ensure Minister, although the UK's economic outlook is uncertain. The global
and regulation introduced, particularly those which directly impact real that we are properly briefed on the potential policy and regulatory geopolitical environment also remains uncertain, heightened by the ongoing war
estate or our customers. implications of political events. in Ukraine. This has potential impacts on interest rates, supply chains,
security, cyber risks, compliance and reputational risks.
- The potential for a change of leadership or political direction. - Where appropriate, we act with other industry participants and
representative bodies to contribute to policy and regulatory debate. We Government legislation has also continued to increase in the year with
- The impact on the businesses of our occupiers as well as our own monitor and respond to social and political reputational challenges relevant potential for this to continue in the future with further associated
business. to the industry and apply our own evidence-based research to engage in thought regulation. As set out under macroeconomic risk, the Board and key committees
leadership discussions. are actively monitoring these external risks and their potential impacts on
KRIs the UK economy and our operations to ensure we are taking appropriate
- Monitor changes within the geopolitical environment, UK policies, laws mitigating actions.
or regulations.
Opportunity
We continue to closely monitor the political outlook and any potential changes
in regulations to ensure changes which may impact the Group, or our customers,
are identified and addressed appropriately. We work closely with Government,
directly and through our membership of key property industry bodies, to input
into regulation as draft proposals are announced. Through this proactive
approach, we view the right kind of regulation and legislation as an
opportunity for our business to outperform.
-
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
2B2B2B3. Property Market Risks
Underlying income, rental growth and capital performance could be adversely - The Board, Executive Committee and Risk Committee regularly assess ↑ 12B12B12BCampuses
affected by a reduction in investor demand or weakening occupier demand in our whether any current or future changes in the property market outlook present
property markets. risks and opportunities which should be reflected in the execution of our The Campus property market risk outlook increased during the year, due to the
strategy and our capital allocation plan. adverse impact of rising inflation and interest rates on the investment
Structural changes in consumer and business practices such as the growth of
market, and is considered a medium impact risk with a medium probability.
online retailing and flexible working practices (including more working from - Our strategy team prepares a regular dashboard for the Board, Executive
home) could have an adverse impact on demand for our assets. and Risk Committees which tracks key investment and occupier demand indicators The prime London office market continues to demonstrate robust occupational
from both internal and independent external sources (see KRIs) which are fundamentals due to low vacancy, a reduced development pipeline coupled with
considered alongside the Committee members' knowledge and experience of market demand gravitating to the best and most sustainable space. However, rising
activity and trends. interest rates have significantly impacted investor sentiment and structural
headwinds remain from an increased trend in working from home, accelerated by
- We focus on prime assets or those with repositioning potential and the impact of Covid-19.
sectors which we believe will be more resilient over the medium term to a
Opportunity
reduction in occupier and investor demand.
Our Campus model is centred on providing well connected, best in class
buildings with leading sustainability and design credentials, surrounded by
- We maintain strong relationships with our occupiers, agents and direct attractive public spaces with a wide range of amenities and an engaging public
investors active in the market and actively monitor trends in our sectors. realm. This supports the resilience of our offer as occupiers focus on the
very best space for their business and this is demonstrated by the continued
- We stress test our business plan for the effect of changes in rental strength of our leasing activity across our Campuses this year.
growth prospects and property yields.
KRIs
- Occupier and investor demand indicators in our sectors.
- Margin between property yields and borrowing costs.
- Online sales market trends.
- Footfall and retail sales to provide insight into consumer trends.
- Campus occupancy to provide insight into occupier trends and people
visiting our Campuses.
←→ 13B13B13BRetail
The Retail property market risk outlook has remained stable in the year and is
considered a medium impact risk with a medium to high probability.
Whilst occupational markets strengthened over the year with more retailers
recovering to pre-pandemic levels in terms of sales, the market outlook
continues to be challenging with retailers facing both increased costs, such
as rising input costs, energy costs and wages, as well as lower consumer
spending. Investment activity was relatively in line with historic trends for
retail parks (albeit lower than last year), while shopping centres remains
below long term averages.
Opportunity
Our Retail portfolio focuses on retail parks, which we believe is the
preferred format for retailers, aligned to the growth of convenience and
compatibility with an omni-channel retail strategy. Despite the continued
challenges in retail, this has been a strong year for our leasing activity and
retailers continue to recognise we offer some of the best quality space in the
UK. We will continue to look for acquisition opportunities where we can create
value by leveraging our scale and our expertise in asset management.
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
3B3B3B3. Property Market Risks continued
↑ 14B14B14BLondon Urban Logistics
The London Urban Logistics property market risk outlook increased slightly in
likelihood in the year, as rising interest rates impacted investment
sentiment, but overall, this risk is a relatively low impact risk with a low
probability given the chronic shortage of space in London.
In London, occupational fundamentals remain favourable underpinned by
structural changes in e-commerce and with supply of the right kind of space
highly constrained. However, as a low yielding sector, the investment market
has been heavily impacted by rising interest rates and pricing has softened.
Opportunity
Our Urban Logistics portfolio is focused on a development-led pipeline through
the intensification and repurposing of existing buildings in London, a market
with significant demand and tightly limited supply. The challenging investment
market may create the environment for opportunistic purchases where our
development expertise is a competitive advantage.
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
4B4B4B4. Major Events/Business Disruption Risks
Major global, regional or national events could cause significant damage and - The Group has comprehensive crisis response plans and incident ↓ Our major events/business disruption risk outlook has reduced over the year as
disruption to the Group's business, portfolio, customers, people and supply management procedures both at head office and asset-level that are regularly Covid-19 related disruption to our business has eased and at present is
chain. reviewed and tested. considered a medium impact risk with a medium probability.
Such incidents could be caused by a wide range of external events such as - Asset emergency procedures are regularly reviewed, and scenario tested. Whilst Covid-19 disruption has eased, the heightened global and political
civil unrest, an act of terrorism, pandemic disease, a cyber-attack, an Physical security measures are in place at properties and development sites. uncertainty, exacerbated by war in Ukraine, could have an impact on the
extreme weather occurrence, environmental disaster or a power shortage.
Group's operations and stakeholders. Specifically, terrorism remains a threat,
- The Group monitors the Home Office terrorism threat level, and we have as is the risk of cyber security breaches. Our crisis management team carries
This could result in sustained asset value or income impairment, liquidity or access to security threat information services to help inform our security out event simulations to test our processes and procedures in response to
business continuity challenges, share price volatility or loss of key measures. major incidents and during the year this was centred on a cyber crisis
customers or suppliers.
simulation.
- We have robust IT security systems that support data security, disaster
Opportunity
recovery and business continuity plans.
The challenges of the last few years have demonstrated the resilience of our
business model and our robust crisis management and business continuity plans.
- We have comprehensive property damage and business interruption We remain vigilant to the continued risk from external threats.
insurance across the portfolio.
KRIs
- Security Service National Threat level.
- Security risk assessments of our assets.
Internal Principal Risks
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
5B5B5B5. Portfolio Strategy Risks
The Group's income and capital performance could underperform in absolute or - The Board carries out an annual review of the overall corporate strategy ↑ Our portfolio strategy risk has increased in likelihood due to the impact of
relative terms as a result of an inappropriate portfolio strategy and including the current and prospective portfolio strategy so as to meet the the macroeconomic conditions and challenging investment markets and is
subsequent execution. Group's overall objectives. considered a medium impact risk with a medium probability.
This could result from: - Our portfolio strategy is determined to be consistent with our target During the year, external impacts discussed in the macroeconomic and property
risk appetite and is based on the evaluation of the external environment. markets risk outlook have influenced our ability to execute our portfolio and
- incorrect sector selection and weighting.
development strategy at pace, and the rising interest environment has
- Progress against the strategy and continuing alignment with our risk inevitably impacted valuations. Despite this tougher macro environment, our
- poor timing of investment and divestment decisions. appetite is discussed regularly by both the Executive and Risk Committees with operational performance has been strong, and reinforces our conviction in our
reference to the property markets and the external economic environment. key markets of Campuses, Retail Parks and London Urban Logistics.
- inappropriate exposure to developments.
Opportunity
- Individual investment decisions are subject to robust risk evaluation
We have a diversified portfolio strategy and focus on sectors which are supply
- wrong mix of assets, occupiers and region concentration. overseen by our Investment Committee including consideration of returns constrained and where we have pricing power and can leverage our competitive
relative to risk adjusted hurdle rates. strengths in development and active management to create value. We will remain
- overpaying for assets through inadequate due diligence or price
disciplined in terms of our capital allocation and responsive to opportunities
competition. - Review of prospective performance of individual assets and their that arise, particularly in Retail Parks and London Urban Logistics. Our
business plans. portfolio has been positioned to be resilient through the cycle and our
- inappropriate co-investment arrangements.
investment criteria have been reassessed to reflect the prevailing economic
- We foster collaborative relationships with our co-investors and enter conditions impacting our capital allocation and investment decisions.
into ownership agreements which balance the interests of the parties.
KRIs
- Execution of targeted acquisitions and disposals in line with capital
allocation plan (overseen by the Investment Committee).
- Annual IRR process which forecasts prospective returns of each asset.
- Portfolio liquidity including percentage of our portfolio in joint
ventures and funds.
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
6B6B6B6. Development Risks
Development provides an opportunity for outperformance but usually involves - We apply a risk-controlled development strategy through managing our ←→ Our development risk has remained at similar levels overall and is considered
elevated risk. This is reflected in our decision making process around which exposure, pre-letting strategy and fixing costs. a medium impact risk with a medium probability.
schemes to develop and the timing of the development, as well as the execution
of these projects. - We manage our levels of total and speculative development exposure During the year, inflationary pressures in the construction supply chain for
within targeted ranges considering associated risks and the impact on key certain materials and labour have continued, which have been further
Development strategy addresses several development risks that could adversely financial metrics. This is monitored regularly by the Risk Committee along compounded by the war in Ukraine, impacting both development returns and the
impact underlying income and capital performance including: with progress of developments against plan. timing of our future pipeline. However, construction cost inflation has
moderated down to around 3-4% forecast for this year, from the peak of 10% in
- development letting exposure. - Prior to committing to a development, a detailed appraisal is 2022, in line with our expectations. We are progressing our committed
undertaken. This includes consideration of returns relative to risk adjusted development pipeline, whilst managing the risks appropriately through a
- construction timing and costs (including construction cost inflation). hurdle rates and is overseen by our Investment Committee. combination of timing, pre-lets, fixing costs and use of joint ventures. Our
development exposure remains well within our internal risk parameters of 12.5%
- major contractor or subcontractor failure. - Pre-lets are used to reduce development letting risk where considered at 5.5% of portfolio gross asset value. We have competitively secured fixed
appropriate. price contracts on 94% of the costs of our committed developments and 38% of
- adverse planning judgements.
our projects are already pre-let or under offer.
- Competitive tendering of construction contracts and, where appropriate,
Opportunity
fixed price contracts are entered into. We measure inflationary pressure on
Progressing value accretive development is one of our key business priorities
construction materials and labour costs (and sensitise for a range of and is a fundamental driver of value. The strength of our balance sheet, our
inflationary scenarios) and make appropriate allowances in our cost estimates relationships with our contractors and the experience of our management team
and incorporate within our fixed price contracts. mean we are well positioned to progress our development pipeline, whilst
mitigating the risk through a combination of timing, pre-lets, fixing costs
- Detailed selection and close monitoring of main contractors and key and use of joint ventures. We will continue to actively monitor the
subcontractors including covenant reviews. inflationary price increases or any potential delays in the construction
supply chain and work with our contractors to manage such issues. We will also
- Experienced development management team closely monitors design, review the impact on development returns prior to committing to future
construction and overall delivery process. developments to ensure we meet our detailed pre-set criteria subject to
approval by the Investment Committee.
- Early engagement and strong relationships with planning authorities. The
Board considers the section 172 factors to ensure the impact on the
environment and communities is adequately addressed.
- Through our Place Based approach, we engage with communities where we
operate to incorporate stakeholder views in our development activities, as
detailed in our Sustainability Brief.
- We engage with our development suppliers to manage environmental and
social risks, including through our Supplier Code of Conduct, Sustainability
Brief and Health and Safety Policy.
- Management of risks across our residential developments, in particular
fire and safety requirements.
KRIs
- Total development exposure ≤12.5% of portfolio by value.
- Speculative development exposure ≤12.5% of portfolio ERV.
- Residential development exposure.
- Progress on execution of key development projects against plan
(including evaluating yield on cost).
- Construction costs inflation forecasts.
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
7B7B7B7. Financing Risks
Failure to adequately manage financing risks may result in a shortage of funds - We regularly review funding requirements for our business plans and ↑ Macroeconomic factors have impacted debt capital markets during the year, and
to sustain the operations of the business or repay facilities as they fall commitments. We monitor the period until financing is required, which is a key as such our financing risk has increased slightly in likelihood. Despite this
due. determinant of financing activity. Debt and capital market conditions are our balance sheet remains strong and we retain good access to finance, and as
reviewed regularly to identify financing opportunities that meet our a result our financing risk is still considered overall a medium impact with a
Financing risks include: requirements. low to medium probability.
- reduced availability of finance. - We maintain good long term relationships with our key financing Market interest rates have risen sharply from very low levels and the future
partners. outlook is volatile and uncertain. Fixed rate debt and derivatives (swaps and
- increased financing costs.
caps) are used to mitigate against the risk of rising interest rates both now
- We set appropriate ranges of hedging on the interest rates on our debt, and going forward, with 76% of projected debt hedged on average over the next
- leverage magnifying property returns, both positive and negative. with a balanced approach to have a higher degree of protection on interest 5 years. Despite the turbulent macroeconomic environment, the scale and
costs in the short term. quality of our business enables us to continue to access funds from a range of
- breach of covenants on borrowing facilities.
sources and we have raised £1.2bn of new finance on good terms in the year.
- We work with industry bodies and relevant organisations to participate Based on current commitments and facilities, the Group also has no requirement
in debate on emerging finance regulations affecting our business. to refinance until early 2026.
Opportunity
- We manage our use of debt and equity finance to balance the benefits of
The current uncertain environment reinforces the importance of a strong
leverage against the risks, including magnification of property valuation balance sheet. Our senior unsecured credit rating 'A' was affirmed by Fitch
movements. during the year, with a stable outlook.
- We aim to manage our loan to value (LTV) through the property cycle such Our Net Debt to EBITDA on a proportionally consolidated basis is 8.4x which is
that our financial position would remain robust in the event of a significant 1.3x lower than in FY22, and our LTV is currently 36.0%. We have significant
fall in property values. We also consider Net Debt to EBITDA, an headroom to our Group unsecured financial covenants.
earnings-based leverage metric. With these metrics, we do not adjust our
approach to leverage based only on changes in property market yields. Good access to debt capital markets allows us to support business requirements
and take advantage of opportunities as they arise.
- We manage our investment activity, the size and timing of which can be
uneven, as well as our development commitments to ensure that our LTV and Net We have strong liquidity with £1.8bn of undrawn, committed, unsecured
Debt to EBITDA levels remain appropriate. revolving facilities and we have no requirement to refinance until early 2026.
- Financial covenant headroom is evaluated regularly and in conjunction
with transaction approval.
- We spread risk through joint ventures and funds which may be partly
financed by debt without recourse to British Land.
KRIs
- Period until refinancing is required
(not less than two years).
- Net Debt to EBITDA.
- LTV (proportionally consolidated).
- Financial covenant headroom.
- Percentage of debt with interest rate hedging (average over next five
years).
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
8B8B8B8. Environmental Sustainability Risks
A failure to anticipate and respond appropriately and sufficiently to (i) - We have a comprehensive ESG programme which is regularly reviewed by the ←→ Our environmental sustainability risk has remained stable in the year with
environmental risks or opportunities and (ii) preventative steps taken by Board, Executive Committee and ESG Committee. both a medium impact and probability.
government and society could lead to damage to our reputation, disruption in
our operations and stranded assets. - The Risk and ESG Committees continue to oversee our annual TCFD Overall, the environmental sustainability risk outlook continues to increase
disclosures including scenario analysis to assess our exposure to in prominence and importance to our business, our customers and other key
This risk category includes the: climate-related physical and transition risks. stakeholders. Also, regulatory requirements and expectations of compliance
with best practice have increased and continue to evolve.
- increased exposure of assets to physical environmental hazards, driven - The ESG Committee monitors our performance and management controls.
by climate change. Underpinned by our SBTi climate targets, our guiding corporate policies (the We have made good progress against our 2030 environmental commitments which
Pathway to Net Zero and the Sustainability Brief) establish a series of include ambitious targets to be net zero carbon portfolio by 2030 and a focus
- policy risk from the cost of complying with new climate regulations with climate and energy targets to ensure our alignment with a societal transition on environmental leadership. We are continuing to improve the energy
specific performance and/or technology requirements. to net zero that limits global warming to 1.5°C. efficiency of our standing portfolio and have improved EPC ratings as a result
of our net zero initiatives with 45% of the portfolio currently A or B rated
- overall compliance requirements from existing and emerging environmental - Our property management department operates an environmental management (March 2022: 36%).
regulation. system aligned with ISO 14001. We continue to hold ISO 14001 and 50001
Opportunity
accreditations at our commercial offices and run ISO-aligned management
We have a clear responsibility but also opportunity to manage our business in
- leasing risk as a result of less sustainable/non-compliant buildings. systems at our retail assets. the most environmentally responsible and sustainable way we can. This is
integral to our strategy; it creates value for our business and drives
- Climate change and sustainability considerations are fully integrated positive outcomes for our stakeholders. Our Sustainability Strategy has
within our investment and development decisions and are evaluated by the evolved further by grouping it into three key pillars: Greener Spaces,
Investment Committee and Board in all investment decisions. Thriving Places and Responsible Choices, which map to the environmental,
social and governance elements of our approach. Our overall sustainability
- Through our Place Based approach to social impact, we understand the performance has been recognised in international benchmarks including GRESB,
most important issues and opportunities in the communities around each of our where we were delighted to achieve a GRESB 5 star rating for developments and
places and focus our efforts collaboratively to ensure we provide places that a 4 star rating for standing investments.
meet the needs of all relevant stakeholders.
- We target BREEAM Outstanding on office developments, Excellent on retail
and HMQ3* on residential. We have also adopted NABERS UK on all our new office
developments.
- We undergo assurance for key data and disclosures across our
Sustainability programme, enhancing the integrity, quality and usefulness of
the information we provide.
KRIs
- Energy intensity and carbon emissions. Specifically, energy performance
certificates.
- Future cost of carbon credits to meet our 2030 net zero carbon goal.
- Portfolio flood risk.
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
9B9B9B9. People and Culture Risks
Inability to recruit, develop and retain staff and Directors with the right Our people strategy is designed to minimise risk through: ↓ Through the success of internal actions, our people and culture risk has
skills and experience required to achieve the business objectives in a culture
reduced in the year and is considered a medium impact risk with a medium
and environment where employees can thrive, may result in significant - informed and skilled recruitment processes. probability.
underperformance or impact the effectiveness of operations and decision
making, in turn impacting business performance. - talent performance management and succession planning for key roles. Against a wider economic background of rising inflation, increasing energy
bills, and the lingering effects of Covid-19 which have been widely felt, like
- competitive compensation and benefits. many companies, we have been experiencing rising wage expectations and an
increase in employee mobility. Albeit the competition for talent, which was
- people development and training. until recently very intense, has eased off more recently. We will continue to
ensure we have the right skills in place across the business and to actively
- our flexible working policy helps retain employees while promoting monitor and promote staff wellbeing. During the year we have actively
work-life balance and helping to improve productivity. responded to feedback from previous employee surveys, and we were pleased to
have our highest ever employee engagement score of 78% in November 2022.
- commitment to equality, diversity and integrity.
Opportunity
We have a broad range of expertise across our business which is critical to
This risk is measured through employee engagement surveys, wellbeing surveys, the successful delivery of our strategy. We will continue to assess our
employee turnover, exit surveys and retention metrics. We engage with our employee proposition to ensure it still delivers what people most value in a
employees and suppliers to make clear our requirements in managing key risks changing labour market. Our goal is to foster a diverse, inclusive and
including health and safety, fraud and bribery, modern slavery and other ambitious culture so we can develop, attract and inspire the best people to
social and environmental risks, as detailed in our policies and codes of deliver our strategy.
conduct.
KRIs
- Voluntary staff turnover.
- Employee engagement and wellbeing.
- Gender and ethnicity representation and pay gap.
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
10B10B10B10. Customer Risks
The majority of the Group's income is comprised of rent received from our - We have a high quality, diversified customer base and monitor exposure ↑ Our customer risk remains elevated and the risk of future administrations or
customers. This could be adversely affected by non-payment of rent; occupier to individual occupiers or sectors. CVAs has increased in likelihood and is considered both a medium to high
failures; inability to anticipate evolving customer needs; inability to re-let
impact and probability.
space on equivalent terms; poor customer service; as well as potential - We perform rigorous occupier covenant checks ahead of approving deals
structural changes to lease obligations. and on an ongoing basis so that we can be proactive in managing exposure to We are mindful that higher input prices impact the profitability of our
weaker occupiers. An occupier watchlist is maintained and regularly reviewed customers, particularly on the retail side which may increase the risk of
by the Risk Committee and property teams. future administrations or CVAs. We are continuing to collaborate closely with
our customers to ensure we provide them with high quality space at a
- We work with our customers to find ways to best meet their evolving sustainable total occupancy cost, allowing us to maximise occupancy and rent
needs. collection. This is reflected in our high occupancy of 96.7% and strong rent
collection which was 99% for the year.
- We take a proactive asset management approach to maintain a strong
Opportunity
occupier line-up. We are proactive in addressing key lease breaks and expiries
Successful customer relationships are vital to our business and continued
to minimise periods of vacancy. growth. Our business model is centred around our customers and aims to
provides them with modern and sustainable space which aligns to their evolving
- We regularly measure satisfaction across our customer base through needs and that of our markets. As our markets have continued to polarise,
surveys. customers demand more from the places where they work and shop. We are well
KRIs positioned across both our Campuses and Retail and London Urban Logistics
- Market letting risk including vacancies, upcoming expiries and breaks, portfolios, where we focus on providing best in class space; and this has been
and speculative development. evidenced by our strong leasing activity in the year.
- Occupier covenant strength and concentration (including percentage of
rent classified as 'High Risk').
- Occupancy and weighted average unexpired lease term.
Risks and impacts How we monitor and mitigate the risks Change in risk assessment in year
11B11B11B11. Operational and Compliance Risks
The Group's ability to protect its reputation, income and capital values could - The Executive and Risk Committees maintain a strong focus on the range ←→ Our operational and compliance risks have remained stable and are considered a
be damaged by a failure to manage several key operational risks to our of operational and compliance risks to our business. medium impact risk with a medium probability.
business including:
15B15B15BTechnology and cyber security Our business faces both operational and compliance risks in its day to day
- technology and cyber security.
activities across our people, processes and technology. The key risks to our
- The InfoSec Steering Committee, chaired by the Chief Financial Officer, business include: technology and cyber security, health and safety, third
- health and safety. oversees our IT infrastructure, cyber security and key IT controls and reports party relationships and financial crime compliance. We remain vigilant to
to the Risk Committee and Audit Committee. these key operational and compliance risks for our business with no
- third party relationships.
significant issues to note over the year. During the year, we have made
- Cyber security risk is managed using a recognised security framework, substantial progress in strengthening our cyber security and IT infrastructure
- financial crime compliance. supported by best practice security tools across our technology and associated key controls as well as our wider internal controls environment
infrastructure, IT security policies, third party risk assessments and including a detailed fraud risk assessment undertaken across the business.
Compliance failures such as breaches in regulations, third party agreements, mandatory user cyber awareness training.
Opportunity
loan agreements or tax legislation could also damage reputation and our
The Risk Committee oversees and monitors our key operational and compliance
financial performance. 16B16B16BHealth and safety risks across the business to ensure we optimise our operational capabilities
and create efficiencies in terms of our people, processes and technology,
- The Health and Safety Committee is chaired by the Head of Property whilst at the same time having appropriate controls to mitigate the risks. Our
Services and governs the Health and Safety management systems, processes and ability to manage and operate large complex property portfolios and
performance in terms of KPIs and reports to the Risk, Audit and ESG developments is a key differentiator and allows us to work with selected joint
Committees. venture partners who value our expertise. We will continue to invest in and
develop our operational risk management platform so that we can adapt to the
- All our properties have general and fire risk assessments undertaken dynamic environment to both protect the business and exploit opportunities.
annually and any required improvements are implemented within defined time
frames depending on the category of risk.
- All our employees must attend Health and Safety training relevant to
their roles.
17B17B17BThird party relationships
- We have a robust selection process for our key partners and suppliers;
and contracts contain service level agreements which are monitored regularly.
- We maintain a portfolio of approved suppliers to ensure resilience
within our supply chain.
18B18B18BFinancial crime compliance
- We operate a zero-tolerance approach for bribery, corruption and fraud
and have policies in place to manage and monitor these risks.
- All employees must undertake mandatory training in these areas.
KRIs
- Information systems vulnerability score.
- Cyber security breaches.
- Health and Safety risk assessments.
- Health and Safety incidents.
Key: Change in risk assessment from last year
↑ Increase ←→ No change ↓ Decrease
Directors' Responsibilities Statement
The Directors' Responsibilities Statement below has been prepared in
connection with the full Annual Report and Accounts for the year ended 31
March 2023. Certain parts of the Annual Report and Accounts have not been
included in this announcement as set out in Note 1 to the condensed financial
information.
The Directors are responsible for preparing the Annual Report and Accounts in
accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the group financial
statements in accordance with UK-adopted international accounting standards
and the company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 "Reduced Disclosure Framework", and applicable law).
Under company law, Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group and Company
for that period. In preparing the financial statements, the directors are
required to:
- select suitable accounting policies and then apply them consistently;
- state whether applicable UK-adopted international accounting standards
have been followed for the group financial statements and United Kingdom
Accounting Standards, comprising FRS 101 have been followed for the company
financial statements, subject to any material departures disclosed and
explained in the financial statements;
- make judgements and accounting estimates that are reasonable and
prudent; and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records
that are sufficient to show and explain the Group's and Company's transactions
and disclose with reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that the financial statements
and the Directors' Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The Directors consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group's and Company's position and performance,
business model and strategy.
Each of the Directors, whose names and functions are listed in Corporate
Governance report, confirms that, to the best of their knowledge:
- the Group financial statements, which have been prepared in accordance
with UK-adopted international accounting standards, give a true and fair view
of the assets, liabilities, financial position and loss of the Group;
- the Company financial statements, which have been prepared in accordance
with United Kingdom Accounting Standards, comprising FRS 101, give a true and
fair view of the assets, liabilities and financial position of the company and
profit of the Company; and
- the Annual Report and Accounts includes a fair review of the development
and performance of the business and the position of the Group and Company,
together with a description of the principal risks and uncertainties that it
faces.
In the case of each director in office at the date the Directors' report is
approved:
- so far as the Director is aware, there is no relevant audit information
of which the Group's and Company's auditors are unaware; and
- they have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit information
and to establish that the Group's and Company's auditors are aware of that
information.
By order of the Board.
Bhavesh Mistry
Chief Financial Officer
16 May 2023
Consolidated Income Statement
For the year ended 31 March 2023
Note 2023 Restated1
2022
Underlying2 Capital Total Underlying2 Capital Total
£m
and other
£m
£m
and other
£m
£m
£m
Revenue 3 418 - 418 432 (20) 412
Costs3 3 (97) - (97) (124) (9) (133)
3 321 - 321 308 (29) 279
Joint ventures (see also below)4 8 92 (559) (467) 84 163 247
Administrative expenses (88) - (88) (88) - (88)
Valuation movement 4 - (798) (798) - 475 475
(Loss) profit on disposal of investment properties and revaluation of - (30) (30) - 45 45
investments
Net financing income
financing income 5 2 88 90 - 67 67
financing charges 5 (62) - (62) (55) (7) (62)
(60) 88 28 (55) 60 5
(Loss) profit on ordinary activities before taxation 265 (1,299) (1,034) 249 714 963
Taxation 6 (1) (4) (5) 4 (2) 2
(Loss) profit for the year after taxation 264 (1,303) (1,039) 253 712 965
Attributable to non-controlling interests 1 (2) (1) 2 - 2
Attributable to shareholders of the Company 263 (1,301) (1,038) 251 712 963
Earnings per share:
basic 2 (112.0)p 103.8p
diluted 2 (112.0)p 103.5p
All results derive from continuing operations.
Note 2023 Restated1
2022
Underlying2 Capital Total Underlying2 Capital Total
and other
£m
£m
and other
£m
£m
£m
£m
Results of joint ventures accounted for using the equity method
Underlying Profit 92 - 92 84 - 84
Valuation movement5 4 - (567) (567) - 167 167
Capital financing income (charges) - 8 8 - (4) (4)
Taxation 6 - - - - - -
8 92 (559) (467) 84 163 247
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2. See definition in Note 2 and a reconciliation between Underlying
Profit and IFRS profit in Note 17.
3. Included within 'Costs' is a credit relating to provisions for
impairment of tenant debtors, accrued income and tenant incentives and
contracted rent increases of £9m (2021/22: £2m credit). This is disclosed in
further detail in Note 7 and Note 10.
4. Included within 'Joint ventures' is a charge relating to provision
for impairment of equity investments and loans to joint ventures of £237m
(2021/22: £22m), disclosed in further detail in Note 8.
5. Included within the 'Valuation movement' debit of £567m (2021/22:
credit of £167m) is a net valuation movement debit of £567m (2021/22: credit
of £115m) and the realisation of gain on disposal of assets into joint
ventures of £nil (2021/22: £52m), disclosed in further detail in Note 8.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2023
2023 Restated1
£m
2022
£m
(Loss) profit for the year after taxation (1,039) 965
Other comprehensive income (expense):
Items that may be reclassified subsequently to profit or loss:
Gains on cash flow hedges
- Joint ventures 10 1
10 1
Reclassification of foreign exchange differences on disposal of subsidiary net - (12)
investment to the income statement
Other comprehensive income (expense) for the year 10 (11)
Total comprehensive (expense) income for the year (1,029) 954
Attributable to non-controlling interests (1) 2
Attributable to shareholders of the Company (1,028) 952
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
Consolidated Balance Sheet
As at 31 March 2023
Note 2023 Restated1
£m
2022
£m
ASSETS
Non-current assets
Investment and development properties 7 5,677 7,032
5,677 7,032
Other non-current assets
Investments in joint ventures 8 2,206 2,521
Other investments 9 58 41
Property, plant and equipment 22 27
Interest rate and currency derivative assets 14 144 97
8,107 9,718
Current assets
Trading properties 7 22 18
Debtors 10 34 60
Corporation tax 2 3
Cash and cash equivalents 14 125 111
183 192
Total assets 8,290 9,910
LIABILITIES
Current liabilities
Short term borrowings and overdrafts 14 (402) (189)
Creditors 11 (282) (278)
(684) (467)
Non-current liabilities
Debentures and loans 14 (1,865) (2,427)
Other non-current liabilities2 12 (145) (152)
Deferred tax liabilities 13 (4) -
Interest rate and currency derivative liabilities 14 (67) (96)
(2,081) (2,675)
Total liabilities (2,765) (3,142)
Net assets 5,525 6,768
EQUITY
Share capital 234 234
Share premium 1,308 1,307
Merger reserve 213 213
Other reserves 15 5
Retained earnings 3,742 4,994
Equity attributable to shareholders of the Company 5,512 6,753
Non-controlling interests 13 15
Total equity 5,525 6,768
EPRA Net Tangible Assets per share3 2 588p 730p
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
2. See footnote 2 in Note 3.
3. See definition in Note 2.
Consolidated Statement of Cash Flows
For the year ended 31 March 2023
Note 2023 Restated1
£m
2022
£m
Income received from tenants 391 419
Fees and other income received 47 30
Operating expenses paid to suppliers and employees (200) (201)
Sale of trading properties - 8
Cash generated from operations 238 256
Interest paid (71) (62)
Corporation taxation payments - (6)
Distributions and other receivables from joint ventures 8 73 57
Net cash inflow from operating activities 240 245
Cash flows from investing activities
Development and other capital expenditure (209) (259)
Purchase of investment properties (155) (596)
Sale of investment properties 8 187
Sale of investment properties to Canada Water Joint Venture 8 - 290
Sale of investment properties to Paddington Central Joint Venture 8 686 -
Purchase of investments (15) (14)
Indirect taxes paid in respect of investing activities 4 (5)
Loan repayments from joint ventures 8 125 133
Investment in and loans to joint ventures (148) (121)
Capital distributions from joint ventures 8 30 -
Net cash inflow (outflow) from investing activities 326 (385)
Cash flows from financing activities
Dividends paid 15 (213) (155)
Dividends paid to non-controlling interests (1) (6)
Capital payments in respect of interest rate derivatives (21) (7)
Purchase of non-controlling interests in Hercules Unit Trust - (38)
Decrease in lease liabilities (4) (4)
Decrease in bank and other borrowings (637) (213)
Drawdowns on bank and other borrowings 324 483
Net cash (outflow) inflow from financing activities (552) 60
Net increase (decrease) in cash and cash equivalents 14 (80)
Cash and cash equivalents at 1 April 111 191
Cash and cash equivalents at 31 March 14 125 111
Cash and cash equivalents consists of:
Cash and short term deposits 99 74
Tenant deposits 26 37
1. Prior year comparatives have been restated for a change in accounting
policy in respect of tenant deposits. Refer to Note 1 for further information.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2023
Share Share Hedging and Re- Merger Restated1 Retained Restated1 Non- Restated1
capital
premium
translation
valuation
reserve
earnings
Total
controlling
Total
£m
£m
reserve
reserve
£m
£m
£m
interests
equity
£m
£m
£m
£m
Balance at 1 April 2022 234 1,307 2 3 213 4,994 6,753 15 6,768
Loss for the year after taxation - - - - - (1,038) (1,038) (1) (1,039)
Gains on cash flow hedges - joint ventures - - - 10 - - 10 - 10
Other comprehensive income - - - 10 - - 10 - 10
Total comprehensive (expense) income for the year - - - 10 - (1,038) (1,028) (1) (1,029)
Shares issued in the year - 1 - - - - 1 - 1
Fair value of share and share option awards - - - - - 1 1 - 1
Dividends payable in year (23.20p per share) - - - - - (215) (215) - (215)
Dividends payable by subsidiaries - - - - - - - (1) (1)
Balance at 31 March 2023 234 1,308 2 13 213 3,742 5,512 13 5,525
Balance at 1 April 2021 as published 234 1,307 14 2 213 4,154 5,924 59 5,983
Change of accounting policy in respect of rental concessions (Note 1) - - - - - 30 30 - 30
Restated balance at 1 April 2021 234 1,307 14 2 213 4,184 5,954 59 6,013
Profit for the year after taxation - - - - - 963 963 2 965
Gains on cash flow hedges - joint ventures - - - 1 - - 1 - 1
Reclassification of foreign exchange differences on disposal of subsidiary net - - (12) - - - (12) - (12)
investment
Other comprehensive income (expense) - - (12) 1 - - (11) - (11)
Total comprehensive income (expense) for the year - - (12) 1 - 963 952 2 954
Fair value of share and share option awards - - - - - 2 2 - 2
Purchase of the units from non-controlling interests2 - - - - - 2 2 (40) (38)
Dividends payable in year (16.96p per share) - - - - - (157) (157) - (157)
Dividends payable by subsidiaries - - - - - - - (6) (6)
Balance at 31 March 2022 234 1,307 2 3 213 4,994 6,753 15 6,768
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2. On 5 July 2021, the Group completed the acquisition of the remaining
21.9% units of Hercules Unit Trust that the Group did not already own for a
consideration of £38m. Whilst the transaction was completed on 5 July 2021,
the Group obtained the risks and rewards of ownership of the 21.9% of Hercules
Unit Trust on 1 April 2021 and therefore, the change in ownership percentage
and resulting non-controlling interests were reflected at this date in the
financial statements. The book value of the net assets purchased at 1 April
2021 were £40m and consequently £40m has been transferred from
non-controlling interests to shareholders' equity.
Notes to the Accounts
1 Basis of preparation, significant accounting policies and accounting judgements
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 March 2023 or 2022, but is derived
from those accounts. Statutory accounts for 2022 have been delivered to the
Registrar of Companies and those for 2023 will be delivered following the
Company's Annual General Meeting. The auditor has reported on those accounts
and their reports on those accounts were unqualified. The auditors' report did
not contain statements under Section 498(2) or (3) of the Companies Act 2006.
The financial statements for the year ended 31 March 2023 have been prepared
on the historical cost basis, except for the revaluation of properties,
investments classified as fair value through profit or loss and derivatives.
The financial statements are prepared in accordance with UK-adopted
International Accounting Standards and the applicable legal requirements of
the Companies Act 2006 ('IFRS').
While the information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement criteria of IFRS,
this announcement does not itself contain sufficient information to comply
with IFRS. The Company expects to publish full financial statements that
comply with IFRS in June 2023.
In the current year the Group has adopted a number of minor amendments to
standards effective in the year issued by the IASB, none of which have had a
material impact on the Group. These include amendments to IAS 16, IAS 37, IFRS
3 and annual improvements to IFRS Standards 2018-2020. Several amendments to
standards and interpretations have been issued but are not yet effective
for the current accounting period. These include amendments to IAS 12, IAS 1
and IFRS Practice Statement 2. These have not yet been adopted by the Group.
The amendments listed above did not have any impact on amounts recognised in
prior years, and are not expected to significantly affect current and future
years.
In the current year the Group has adopted two Agenda Decisions issued by the
IFRS Interpretations Committee, in respect of the accounting for rental
concessions granted to tenants and tenant deposits. This has led to a change
in the Group's accounting policies in these two respective areas. Further
details on these changes have been disclosed later in this Note.
Going concern
The financial statements are prepared on a going concern basis. The
consolidated balance sheet shows that the Group is in a net current liability
position, predominantly due to short term borrowings and overdrafts of £402m.
The Group has access to £1.8bn of undrawn facilities and cash, which provides
the Directors with a reasonable expectation that the Group will be able to
meet these current liabilities as they fall due. In making this assessment the
Directors took into account forecast cash flows and covenant compliance,
including stress testing through the impact of sensitivities as part of a
'severe but plausible downside scenario'. Before factoring in any income
receivable, the undrawn facilities and cash would also be sufficient to cover
forecast capital expenditure, property operating costs, administrative
expenses, maturing debt and interest over the next 12 months from the approval
date of these financial statements.
Having assessed the principal risks, the Directors believe that the Group is
well placed to manage its financing and other business risks satisfactorily
despite the uncertain economic climate and have a reasonable expectation that
the Company and the Group have adequate resources to continue in operation for
at least 12 months from the signing date of these financial statements.
Accordingly, they believe the going concern basis is an appropriate one.
Critical accounting judgements and key sources of estimation uncertainty
In applying the Group's accounting policies, the Directors are required
to make critical accounting judgements and assess key sources of estimation
uncertainty that affect the financial statements.
Key sources of estimation uncertainty
Valuation of investment, development and trading properties: The Group uses
external professional valuers to determine the relevant amounts. The primary
source of evidence for property valuations should be recent, comparable market
transactions on an arm's length basis. However, the valuation of the Group's
property portfolio is inherently subjective, as it is based upon valuer
assumptions and estimations that form part of the key unobservable inputs of
the valuation, which may prove to be inaccurate. Further details on the
valuers' assumptions and estimates have been provided in Note 7.
Impairment provisioning of tenant debtors (including accrued income) and
tenant incentives, which are presented within investment properties: The
impact of Covid-19 gave rise to an increase in tenant debtors due from
tenants along with higher loss rates, however these are continuing to decrease
as the impact of the pandemic recedes. Consequently, for the year ended 31
March 2023 the impairment provisions calculated using the expected credit loss
model under IFRS 9 'Financial Instruments' against these balances are lower
than in the prior year. See Note 10 for further details on the reduction of
tenant debtors and associated provisions in the year.
The key assumptions within the expected credit loss model include the tenants'
credit risk rating and the related loss rates assumed for each risk rating
depending on the historical experience collection rate and the ageing profile.
Tenant risk ratings are determined by management, taking into consideration
information available surrounding a tenant's credit rating, financial position
and historical loss rates. Tenants are classified as being in Administration
or CVA, high, medium or low risk based on this information. The assigned loss
rates for these risk categories are reviewed at each balance sheet date and
are based on historical experience collection rates and future expectations of
collection rates. The same key assumptions are applied in the expected credit
loss model for tenant incentives, without the consideration of the ageing
profile which is not relevant for these balances.
Other sources of estimation uncertainty that would not result in a material
movement in the carrying amount in the next financial year include the
valuation of interest rate derivatives, the determination of share-based
payments, the actuarial assumptions used in calculating the Group's retirement
benefit obligations and taxation provisions.
Critical accounting judgements
The Directors have exercised critical judgement in respect of the joint
control assessment of the Paddington Central Joint Venture which was entered
into in the year. As part of the assessment, the Directors considered the
Group's control over the Paddington Property Limited Partnership in respect of
its 25% ownership. The Directors assessed the Group's power to direct the
relevant activities of the Partnership through the partnership agreements,
including reserved matters which require the unanimous consent of the
Partners, and the Group's subsequent exposure to variable returns. Through
this analysis, the Directors have been able to satisfactorily conclude that
the Group has joint control over the Partnership and therefore has accounted
for the Partnership as a joint venture using the equity method, in line with
the Group's accounting policies.
The following items are ongoing areas of accounting judgement, however, the
Directors do not consider these accounting judgements to be critical and
significant accounting judgement has not been required for any of these items
in the current financial year.
REIT status: British Land is a Real Estate Investment Trust ('REIT') and does
not pay tax on its property income or gains on property sales, provided that
at least 90% of the Group's property income is distributed as a dividend to
shareholders, which becomes taxable in their hands. In addition, the Group
has to meet certain conditions such as ensuring the property rental business
represents more than 75% of total profits and assets. Any potential or
proposed changes to the REIT legislation are monitored and discussed with
HMRC. It is management's intention that the Group will continue as a REIT for
the foreseeable future.
Accounting for joint ventures: In accordance with IFRS 10 'Consolidated
Financial Statements', IFRS 11 'Joint Arrangements' and IFRS 12 'Disclosure of
Interests in Other Entities', an assessment is required to determine the
degree of control or influence the Group exercises and the form of any
control to ensure that the financial statement treatment is appropriate. The
assessment undertaken by management includes consideration of the structure,
legal form, contractual terms and other facts and circumstances relating to
the relevant entity. This assessment is updated annually and there have been
no changes in the judgement reached in relation to the degree of control the
Group exercises within the current or prior year. An assessment was performed
for both the Paddington Central Joint Venture transaction that occurred in the
current year, and the Canada Water Joint Venture transaction that occurred in
the prior year (see Note 8). As previously disclosed, a critical accounting
judgement was exercised in the assessment of the Paddington Central Joint
Venture transaction. However, as part of the Canada Water Joint Venture
transaction assessment, no critical accounting judgements were applied. Group
shares in joint ventures resulting from this process are disclosed in Note 8
to the financial statements.
Joint ventures are accounted for under the equity method, whereby the
consolidated balance sheet incorporates the Group's share of the net assets of
its joint ventures and associates. The consolidated income statement
incorporates the Group's share of joint venture and associate profits after
tax.
Accounting for transactions: Property transactions are complex in nature and
can be material to the financial statements. Judgements made in relation to
transactions include whether an acquisition is a business combination or an
asset; whether held for sale criteria have been met for transactions not yet
completed; accounting for transaction costs and contingent consideration; and
application of the concept of linked accounting. Management consider each
transaction separately in order to determine the most appropriate accounting
treatment, and, when considered necessary, seek independent advice. In this
regard, management have considered the accounting of both the Paddington
Central Joint Venture transaction in the year ended 31 March 2023 and the
Canada Water Joint Venture transaction in the year ended 31 March 2022 (see
Note 8).
Change in accounting policies
Rental concessions
In October 2022, the IFRS Interpretations Committee (IFRIC) issued an Agenda
Decision in relation to Lessor Forgiveness of Lease Payments (IFRS 9 and IFRS
16), giving clarification on the lessor accounting for concessions (or rental
forgiveness) granted to tenants. Concessions granted to tenants consisted of
reducing or waiving the rent for a specified period.
The IFRIC clarified that concessions granted to tenants for rental debtors
past their due date would fall under the scope of expected credit losses
within IFRS 9. As such, the expected credit loss would be reflected in the
income statement as part of the derecognition and provisioning of the rental
debtor.
Before the Agenda Decision, the Group treated concessions granted to tenants
for rental debtors past their due date (predominantly in response to
Covid-19), as a lease modification under IFRS 16 'Leases', recognising the
concession granted on a straight-line basis over the lease term.
Following the Agenda Decision, the Group has retrospectively applied the
accounting clarification to relevant concessions for the years ended 31 March
2021 and 2022. This includes restating the 2021 opening balances and the 2022
comparative balances as set out below. No relevant concessions were granted in
preceding financial years.
As part of considering the Agenda Decision, the Group has reassessed the
position of the tenant incentive provision on the consolidated balance sheet.
Previously, this balance was accounted for as part of debtors. However,
following the Agenda Decision, the Group has chosen to retrospectively
represent the tenant incentive provision within investment property, as part
of the overall concession accounting reassessment. As the associated
concession tenant incentive provision was previously accounted for as part of
debtors as opposed to investment property, the provision reduction on
restatement leads to an increase in both net assets and profit as outlined
below.
Overall, for the year ended 31 March 2022, the profit on ordinary activities
before taxation increases by £5m from £958m to £963m. Within the
consolidated income statement, the restatement has resulted in a change to the
following balances:
- Gross rental income;
- Provisions for impairment of trade debtors and accrued income;
- Provisions for impairment of tenant incentives and contracted rent
increases;
- Valuation movement; and
- Joint venture result.
In respect of the consolidated balance sheet, the restatement has resulted in
the opening net assets of the Group as at 1 April 2021 increasing by £30m
from £5,983m to £6,013m. For the year ended 31 March 2022, subsequent to
adjusting the opening balances, the net assets of the Group increased by £5m
to £6,768m. Within the consolidated balance sheet, the restatement has
resulted in a change to the following balances:
- Tenant incentive movement and revaluation within investment property;
- Debtors; and
- Net investment in joint ventures.
The quantitative impact on each balance has been outlined below.
Tenant deposits
In April 2022, the IFRIC issued an Agenda Decision in relation to Demand
Deposits with Contractual Restrictions in Use, clarifying that deposits of
this nature meet the definition of cash and cash equivalents under IAS 7
'Statement of Cash Flows' and should be disclosed as Tenant deposits within
cash and cash equivalents. For the year ended 31 March 2022, the Group
recognised £4m of rental deposits within debtors and identified a further
£33m of service charge deposits not previously recognised on the Group's
consolidated balance sheet, as both meeting the amended definition of a demand
deposit. The service charge deposits were previously not recognised on the
consolidated balance sheet due to contractual restrictions on the use of these
deposits. The Group has amended its accounting policy accordingly and will
recognise these balances on the consolidated balance sheet as part of cash and
cash equivalents, with a restatement to the 31 March 2022 prior year
comparative of £37m.
As part of this reassessment, the Group will also recognise service charge
income and expense related cash flows within the consolidated statement of
cash flows, within the income received from tenants and operating expenses
paid to suppliers and employees of £61m respectively, with a restatement to
the year ended 31 March 2022 prior year comparative.
31 March 2022 Opening balance restatement for rental concessions Rental concessions Tenant deposits Restatement 31 March 2022
Published
£m
Restatement
£m
Restated
£m
£m
£m
Consolidated income statement (extract)
Revenue 410 - 2 - 412
Costs (129) - (4) - (133)
Joint ventures 244 - 3 - 247
Valuation movement 471 - 4 - 475
Profit on ordinary activities before taxation 958 - 5 - 963
Consolidated balance sheet (extract)
Investments in joint ventures 2,511 7 3 - 2,521
Debtors 39 23 2 (4) 60
Cash and cash equivalents 74 - - 37 111
Creditors (245) - - (33) (278)
Retained earnings 4,959 30 5 - 4,994
Net assets 6,733 30 5 - 6,768
Consolidated statement of cash flows (extract)
Income received from tenants 358 - - 61 419
Operating expenses paid to suppliers and employees (140) - - (61) (201)
Cash and cash equivalents at 1 April 154 - - 37 191
Cash and cash equivalents at 31 March 74 - - 37 111
Cash and cash equivalents consist of:
Tenant deposits - - - 37 37
Performance measures (Note 2)
Underlying Profit (Table A) 251 - (4) - 247
EPRA Net Tangible Assets 6,771 30 5 - 6,806
pence pence pence pence pence
Underlying diluted earnings per share 27.4 - (0.4) - 27.0
EPRA Net Tangible Assets per share 727 4 (1) - 730
2 Performance measures
Earnings per share
The Group measures financial performance with reference to underlying earnings
per share, the European Public Real Estate Association (EPRA) earnings per
share and IFRS earnings per share. The relevant earnings and weighted average
number of shares (including dilution adjustments) for each performance measure
are shown below, and a reconciliation between these is shown within
the supplementary disclosures (Table B).
EPRA earnings per share is calculated using EPRA earnings, which is the IFRS
profit after taxation attributable to shareholders of the Company excluding
investment and development property revaluations, gains/losses on investing
and trading property disposals, changes in the fair value of financial
instruments and associated close-out costs and their related taxation.
Underlying earnings per share is calculated using Underlying Profit adjusted
for underlying taxation (see Note 6), with the dilutive measure being the
primary disclosure measure used. Underlying Profit is the pre-tax EPRA
earnings measure, with additional Company adjustments for items which are
considered to be unusual and/or significant by virtue of their size and
nature. No Company adjustments were made in the current year to 31 March 2023.
In the prior year to 31 March 2022, a £29m surrender premium payment and a
£12m reclassification of foreign exchange differences were excluded from the
calculation of Underlying Profit (see Note 3 and Note 5, respectively, for
further details). There was no tax effect of these Company adjusted items.
Earnings per share 2023 Restated1
2022
Relevant Relevant Earnings Relevant Relevant Earnings
earnings
number
per share
earnings
number
per share
£m
of shares
pence
£m
of shares
pence
million
million
Underlying
Underlying basic 263 927 28.4 251 927 27.1
Underlying diluted 263 930 28.3 251 930 27.0
EPRA
EPRA basic 263 927 28.4 234 927 25.3
EPRA diluted 263 930 28.3 234 930 25.2
IFRS
Basic (1,038) 927 (112.0) 963 927 103.8
Diluted (1,038) 927 (112.0) 963 930 103.5
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
Net asset value
The Group measures financial position with reference to EPRA Net Tangible
Assets (NTA), Net Reinvestment Value (NRV) and Net Disposal Value (NDV). The
net assets and number of shares for each performance measure are shown below.
A reconciliation between IFRS net assets and the three EPRA net asset
valuation metrics, and the relevant number of shares for each performance
measure, is shown within the supplementary disclosures (Table B). EPRA NTA is
a measure that is based on IFRS net assets excluding the mark-to-market on
derivatives and related debt adjustments, the carrying value of intangibles,
as well as deferred taxation on property and derivative valuations. The metric
includes the valuation surplus on trading properties and is adjusted for the
dilutive impact of share options.
Net asset value per share 2023 Restated1
2022
Relevant Relevant Net asset Relevant Relevant Net asset
net assets
number
value per
net assets
number of
value per
£m
of shares
share
£m
shares
share
million
pence
million
pence
EPRA
EPRA NTA 5,487 933 588 6,806 932 730
EPRA NRV 6,029 933 646 7,438 932 798
EPRA NDV 5,658 933 606 6,577 932 706
IFRS
Basic 5,525 927 596 6,768 927 730
Diluted 5,525 933 592 6,768 932 726
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
Total accounting return
The Group also measures financial performance with reference to total
accounting return. This is calculated as the movement in EPRA NTA per share
and dividend paid in the year as a percentage of the EPRA NTA per share at the
start of the year.
2023 Restated1
2022
Movement in Dividend per Total Movement in Dividend per Total
NTA per share
share paid
accounting
NTA per share
share paid
accounting
pence
pence
return
pence
pence
return
Total accounting return (142) 23.2 (16.3%) 78 16.96 14.6%
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
3 Revenue and costs
2023 Restated1
2022
Underlying Capital Total Underlying Capital Total
£m
and other
£m
£m
and other
£m
£m
£m
Rent receivable 306 - 306 332 - 332
Spreading of tenant incentives and contracted rent increases 15 - 15 7 - 7
Surrender premia2 1 - 1 1 (29) (28)
Gross rental income 322 - 322 340 (29) 311
Trading property sales proceeds - - - - 9 9
Service charge income 59 - 59 62 - 62
Management and performance fees (from joint ventures) 13 - 13 9 - 9
Other fees and commissions 24 - 24 21 - 21
Revenue 418 - 418 432 (20) 412
Trading property cost of sales - - - - (9) (9)
Service charge expenses (50) - (50) (55) - (55)
Property operating expenses (37) - (37) (54) - (54)
Release (provisions) for impairment of trade debtors and accrued income 11 - 11 (1) - (1)
(Provisions) release for impairment of tenant incentives and contracted (2) - (2) 3 - 3
rent increases
Other fees and commissions expenses (19) - (19) (17) - (17)
Costs (97) - (97) (124) (9) (133)
321 - 321 308 (29) 279
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2. In the prior year, on 31 August 2021, the Group undertook a leasing
transaction with two unrelated parties in relation to one of its investment
properties. The transaction was commercially beneficial and resulted in an
overall increase in the net assets of the Group. It involved a £29m payment
to one party for the surrender of an agreement for lease, with a subsequent
premium of £29m received for the grant of a new agreement for lease for the
same property with another party, meaning the transaction was cash neutral. In
line with the requirements of IFRS 16, and due to the unrelated parties in the
transaction, the Group is required to account for the elements of the
transaction separately, and as such an associated £29m surrender premium
payment was recognised in full through the income statement in the year. Owing
to the unusual and significant size and nature of the payment and in line with
the Group's accounting policies the payment has been included within the
Capital and other column of the income statement. The premium recognised as
deferred income on the balance sheet as at 31 March 2023 within other
non-current liabilities was £25m (2021/22: £27m) (see Note 12).
The cash element of net rental income (gross rental income less property
operating expenses) recognised during the year ended 31 March 2023 from
properties which were not subject to a security interest was £238m (2021/22:
£232m). Property operating expenses relating to investment properties that
did not generate any rental income were £nil (2021/22: £nil). Contingent
rents of £9m (2021/22: £6m) that contain a variable lease payment were
recognised in the year.
Further detail on the provision for impairment of trade debtors, accrued
income, tenant incentives and contracted rent increases is disclosed in Note 7
and Note 10.
4 Valuation movements on property
2023 Restated1
£m
2022
£m
Consolidated income statement
Revaluation of properties (798) 475
Revaluation of properties held by joint ventures accounted for using the (567) 167
equity method2
(1,365) 642
1. Prior year comparative has been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2. Comprises net valuation movement debit of £567m (2021/22: credit of
£115m) and realisation of gain on disposal of assets into joint ventures of
£nil (2021/22: credit of £52m), disclosed in further detail in Note 8.
5 Net financing income
2023 2022
£m
£m
Underlying
Financing charges
Facilities and overdrafts (28) (20)
Derivatives 28 29
Other loans (72) (68)
Obligations under head leases (3) (3)
(75) (62)
Development interest capitalised 13 7
(62) (55)
Financing income
Deposits, securities and liquid investments 2 -
2 -
Net financing charges - Underlying (60) (55)
Capital and other
Financing charges
Valuation movement on fair value hedge accounted derivatives1 - (67)
Valuation movement on fair value hedge accounted debt1 - 61
Valuation movement on non-hedge accounted derivatives - (1)
- (7)
Financing income
Valuation movements on translation of foreign currency debt and investments 1 -
Valuation movement on fair value hedge accounted derivatives1 (27) -
Valuation movement on fair value hedge accounted debt1 33 -
Reclassification of foreign exchange differences on disposal of subsidiary net - 12
investment from equity2
Valuation movement on non-hedge accounted derivatives 81 55
88 67
Net financing income - Capital and other 88 60
Net financing income
Total financing income 90 67
Total financing charges (62) (62)
Net financing income 28 5
1. The difference between valuation movement on designated fair value
hedge accounted derivatives (hedging instruments) and the valuation movement
on fair value hedge accounted debt (hedged item) represents hedge
ineffectiveness for the year of a credit of £6m (2021/22: a debit of £6m).
2. £nil (2021/22: £12m) has been reclassified from the hedging and
translation reserve to the income statement, relating to cumulative foreign
exchange gains on disposal of the net investment in a foreign subsidiary.
Interest payable on unsecured bank loans and related interest rate derivatives
was £16m (2021/22: £13m). Interest on development expenditure is capitalised
at the Group's weighted average interest rate of 2.9% (2021/22: 2.4%). The
weighted average interest rate on a proportionately consolidated basis at 31
March 2023 was 3.5% (2021/22: 2.9%).
6 Taxation
2023 Restated1
£m
2022
£m
Taxation (expense) income
Current taxation
Underlying Profit
Current period UK corporation taxation (2022/23: 19%; 2021/22: 19%) (2) (2)
Underlying Profit adjustments in respect of prior periods 1 6
Total current Underlying Profit taxation (expense) income (1) 4
Capital and other profit - -
Current period UK corporation taxation (2022/23: 19%; 2021/22: 19%)
Capital and other profit adjustments in respect of prior periods - (2)
Total current Capital and other profit taxation income (expense) - (2)
Total current taxation (expense) income (1) 2
Deferred taxation on revaluation of derivatives (4) -
Group total taxation (expense) income (5) 2
Attributable to joint ventures2 - -
Total taxation (expense) income (5) 2
Taxation reconciliation
(Loss) profit on ordinary activities before taxation (1,034) 963
Less: Loss (profit) attributable to joint ventures 467 (247)
Group (loss) profit on ordinary activities before taxation (567) 716
Taxation on loss (profit) on ordinary activities at UK corporation taxation 108 (136)
rate of 19% (2021/22: 19%)
Effects of:
- REIT exempt income and (losses) gains (125) 126
- Taxation losses 15 9
- Deferred taxation on revaluation of derivatives (4) -
- Adjustments in respect of prior years 1 3
Group total taxation (expense) income (5) 2
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2. Current taxation expense of £nil (2021/22: £nil) and a deferred
taxation expense of £nil (2021/22: £nil) arose on profits attributable to
joint ventures.
Taxation expense attributable to Underlying Profit for the year ended 31 March
2023 was £1m (2021/22: £4m income). Taxation expense attributable to Capital
and other profit was £nil (2021/22: £2m expense). Corporation tax receivable
as at 31 March 2023 was £2m (2021/22: £3m receivable) as shown on the
consolidated balance sheet. Deferred taxation expense on the revaluation of
derivatives attributable to Capital and other profit was £4m (2021/22:
£nil).
A REIT is required to pay Property Income Distributions (PIDs) of at least 90%
of the taxable profits from its UK property rental business within 12 months
of the end of each accounting period.
7 Property
Property reconciliation for the year ended 31 March 2023
Campuses Retail & Fulfilment Developments Investment and Trading Total
Level 3
Level 3
Level 3
development
properties
£m
£m
£m
£m
properties
£m
Level 3
£m
Carrying value at 1 April 2022 3,477 2,850 705 7,032 18 7,050
Additions
- property purchases - 99 59 158 - 158
- development expenditure - 6 146 152 4 156
- capitalised interest and staff costs - - 13 13 - 13
- capital expenditure on asset management initiatives 18 43 1 62 - 62
18 148 219 385 4 389
Disposals (929) (5) (11) (945) - (945)
Reclassifications (20) (31) 51 - - -
Revaluations included in income statement (328) (339) (131) (798) - (798)
Movement in tenant incentives and contracted rent uplift balances 15 (12) - 3 - 3
Carrying value at 31 March 2023 2,233 2,611 833 5,677 22 5,699
Lease liabilities (Notes 11 and 12)1 (102)
Less valuation surplus on right-of-use assets2 (9)
Valuation surplus on trading properties 7
Group property portfolio valuation at 31 March 2023 5,595
Non-controlling interests (13)
Group property portfolio valuation at 31 March 2023 attributable to 5,582
shareholders
1. The £24m difference between lease liabilities of £102m and £126m
per Notes 11 and 12 relates to a £24m lease liability where the right-of-use
asset is classified as property, plant and equipment.
2. Relates to properties held under leasing agreements. The fair value
of right-of-use assets is determined by calculating the present value of net
rental cash flows over the term of the lease agreements. IFRS 16 right-of-use
assets are not externally valued, their fair values are determined by
management, and are therefore not included in the Group property portfolio
valuation of £5,595m above.
On 19 July 2022, the Group entered into a Joint Venture Agreement with GIC in
relation to the majority of the Paddington Central Campus, resulting in the
disposal of £934m of investment and development properties and £2m of
property, plant and equipment with a resulting loss in the Capital and other
column of the consolidated income statement of £19m for the year ended
31 March 2023.
Property valuation
The different valuation method levels are defined below:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
These levels are specified in accordance with IFRS 13 'Fair Value
Measurement'. Property valuations are inherently subjective as they are made
on the basis of assumptions made by the valuer which may not prove to be
accurate. For these reasons, and consistent with EPRA's guidance, we have
classified the valuations of our property portfolio as Level 3 as defined by
IFRS 13. The inputs to the valuations are defined as 'unobservable' by IFRS
13. These key unobservable inputs are net equivalent yield and estimated
rental values for investment properties, and costs to complete for development
properties. Further analysis of these key unobservable inputs have been
included later in this note. There were no transfers between levels in the
year.
The Group's total property portfolio was valued by external valuers on the
basis of fair value, in accordance with the RICS Valuation - Global Standards
2022, published by The Royal Institution of Chartered Surveyors.
The information provided to the valuers, and the assumptions and valuation
models used by the valuers, are reviewed by the property portfolio team, the
Head of Real Estate, the Chief Financial Officer and the Chief Executive
Officer. The valuers meet with the external auditor and also present directly
to the Audit Committee at the interim and year-end review of results.
Investment properties, excluding properties held for development, are valued
by adopting the 'investment method' of valuation. This approach involves
applying capitalisation yields to current and future rental streams net of
income voids arising from vacancies or rent-free periods and associated
running costs. These capitalisation yields and future rental values are based
on comparable property and leasing transactions in the market using the
valuers' professional judgement and market observation. Other factors taken
into account in the valuations include the tenure of the property, tenancy
details and ground and structural conditions.
In the case of ongoing developments, the approach applied is the 'residual
method' of valuation, which is the investment method of valuation as described
above, with a deduction for all costs necessary to complete the development,
including a notional finance cost, together with a further allowance for
remaining risk. Properties held for development are generally valued by
adopting the higher of the residual method of valuation, allowing for all
associated risks, or the investment method of valuation for the existing
asset.
The valuers of the Group's property portfolio have a working knowledge of the
various ways that sustainability and Environmental, Social and Governance
factors can impact value and have considered these, and how market
participants are reflecting these in their pricing, in arriving at their
Opinion of Value and resulting valuations as at the balance sheet date. These
may be:
- physical risks;
- transition risks related to policy or legislation to achieve
sustainability and Environmental, Social and Governance targets; and
- risks reflecting the views and needs of market participants.
The Group has shared recently conducted physical climate and transitional risk
assessments with the valuers which they have reviewed and taken into
consideration to the extent that current market participants would.
Valuers observe, assess and monitor evidence from market activities, including
market (investor) sentiment on issues such as longer term obsolescence and,
where known, future Environmental, Social and Governance related risks and
issues which may include, for example, the market's approach to capital
expenditure required to maintain the utility of the asset. In the absence of
reliable benchmarking data and indices for estimating costs, specialist advice
on cost management may be required which is usually agreed with the valuer in
the terms of engagement and without which reasonable estimates/assumptions may
be needed to properly reflect market expectations in arriving at the Opinion
of Value.
A breakdown of valuations split between the Group and its share of joint
ventures is shown below:
2023 2022
Group Joint Total Group Joint Total
£m
ventures
£m
£m
ventures
£m
£m
£m
Knight Frank LLP 801 217 1,018 1,387 37 1,424
CBRE 1,492 471 1,963 1,906 448 2,354
Jones Lang LaSalle 2,972 556 3,528 3,330 638 3,968
Cushman & Wakefield 330 2,072 2,402 321 2,415 2,736
Total property portfolio valuation 5,595 3,316 8,911 6,944 3,538 10,482
Non-controlling interests (13) - (13) (15) - (15)
Total property portfolio valuation attributable to shareholders1 5,582 3,316 8,898 6,929 3,538 10,467
1. The total property portfolio valuation for joint ventures is £3,316m
(2021/22: £3,538m), compared to the total investment and trading properties
of £3,334m (2021/22: £3,545m) disclosed in Note 8. The £3,316m (2021/22:
£3,545m) includes £23m (2021/22: £12m) of trading properties and excludes
£18m (2021/22: £19m) of headleases, both at Group share.
Information about fair value measurements using unobservable inputs (Level 3)
for the year ended 31 March 2023
Investment Fair value at Valuation ERV per sq ft Equivalent yield Costs to complete per sq ft
31 March 2023
technique
£m
Min Max Average Min Max Average Min Max Average
£
£
£
%
%
%
£
£
£
Campuses 2,153 Investment methodology 9 141 58 4 7 5 - 158 28
Retail & Fulfilment 2,580 Investment methodology 2 32 19 4 18 7 - 44 6
Developments 833 Residual methodology 29 98 70 5 6 5 273 1,048 645
Total 5,566
Trading properties 29
at fair value
Group property 5,595
portfolio valuation
Provisions for impairment of tenant incentives and contracted rent increases
A provision of £20m (2021/22: £19m) has been made for impairment of tenant
incentives and contracted rent uplift balances (contracted rents). The charge
to the income statement in relation to write-offs and provisions for
impairment for tenant incentives and contracted rents was £2m (2021/22:
credit of £3m) (see Note 3). The Directors consider that the carrying amount
of tenant incentives is approximate to their fair value.
The table below shows the movement in provisions for impairment of tenant
incentives during the year ended 31 March 2023 on a Group and on a
proportionally consolidated basis.
Movement in provisions for impairment of tenant incentives (Restated1) Group Proportionally consolidated
£m
£m
Provisions for impairment of tenant incentives as at 1 April 2022 19 27
Write-offs of tenant incentives (1) (2)
Movement in provisions for impairment of tenant incentives 2 7
Total provision movement recognised in income statement 2 7
Provisions for impairment of tenant incentives as at 31 March 2023 20 32
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
8 Joint ventures
Summary movement for the year of the investments in joint ventures
Equity Loans Total
£m
£m
£m
At 1 April 2022 (Restated1) 1,889 632 2,521
Additions 71 211 282
Disposals (39) 1 (38)
Share of loss on ordinary activities after taxation2 (410) (57) (467)
Distributions and dividends:
- Capital (30) - (30)
- Revenue (72) - (72)
Hedging and exchange movements 10 - 10
At 31 March 2023 1,419 787 2,206
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
2. The share of losses on ordinary activities after taxation comprises
equity accounted losses of £230m and IFRS 9 impairment charges against equity
investments and loans of £237m, relating to Broadgate REIT Ltd (equity
impairment of £129m), MSC Property Intermediate Holdings Ltd (loan impairment
of £49m, equity impairment £4m), BL CW Upper Limited Partnership (equity
impairment £23m), BL West End Offices Ltd (equity impairment of £13m),
Paddington Property Investment Limited Partnership (equity impairment £10m),
WOSC Partners Limited Partnership (loan impairment of £6m) and USS Joint
Ventures (equity impairment of £3m). In accordance with IFRS 9, management
has assessed the recoverability of loans to joint ventures and assessed the
carrying value of investments in joint ventures against the net asset value.
Amounts due are expected to be recovered by a joint venture selling its
properties and investments and settling financial assets, net of financial
liabilities. The net asset value of a joint venture is considered to be a
reasonable approximation of the available assets that could be realised to
recover the amounts due and the requirement to recognise expected credit
losses. The impairments recognised in each joint venture are attributable to
the net valuation loss recognised in the year.
On 19 July 2022, the Group entered into a new Joint Venture Agreement with GIC
in relation to the majority of the Paddington Central Campus. The transaction
value of the assets transferred by the Group on the formation of the joint
venture at 100% was £934m of investment and development properties and £2m
of property, plant and equipment with a resulting loss in the Capital and
other column of the consolidated income statement of £19m for the year ended
31 March 2023. The Group owns 25% of this new joint venture while GIC owns the
remaining 75% stake. The Group has recognised a share of the joint venture's
loss of £19m and share of net assets less shareholder loans of £107m in
relation to this new joint venture for the year ended 31 March 2023. A
critical accounting judgement has been exercised in relation to the joint
control assessment of the Paddington Central Joint Venture as further outlined
in Note 1. The Group received £686m of cash consideration in relation to the
sale of the investment and development properties to the joint venture (net of
transaction costs of £9m), and subsequently a further £125m through a loan
repayment from the newly formed joint venture, as a result of the joint
venture obtaining external debt financing. The Group's investment into the
Paddington Central Joint Venture is principally through a shareholder loan
from the Group to the new joint venture.
In the prior year, the Group entered into a Joint Venture Agreement with
AustralianSuper on 7 March 2022 in relation to the Canada Water Campus. For
the year ended 31 March 2022, the Group recognised a share of the joint
venture's loss of £6m in addition to the realisation of the gain on disposal
of assets into the joint venture of £52m. Therefore the Group had recognised
a share of total comprehensive income of £46m and share of net assets less
shareholder loans of £294m in relation to this new joint venture in the prior
year.
The summarised income statements and balance sheets below show 100% of the
results, assets and liabilities of joint ventures. Where necessary, these have
been restated to the Group's accounting policies.
Joint ventures' summary financial statements for the year ended 31 March 2023
Broadgate MSC Property WOSC Partners BL West End
REIT Ltd
Intermediate
Limited Partnership
Offices Limited
Holdings Ltd
Partners Euro Bluebell LLP Norges Bank Investment Norges Bank Investment Allianz SE
(GIC)
Management
Management
Property sector City Offices Shopping Centres West End West End
Broadgate
Meadowhall
Offices
Offices
Group share 50% 50% 25% 25%
Summarised income statements
Revenue4 245 79 9 28
Costs (83) (20) (4) (9)
162 59 5 19
Administrative expenses (1) - - -
Net interest payable (65) (26) - (5)
Underlying Profit 96 33 5 14
Net valuation movement (809) (62) (17) (73)
Capital financing (charges) income 5 - - -
(Loss) profit on disposal of investment properties and investments - - - -
(Loss) profit on ordinary activities before taxation (708) (29) (12) (59)
Taxation - - - (6)
(Loss) profit on ordinary activities after taxation (708) (29) (12) (65)
Other comprehensive income 10 6 - 5
Total comprehensive (expense) income (698) (23) (12) (60)
British Land share of total comprehensive (expense) income (349) (11) (3) (12)
British Land share of distributions payable (48) (4) - (1)
Summarised balance sheets
Investment and trading properties 4,142 702 134 464
Other non-current assets 32 - - 19
Current assets 13 9 2 2
Cash and cash equivalents 175 39 5 11
Gross assets 4,362 750 141 496
Current liabilities (107) (47) (4) (8)
Bank and securitised debt (1,567) (480) - (159)
Loans from joint venture partners (995) (576) (209) (15)
Other non-current liabilities - (4) (4) (14)
Gross liabilities (2,669) (1,107) (217) (196)
Net assets (liabilities) 1,693 (357) (76) 300
British Land share of net assets less shareholder loans 846 - - 75
1. USS joint ventures include the Eden Walk Shopping Centre Unit Trust
and the Fareham Property Partnership.
2. Hercules Unit Trust joint ventures includes 50% of the results of
Deepdale Co-Ownership Trust, Fort Kinnaird Limited Partnership and Valentine
Co-Ownership Trust and 41.25% of Birstall Co-Ownership Trust. The balance
sheet shows 50% of the assets of these joint ventures.
The interest in the Deepdale Co-Ownership Trust was disposed of on 30 November
2022.
3. Included in the column headed 'Other joint ventures' are
contributions from the following: BL Goodman Limited Partnership, Bluebutton
Property Management UK Limited, City of London Office Unit Trust and Reading
Gate Retail Park Co-Ownership.
4. Revenue includes gross rental income at 100% share of £359m
(2021/22: £290m).
BL CW Upper Limited Partnership Paddington Property Investment Limited Partnership The SouthGate Limited USS Hercules Unit Trust Other Total Total
Partnership
joint ventures1
joint ventures2
joint ventures3
2023
Group share
2023
AustralianSuper Euro Emerald Private Limited (GIC) Aviva Universities
Investors
Superannuation
Scheme Group PLC
Canada Water Campus Paddington Central Campus Shopping Shopping Retail
Centres
Centres
Parks
50% 25% 50% 50% Various
10 47 13 12 22 5 470 214
(6) (23) (5) (3) (3) - (156) (70)
4 24 8 9 19 5 314 144
(2) (1) - - - - (4) (1)
- (13) (1) - - - (110) (51)
2 10 7 9 19 5 200 92
(133) (78) (5) (11) (16) (12) (1,216) (567)
(1) 20 - - - - 24 8
(2) - - - - - (2) -
(134) (48) 2 (2) 3 (7) (994) (467)
- - - - - - (6) -
(134) (48) 2 (2) 3 (7) (1,000) (467)
- - - - - - 21 10
(134) (48) 2 (2) 3 (7) (979) (457)
(67) (12) 1 (1) 1 (4) (457)
- - (3) (4) (39) (3) (102)
571 866 137 130 186 70 7,402 3,334
- 23 - - - - 74 26
10 7 2 2 1 3 51 20
42 19 7 8 12 3 321 152
623 915 146 140 199 76 7,848 3,532
(39) (25) (7) (6) (4) (4) (251) (113)
(4) (510) - - - - (2,720) (1,192)
- (429) - (31) - (68) (2,323) (1,001)
(1) (1) (28) - - - (52) (21)
(44) (965) (35) (37) (4) (72) (5,346) (2,327)
579 (50) 111 103 195 4 2,502 1,205
290 - 56 52 98 2 1,419
The borrowings of joint ventures and their subsidiaries are non-recourse to
the Group. All joint ventures are incorporated in the United Kingdom, with the
exception of Broadgate REIT Limited, the Eden Walk Shopping Centre Unit Trust
and the Hercules Unit Trust joint ventures which are incorporated in Jersey.
These financial statements include the results and financial position of the
Group's interest in the Fareham Property Partnership, the BL Goodman Limited
Partnership and the Gibraltar Limited Partnership. Accordingly, advantage has
been taken of the exemptions provided by Regulation 7 of the Partnership
(Accounts) Regulations 2008 not to attach the partnership accounts to these
financial statements.
Operating cash flows of joint ventures (Group share)
2023 Restated(1)
£m
2022
£m
Income received from tenants 211 194
Operating expenses paid to suppliers and employees (73) (69)
Cash generated from operations 138 125
Interest paid (47) (44)
Interest received 1 -
UK corporation tax (paid) received (2) 2
Cash inflow from operating activities 90 83
Cash inflow from operating activities deployed as:
Surplus cash retained within joint ventures 17 26
Revenue distributions per consolidated statement of cash flows 73 57
Revenue distributions split between controlling and non-controlling interests
Attributable to non-controlling interests - -
Attributable to shareholders of the Company 73 57
1. Prior year comparatives have been restated for a change in accounting
policy in respect of tenant deposits. The Income received from tenants and the
Operating expenses paid to suppliers and employees have both been restated for
the year ended 31 March 2022 by £41m. Refer to Note 1 for further
information.
9 Other investments
2023 2022
Fair value Amortised Intangible Total Fair value Amortised Intangible Total
through
cost
assets
£m
through
cost
assets
£m
profit or loss
£m
£m
profit or loss
£m
£m
£m
£m
At 1 April 28 4 9 41 6 2 12 20
Additions 13 - 2 15 14 2 2 18
Revaluation and foreign currency translation 7 - - 7 8 - - 8
Amortisation - (2) (3) (5) - - (5) (5)
At 31 March 48 2 8 58 28 4 9 41
The amount included in the fair value through profit or loss relates to
private equity/venture capital investments of £48m (2021/22: £28m) which are
categorised as Level 3 in the fair value hierarchy. The fair values of private
equity/venture capital investments are determined by the Directors.
10 Debtors
2023 Restated1
£m
2022
£m
Trade and other debtors 22 49
Prepayments and accrued income 12 11
34 60
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
Trade and other debtors are shown after deducting a provision for impairment
against tenant debtors of £27m (2021/22: £47m). Accrued income is shown
after deducting a provision for impairment of £2m (2021/22: £1m). The
provision for impairment is calculated as an expected credit loss on trade and
other debtors in accordance with IFRS 9 as set out in Note 1.
The credit to the income statement for the year in relation to provisions for
impairment of trade debtors and accrued income was £11m (2021/22: £7m
credit), as disclosed in Note 3.
The decrease in provisions for impairment of trade debtors and accrued income
of £18m (2021/22: £15m decrease) is equal to the credit to the income
statement of £11m (2021/22: £1m debit), and write-offs of trade debtors of
£7m (2021/22: £8m).
The Directors consider that the carrying amount of trade and other debtors is
approximate to their fair value.
The table below summarises the movement in provisioning for impairment of
tenant debtors and accrued income during the year ended 31 March 2023.
Movement in provisions for impairment of tenant debtors and accrued income Group Proportionally consolidated
£m
£m
Provisions for impairment of tenant debtors and accrued income as at 1 April 47 61
2022
Write-offs of tenant debtors (7) (12)
Movement in provisions for impairment of tenant debtors (12) (15)
Movement in provisions for impairment of accrued income 1 2
Total provision movement recognised in income statement (11) (13)
Provisions for impairment of tenant debtors and accrued income as at 31 March 29 36
2023
11 Creditors
2023 Restated1
£m
2022
£m
Trade creditors 113 74
Accruals 60 70
Deferred income 52 66
Other taxation and social security 25 25
Lease liabilities 6 6
Tenant deposits 26 37
282 278
1. Prior year comparatives have been restated for a change in accounting
policy in respect of tenant deposits. Refer to Note 1 for further information.
Trade creditors are interest-free and have settlement dates within one year.
The Directors consider that the carrying amount of trade and other creditors
is approximate to their fair value.
12 Other non-current liabilities
2023 2022
£m
£m
Lease liabilities 120 125
Deferred income 25 27
145 152
13 Deferred tax
The movement on deferred tax is as shown below:
Deferred tax assets year ended 31 March 2023
1 April Debited to Credited 31 March
2022
income
to equity
2023
£m
£m
£m
£m
Temporary differences - 5 - 5
Deferred tax liabilities year ended 31 March 2023
£m £m £m £m
Derivative revaluations - (9) - (9)
Net deferred tax liabilities - (4) - (4)
Deferred tax assets year ended 31 March 2022
1 April Debited to Credited 31 March
2021
income
to equity
2022
£m
£m
£m
£m
Temporary differences - - - -
Deferred tax liabilities year ended 31 March 2022
£m £m £m £m
Derivative revaluations - - - -
- - - -
Net deferred tax assets (liabilities) - - - -
The following corporation tax rates have been substantively enacted: 19%
effective from 1 April 2017 and 25% effective from 1 April 2023. The deferred
tax assets and liabilities have been calculated at the tax rate effective in
the period that the tax is expected to crystallise.
At 31 March 2023 the Group had capital losses of £718m (2021/22: £720m)
available to offset future capital gains giving rise to an unrecognised
deferred tax asset calculated at 25% (2021/22: 19%) of £180m (2021/22:
£137m).
At 31 March 2023 the Group had UK revenue tax losses from previous years of
£224m (2021/22: £247m) giving rise to an unrecognised deferred tax asset
calculated at 25% (2021/22: 19%) of £56m (2021/22: £47m).
The Group has recognised a net deferred tax liability on derivative
revaluations of £4m (2021/22: £nil). On a gross basis, to the extent that
future matching taxable profits are expected to arise of £9m in respect of
derivative revaluations (2021/22: £nil), deferred tax assets of £5m have
been recognised (2021/22: £nil).
Under the REIT regime development properties which are sold within three years
of completion do not benefit from tax exemption. At 31 March 2023 the value of
such properties is £827m (2021/22: £1,429m) and if these properties were to
be sold and no tax exemption was available the tax arising would be £3m
(2021/22: £21m).
14 Net debt
Footnote 2023 Restated7
£m
2022
£m
Secured on the assets of the Group
5.264% First Mortgage Debenture Bonds 2035 325 347
5.0055% First Mortgage Amortising Debentures 2035 86 88
5.357% First Mortgage Debenture Bonds 2028 218 227
Bank loans 1 298 347
927 1,009
Unsecured
4.766% Senior US Dollar Notes 2023 2 105 101
5.003% Senior US Dollar Notes 2026 2 65 66
3.81% Senior Notes 2026 97 102
3.97% Senior Notes 2026 97 103
2.375% Sterling Unsecured Bond 2029 299 298
4.16% Senior US Dollar Notes 2025 2 78 77
2.67% Senior Notes 2025 38 37
2.75% Senior Notes 2026 38 37
Floating Rate Senior Notes 2028 80 80
Floating Rate Senior Notes 2034 101 102
Facilities and overdrafts 342 604
1,340 1,607
Gross debt 3 2,267 2,616
Interest rate and currency derivative liabilities 67 96
Interest rate and currency derivative assets (144) (97)
Cash and cash equivalents 4,5,6 (125) (111)
Total net debt 2,065 2,504
Net debt attributable to non-controlling interests 1 1
Net debt attributable to shareholders of the Company 2,066 2,505
Total net debt 2,065 2,504
Amounts payable under leases (Notes 11 and 12) 126 131
Total net debt (including lease liabilities) 2,191 2,635
Net debt attributable to non-controlling interests (including lease 4 1 1
liabilities)
Net debt attributable to shareholders of the Company (including lease 2,192 2,636
liabilities)
1. These are non-recourse borrowings with no recourse for repayment to
other companies or assets in the Group.
2023 2022
£m
£m
Hercules Unit Trust 298 347
298 347
2. Principal and interest on these borrowings were fully hedged into
Sterling at a floating rate at the time of issue.
3. The principal amount of gross debt at 31 March 2023 was £2,250m
(2021/22: £2,562m). Included in this is the principal amount of secured
borrowings and other borrowings of non-recourse companies of £933m.
4. Included in cash and cash equivalents is the cash and short term
deposits of Hercules Unit Trust of £37m, of which £1m is the proportion not
beneficially owned by the Group.
5. Cash and short term deposits not subject to a security interest
amount to £86m (2021/22: £64m).
6. Cash and cash equivalents includes tenant deposits of £26m (2021/22:
£37m).
7. Prior year comparatives have been restated for a change in accounting
policy in respect of tenant deposits. Refer to Note 1 for further information.
Maturity analysis of net debt
2023 Restated1
£m
2022
£m
Repayable: within one year and on demand 402 189
Between: one and two years 6 279
two and five years 989 854
five and ten years 386 659
ten and fifteen years 484 485
fifteen and twenty years - 150
1,865 2,427
Gross debt 2,267 2,616
Interest rate and currency derivatives (77) (1)
Cash and cash equivalents (125) (111)
Net debt 2,065 2,504
1. Prior year comparatives have been restated for a change in accounting
policy in respect of tenant deposits. Refer to Note 1 for further information.
Fair value and book value of net debt
2023 Restated1
2022
Fair value Book value Difference Fair value Book value Difference
£m
£m
£m
£m
£m
£m
Debentures and unsecured bonds 1,533 1,627 (94) 1,745 1,665 80
Bank debt and other floating rate debt 645 640 5 955 951 4
Gross debt 2,178 2,267 (89) 2,700 2,616 84
Interest rate and currency derivative liabilities 67 67 - 96 96 -
Interest rate and currency derivative assets (144) (144) - (97) (97) -
Cash and cash equivalents (125) (125) - (111) (111) -
Net debt 1,976 2,065 (89) 2,588 2,504 84
Net debt attributable to non-controlling interests 1 1 - 1 1 -
Net debt attributable to shareholders of the Company 1,977 2,066 (89) 2,589 2,505 84
1. Prior year comparatives have been restated for a change in accounting
policy in respect of tenant deposits. Refer to Note 1 for further information.
The fair values of debentures and unsecured bonds have been established by
obtaining quoted market prices from brokers. The bank debt and other floating
rate debt has been valued assuming it could be renegotiated at contracted
margins. The derivatives have been valued by calculating the present value of
expected future cash flows, using appropriate market discount rates, by an
independent treasury adviser.
Short term debtors and creditors and other investments have been excluded from
the disclosures on the basis that the fair value is equivalent to the book
value. The fair value hierarchy level of debt held at amortised cost is Level
2 (as defined in Note 7).
Loan to Value (LTV)
LTV is the ratio of principal amount of gross debt less cash, short term
deposits and liquid investments to the aggregate value of properties and
investments, excluding non-controlling interests. EPRA LTV has been disclosed
in Table E.
Group LTV
2023 Restated(1)
£m
2022
£m
Group LTV 27.4% 26.2%
Principal amount of gross debt 2,250 2,562
Less debt attributable to non-controlling interests - -
Less cash and short term deposits (statement of cash flows)(2) (99) (74)
Plus cash attributable to non-controlling interests 1 1
Total net debt for LTV calculation 2,152 2,489
Group property portfolio valuation (Note 7) 5,595 6,944
Investments in joint ventures (Note 8) 2,206 2,521
Other investments and property, plant and equipment (balance sheet)3 61 46
Less property and investments attributable to non-controlling interests (13) (15)
Total assets for LTV calculation 7,849 9,496
Proportionally consolidated LTV
2023 2022
£m
£m
Proportionally consolidated LTV 36.0% 32.9%
Principal amount of gross debt 3,448 3,648
Less debt attributable to non-controlling interests - -
Less cash and short term deposits4 (228) (191)
Plus cash attributable to non-controlling interests 1 1
Total net debt for proportional LTV calculation 3,221 3,458
Group property portfolio valuation (Note 7) 5,595 6,944
Share of property of joint ventures (Note 7) 3,316 3,538
Other investments and property, plant and equipment (balance sheet)3 61 46
Less property attributable to non-controlling interests (13) (15)
Total assets for proportional LTV calculation 8,959 10,513
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2. Cash and short term deposits exclude tenant deposits of £26m
(2021/22: £37m).
3. The £19m (2021/22: £22m) difference between other investments and
plant, property and equipment per the balance sheet totalling £80m (2021/22:
£68m), relates to a right-of-use asset recognised under a lease which is
classified as property, plant and equipment which is not included within Total
assets for the purposes of the LTV calculation.
4. Cash and short term deposits exclude tenant deposits of £49m
(2021/22: £61m).
Net Debt to EBITDA
Net Debt to EBITDA is the ratio of principal amount of gross debt less cash,
short term deposits and liquid investments to earnings before interest, tax,
depreciation and amortisation (EBITDA).
The Group ratio excludes non-recourse and joint venture borrowings and
includes distributions and other receivables from non-recourse companies and
joint ventures.
Group Net Debt to EBITDA
2023 2022
£m
£m
Group Net Debt to EBITDA 6.4x 7.9x
Principal amount of gross debt 2,250 2,562
Less non-recourse borrowings (298) (347)
Less cash and short term deposits (statement of cash flows)(1) (99) (74)
Plus cash attributable to non-recourse companies 37 29
Total net debt for group Net Debt to EBITDA calculation 1,890 2,170
Underlying Profit (Table A) 264 247
Plus Net finance income (Note 5) 60 55
Less Underlying Profit due to joint ventures and non-recourse companies(2) (144) (133)
Plus distributions and other receivables from joint ventures and non-recourse 107 97
companies(3)
Plus depreciation and amortisation (Table A) 7 9
Total EBITDA for group Net Debt to EBITDA calculation 294 275
Proportionately consolidated Net Debt to EBITDA
2023 2022
£m
£m
Proportionally consolidated Net Debt to EBITDA 8.4x 9.7x
Principal amount of gross debt 3,448 3,648
Less cash and short term deposits4 (228) (191)
Plus cash attributable to non-controlling interests 1 1
Total net debt for proportional Net Debt to EBITDA calculation 3,221 3,458
Underlying Profit (Table A) 264 247
Plus Net finance income (Table A) 111 102
Plus depreciation and amortisation (Table A) 7 9
Total EBITDA for proportional Net Debt to EBITDA calculation 382 358
1. Cash and short term deposits exclude tenant deposits of £26m
(2021/22: £37m).
2. Underlying Profit due to joint ventures £92m (2021/22: £84m) as
disclosed in the consolidated income statement and Underlying Profit due to
non-recourse companies £52m (2021/22: £49m).
3. Distributions and other receivables from joint ventures £73m
(2021/22 £57m) as disclosed in the consolidated statement of cash flows and
distributions and other receivables from non-recourse companies £34m
(2021/22: £40m).
4. Cash and short term deposits exclude tenant deposits of £49m
(2021/22: £61m).
British Land Unsecured Financial Covenants
The two financial covenants applicable to the Group unsecured debt are shown
below:
2023 Restated1
£m
2022
£m
Net Borrowings not to exceed 175% of Adjusted Capital and Reserves 38% 36%
Principal amount of gross debt 2,250 2,562
Less the relevant proportion of borrowings of the partly owned - -
subsidiary/non-controlling interests
Less cash and short term deposits (statement of cash flows)(2) (99) (74)
Plus the relevant proportion of cash and deposits of the partly owned 1 1
subsidiary/non-controlling interests
Net Borrowings 2,152 2,489
Share capital and reserves (balance sheet) 5,525 6,768
Trading property surpluses (Table A) 7 8
Exceptional refinancing charges (see below) 161 174
Fair value adjustments of financial instruments (Table A) (44) 46
Less reserves attributable to non-controlling interests (balance sheet) (13) (15)
Adjusted Capital and Reserves 5,636 6,981
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
2. Cash and short term deposits exclude tenant deposits of £26m
(2021/22: £37m).
In calculating Adjusted Capital and Reserves for the purpose of the unsecured
debt financial covenants, there is an adjustment of £161m (2021/22: £174m)
to reflect the cumulative net amortised exceptional items relating to the
refinancings in the years ended 31 March 2005, 2006 and 2007.
2023 Restated1
£m
2022
£m
Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets 32% 30%
Principal amount of gross debt 2,250 2,562
Less cash and short term deposits not subject to a security interest (86) (64)
Less principal amount of secured and non-recourse borrowings (933) (985)
Net Unsecured Borrowings 1,231 1,513
Group property portfolio valuation (Note 7) 5,595 6,944
Investments in joint ventures and funds (Note 8) 2,206 2,521
Other investments and property, plant and equipment (balance sheet)2 61 46
Less investments in joint ventures (2,206) (2,521)
Less encumbered assets (Note 7) (1,747) (1,915)
Unencumbered Assets 3,909 5,075
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
2. The £19m (2021/22: £22m) difference between other investments and
plant, property and equipment per the balance sheet totalling £80m (2021/22:
£68m), relates to a right-of-use asset recognised under a lease which is
classified as property, plant and equipment which is not included within Total
assets for the purposes of the LTV calculation.
Reconciliation of movement in Group net debt for the year ended 31 March 2023
Restated(1) Cash flows Transfers2 Foreign Fair value Arrangement 2023
£m
£m
exchange
£m
cost
£m
2022
£m
amortisation
£m
£m
Short term borrowings 189 (190) 402 - - 1 402
Long term borrowings 2,427 (123) (402) 20 (55) (2) 1,865
Derivatives3 (1) (12) - (20) (44) - (77)
Total liabilities from financing activities4 2,615 (325) - - (99) (1) 2,190
Cash and cash equivalents (111) (14) - - - - (125)
Net debt 2,504 (339) - - (99) (1) 2,065
1. Prior year comparative has been restated for a change in accounting
policy in respect of tenant deposits. Refer to Note 1 for further information.
2. Transfers comprises debt maturing from long term to short term
borrowings.
3. Cash flows on derivatives include £9m of net receipts on derivative
interest.
4. Cash flows of £325m shown above represents net cash flows on capital
payments in respect of interest rate derivatives of £21m, decrease in bank
and other borrowings of £637m and drawdowns on bank and other borrowings of
£324m shown in the consolidated statement of cash flows, along with £9m of
net receipts on derivative interest.
Fair value hierarchy
The table below provides an analysis of financial instruments carried at fair
value, by the valuation method. The fair value hierarchy levels are defined in
Note 7.
2023 2022
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
£m
£m
£m
£m
Interest rate and currency derivative assets - (144) - (144) - (97) - (97)
Other investments - fair value through profit or loss (Note 9) - - (48) (48) - - (28) (28)
Assets - (144) (48) (192) - (97) (28) (125)
Interest rate and currency derivative liabilities - 67 - 67 - 96 - 96
Liabilities - 67 - 67 - 96 - 96
Total - (77) (48) (125) - (1) (28) (29)
Categories of financial instruments
2023 Restated1
£m
2022
£m
Financial assets
Amortised cost
Cash and cash equivalents 125 111
Trade and other debtors (Note 10) 22 49
Other investments (Note 9) 2 4
Fair value through profit or loss
Derivatives in designated fair value hedge accounting relationships2,3 45 59
Derivatives not in designated hedge accounting relationships 99 38
Other investments (Note 9) 48 28
341 289
Financial liabilities
Amortised cost
Creditors (Note 11) (199) (157)
Gross debt (2,267) (2,616)
Lease liabilities (Notes 11 and 12) (126) (131)
Fair value through profit or loss
Derivatives not in designated hedge accounting relationships (50) (96)
Derivatives in designated fair value hedge accounting relationships2,3 (17) -
(2,659) (3,000)
Total (2,318) (2,711)
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
2. Derivative assets and liabilities in designated hedge accounting
relationships sit within the derivative assets and derivative liabilities
balances of the consolidated balance sheet.
3. The fair value of derivative assets in designated hedge accounting
relationships represents the accumulated amount of fair value hedge
adjustments on hedged items.
Gains and losses on financial instruments, as classed above, are disclosed in
Note 5 (net financing income), Note 10 (debtors), the consolidated income
statement and the consolidated statement of comprehensive income. The
Directors consider that the carrying amounts of other investments are
approximate to their fair value, and that the carrying amounts
are recoverable.
Maturity of committed undrawn borrowing facilities
2023 2022
£m
£m
Maturity date: over five years 130 70
between four and five years 504 401
between three and four years 370 406
Total facilities available for more than three years 1,004 877
Between two and three years 555 360
Between one and two years 170 50
Within one year 50 -
Total 1,779 1,287
The undrawn facilities are comprised of British Land undrawn facilities of
£1,779m (2021/22: £1,287m).
15 Dividends
The final dividend payment for the six-month period ended 31 March 2023 will
be 11.04p. Payment will be made on 28 July 2023 to shareholders on the
register at close of business on 23 June 2023. The final dividend will be a
Property Income Distribution and no SCRIP alternative will be offered.
PID dividends are paid, as required by REIT legislation, after deduction of
withholding tax at the basic rate (currently 20%), where appropriate. Certain
classes of shareholders may be able to elect to receive dividends gross.
Please refer to our website britishland.com/dividends for details.
Payment date Dividend Pence per 2023 2022
share
£m
£m
Current year dividends
28.07.2023 2023 Final 11.04
06.01.2023 2023 Interim 11.60 107
22.64
Prior year dividends
29.07.2022 2022 Final 11.60 108
07.01.2022 2022 Interim 10.32 95
21.92
06.08.2021 2021 Final 6.64 62
Dividends disclosed in consolidated statement of changes in equity 215 157
Dividends settled in shares - -
Dividends settled in cash 215 157
Timing difference relating to payment of withholding tax (2) (2)
Dividends disclosed in consolidated statement of cash flows 213 155
16 Share capital and reserves
2023 2022
Number of ordinary shares in issue at 1 April 938,109,433 937,981,992
Share issues 225,544 127,441
At 31 March 938,334,977 938,109,433
Of the issued 25p ordinary shares, 7,376 shares were held in the ESOP trust
(2021/22: 7,376), 11,266,245 shares were held as treasury shares (2021/22:
11,266,245) and 927,061,356 shares were in free issue (2021/22: 926,835,812).
No treasury shares were acquired by the ESOP trust during the year. All issued
shares are fully paid.
17 Segment information
The Group allocates resources to investment and asset management according to
the sectors it expects to perform over the medium term, and reports under two
operating segments, being Campuses and Retail & Fulfilment. From 1 April
2023 the Group intends to change the name of the Retail & Fulfilment
operating segment to Retail & London Urban Logistics in line with our
evolving strategy. There will be no changes in the allocation of segment
results or assets as a consequence of this change.
The relevant gross rental income, net rental income, operating result and
property assets, being the measures of segment revenue, segment result and
segment assets used by the management of the business, are set out below.
Management reviews the performance of the business principally on a
proportionally consolidated basis, which includes the Group's share of joint
ventures on a line-by-line basis and excludes non-controlling interests in the
Group's subsidiaries. The chief operating decision maker for the purpose of
segment information is the Executive Committee.
Gross rental income is derived from the rental of buildings. Operating result
is the net of net rental income, fee income and administrative expenses. No
customer exceeded 10% of the Group's revenues in either year.
Segment result
Campuses Retail & Fulfilment Unallocated Total
2023 Restated1 2023 Restated1 2023 Restated1 2023 Restated1
£m
2022
£m
2022
£m
2022
£m
2022
£m
£m
£m
£m
Gross rental income
British Land Group 115 143 205 195 - - 320 338
Share of joint ventures 107 91 57 57 - - 164 148
Total 222 234 262 252 - - 484 486
Net rental income
British Land Group 108 116 189 175 - - 297 291
Share of joint ventures 89 76 51 51 - - 140 127
Total 197 192 240 226 - - 437 418
Operating result
British Land Group 115 119 186 170 (55) (60) 246 229
Share of joint ventures 82 72 49 50 (2) (2) 129 120
Total 197 191 235 220 (57) (62) 375 349
Reconciliation to Underlying Profit 2023 Restated1
£m
2022
£m
Operating result 375 349
Net financing charges (111) (102)
Underlying Profit 264 247
Reconciliation to (loss) profit on ordinary activities before taxation
Underlying Profit 264 247
Capital and other (1,299) 714
Underlying Profit attributable to non-controlling interests 1 2
Total (loss) profit on ordinary activities before taxation (1,034) 963
Reconciliation to Group revenue
Gross rental income per operating segment result 484 486
Less share of gross rental income of joint ventures (164) (148)
Plus share of gross rental income attributable to non-controlling interests 2 2
Gross rental income (Note 3) 322 340
Trading property sales proceeds - 9
Service charge income 59 62
Management and performance fees (from joint ventures) 13 9
Other fees and commissions 24 21
Surrender premium payable - (29)
Revenue (consolidated income statement) 418 412
1. Prior year comparative has been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
A reconciliation between net financing income in the consolidated income
statement and net financing charges of £111m (2021/22: £102m) in the
segmental disclosures above can be found within Table A in the supplementary
disclosures. Of the total revenues above, £nil (2021/22: £nil) was derived
from outside the UK.
Segment assets
Campuses Retail & Fulfilment Total
2023 2022 2023 2022 2023 2022
£m
£m
£m
£m
£m
£m
Property assets
British Land Group 2,972 4,150 2,619 2,788 5,591 6,938
Share of joint ventures 2,687 2,826 629 712 3,316 3,538
Total 5,659 6,976 3,248 3,500 8,907 10,476
Reconciliation to net assets
British Land Group 2023 Restated1
£m
2022
£m
Property assets 8,907 10,476
Other non-current assets 141 104
Non-current assets 9,048 10,580
Other net current liabilities (384) (377)
EPRA net debt (3,127) (3,397)
Other non-current liabilities (50) -
EPRA NTA (diluted) 5,487 6,806
Non-controlling interests 13 15
EPRA adjustments 25 (53)
Net assets 5,525 6,768
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
18 Subsequent events
There have been no significant subsequent events post the balance sheet date.
Supplementary disclosures
Unaudited unless otherwise stated
Table A: Summary income statement and balance sheet (Unaudited)
Summary income statement based on proportional consolidation for the year ended 31 March 2023
The following pro forma information is unaudited and does not form part of the
consolidated primary statements or the notes thereto. It presents the results
of the Group, with its share of the results of joint ventures included on a
line-by-line basis and excluding non-controlling interests.
Year ended 31 March 2023 Restated1
Year ended 31 March 2022
Group Joint Less non- Proportionally Group Joint Less non- Proportionally
£m
ventures
controlling
consolidated
£m
ventures
controlling
consolidated
£m
interests
£m
£m
interests
£m
£m
£m
Gross rental income2 331 164 (2) 493 347 148 (2) 493
Property operating expenses (28) (20) 1 (47) (52) (16) - (68)
Net rental income 303 144 (1) 446 295 132 (2) 425
Administrative expenses3 (88) (1) - (89) (88) (1) - (89)
Net fees and other income 18 - - 18 13 - - 13
Ungeared income return 233 143 (1) 375 220 131 (2) 349
Net financing charges (60) (51) - (111) (55) (47) - (102)
Underlying Profit 173 92 (1) 264 165 84 (2) 247
Underlying taxation (1) - - (1) 4 - - 4
Underlying Profit after taxation 172 92 (1) 263 169 84 (2) 251
Valuation movement (see Note 4) (1,365) 642
Other capital and taxation (net)4 74 59
Result attributable to (1,028) 952
shareholders of the Company
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2. Group gross rental income includes £9m (2021/22: £7m) of
all-inclusive rents relating to service charge income and excludes the
surrender premium payable of £nil (2021/22: £29m) within the Capital and
other column of the income statement.
3. Administrative expenses includes £7m (2021/22: £9m) of depreciation
and amortisation.
4. Includes other comprehensive income.
Summary balance sheet based on proportional consolidation as at 31 March 2023
The following pro forma information is unaudited and does not form part of the
consolidated primary statements or the notes thereto. It presents the
composition of the EPRA NTA of the Group, with its share of the net assets of
the joint ventures included on a line-by-line basis, and excluding
non-controlling interests, and assuming full dilution.
Group Share Less non- Share Mark-to- Lease liabilities Valuation Intangibles EPRA Restated1
£m
of joint
controlling
options
market on
£m
surplus on
NTA
EPRA
ventures
interests
£m
derivatives and related debt
trading and Deferred
31 March
NTA
£m
£m
adjustments
properties
2023
31 March
£m
£m tax
£m
2022
£m
£m
Campuses properties 3,034 2,690 - - - (72) 7 - 5,659 6,976
Retail & Fulfilment properties 2,665 644 (13) - - (48) - - 3,248 3,500
Total properties2 5,699 3,334 (13) - - (120) 7 - 8,907 10,476
Investments in joint ventures 2,206 (2,206) - - - - - - - -
Other investments 58 - - - - - - (8) 50 48
Other net (liabilities) assets (369) (109) 1 14 - 120 - - (343) (321)
Deferred tax liability (4) (2) - - - - - 6 - -
Net debt(3) (2,065) (1,017) (1) - (44) - - - (3,127) (3,397)
Net assets 5,525 - (13) 14 (44) - 7 (2) 5,487 6,806
EPRA NTA per share (Note 2) 588p 730p
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
2. Included within the total property value of £8,907m (2021/22:
£10,476m) are right-of-use assets net of lease liabilities of £9m (2021/22:
£9m), which in substance, relate to properties held under leasing agreements.
The fair values of right-of-use assets are determined by calculating the
present value of net rental cash flows over the term of the lease agreements.
3. EPRA net debt of £3,127m represents adjusted net debt used in
Proportionally consolidated LTV and Net Debt to EBITDA calculations of
£3,221m (see Note 14), less tenant deposits of £49m and issue costs and fair
value hedge adjustments of £45m.
EPRA Net Tangible Assets movement
Year ended Restated1
31 March 2023
Year ended
31 March 2022
£m Pence £m Pence
per share
per share
Opening EPRA NTA 6,806 730 6,080 651
Income return 263 28 251 27
Capital return (1,367) (147) 632 69
Dividend paid (215) (23) (157) (17)
Closing EPRA NTA 5,487 588 6,806 730
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
Table B: EPRA Performance measures
EPRA Performance measures summary table
2023 Restated1
2022
£m Pence £m Pence
per share
per share
EPRA Earnings - basic 263 28.4 234 25.3
- diluted 263 28.3 234 25.2
Percentage Percentage
EPRA Net Initial Yield 5.1% 4.3%
EPRA 'topped-up' Net Initial Yield 5.7% 4.9%
EPRA Vacancy Rate 6.3% 6.3%
EPRA Cost Ratio (including direct vacancy costs) 19.5% 25.6%
EPRA Cost Ratio (excluding direct vacancy costs) 12.6% 16.5%
1. Prior year comparative has been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2023 Restated1
2022
Net assets Net asset Net assets Net asset
£m
value per share
£m
value per share
(pence)
(pence)
EPRA NTA 5,487 588 6,806 730
EPRA NRV 6,029 646 7,438 798
EPRA NDV 5,658 606 6,577 706
Percentage Percentage
EPRA LTV 39.5% 35.7%
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
Calculation and reconciliation of Underlying/EPRA/IFRS Earnings and Underlying/EPRA/IFRS Earnings per share (Audited)
2023 Restated1
£m
2022
£m
(Loss) profit attributable to the shareholders of the Company (1,038) 963
Exclude:
Group - current taxation 1 (2)
Group - deferred taxation 4 -
Group - valuation movement 798 (475)
Group - loss (profit) on disposal of investment properties and investments 30 (45)
Group - Capital and other surrender premia payable (see Note 3) - 29
Joint ventures - valuation movement (including result on disposals) (see Note 567 (167)
4)
Joint ventures - Capital financing charges (8) 4
Joint ventures - deferred taxation - -
Changes in fair value of financial instruments and associated close-out costs (88) (60)
Non-controlling interests in respect of the above (2) -
Underlying Profit 264 247
Group - Underlying current taxation (1) 4
Underlying Earnings - basic and diluted 263 251
Group - Capital and other surrender premia payable (see Note 3) - (29)
Group - reclassification of foreign exchange differences (see Note 5) - 12
EPRA Earnings - basic and diluted 263 234
(Loss) profit attributable to the shareholders of the Company (1,038) 963
IFRS Earnings - basic and diluted (1,038) 963
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2023 2022
Number
Number
million
million
Weighted average number of shares 938 938
Adjustment for treasury shares (11) (11)
IFRS/EPRA/Underlying Weighted average number of shares (basic) 927 927
Dilutive effect of share options - -
Dilutive effect of ESOP shares 3 3
EPRA/Underlying Weighted average number of shares (diluted) 930 930
Remove anti-dilutive effect (3) -
IFRS Weighted average number of shares (diluted) 927 930
Net assets per share (Audited)
2023 Restated1
2022
£m Pence £m Pence
per share
per share
IFRS net assets 5,525 6,768
Deferred tax arising on revaluation movements 6 -
Mark-to-market on derivatives and related debt adjustments (44) 46
Dilution effect of share options 14 8
Surplus on trading properties 7 8
Intangible assets (8) (9)
Less non-controlling interests (13) (15)
EPRA NTA 5,487 588 6,806 730
Intangible assets 8 9
Purchasers' costs 534 623
EPRA NRV 6,029 646 7,438 798
Deferred tax arising on revaluation movements (7) (2)
Purchasers' costs (534) (623)
Mark-to-market on derivatives and related debt adjustments 44 (46)
Mark-to-market on debt 126 (190)
EPRA NDV 5,658 606 6,577 706
1. Prior year comparatives have been restated for a change in accounting
policies in respect of rental concessions and tenant deposits. Refer to Note 1
for further information.
EPRA NTA is considered to be the most relevant measure for the Group and is
now the primary measure of net assets. EPRA NTA assumes that entities buy and
sell assets, thereby crystallising certain levels of unavoidable deferred tax.
Due to the Group's REIT status, deferred tax is only provided at each balance
sheet date on properties outside the REIT regime. As a result deferred taxes
are excluded from EPRA NTA for properties within the REIT regime. For
properties outside of the REIT regime, deferred tax is included to the extent
that it is expected to crystallise, based on the Group's track record and tax
structuring. EPRA NRV reflects what would be needed to recreate the Group
through the investment markets based on its current capital and financing
structure. EPRA NDV reflects shareholders' value which would be recoverable
under a disposal scenario, with deferred tax and financial instruments
recognised at the full extent of their liability.
2023 2022
Number
Number
million
million
Number of shares at year end 938 938
Adjustment for treasury shares (11) (11)
IFRS/EPRA number of shares (basic) 927 927
Dilutive effect of share options 3 3
Dilutive effect of ESOP shares 3 2
IFRS/EPRA number of shares (diluted) 933 932
EPRA Net Initial Yield and 'topped-up' Net Initial Yield (Unaudited)
2023 2022
£m
£m
Investment property - wholly owned 5,582 6,929
Investment property - share of joint ventures 3,316 3,538
Less developments, residential and land (1,363) (1,168)
Completed property portfolio 7,535 9,299
Allowance for estimated purchasers' costs 525 672
Gross up completed property portfolio valuation (A) 8,060 9,971
Annualised cash passing rental income 443 457
Property outgoings (34) (33)
Annualised net rents (B) 409 424
Rent expiration of rent-free periods and fixed uplifts1 54 61
'Topped-up' net annualised rent (C) 463 485
EPRA Net Initial Yield (B/A) 5.1% 4.3%
EPRA 'topped-up' Net Initial Yield (C/A) 5.7% 4.9%
Including fixed/minimum uplifts received in lieu of rental growth 6 5
Total 'topped-up' net rents (D) 469 490
Overall 'topped-up' Net Initial Yield (D/A) 5.8% 4.9%
'Topped-up' net annualised rent 463 485
ERV vacant space 31 33
Reversions (7) 4
Total ERV (E) 487 522
Net Reversionary Yield (E/A) 6.0% 5.2%
1. The weighted average period over which rent-free periods expire is
one year (2021/22: one year).
EPRA Net Initial Yield (NIY) basis of calculation
EPRA NIY is calculated as the annualised net rent (on a cash flow basis),
divided by the gross value of the completed property portfolio. The valuation
of our completed property portfolio is determined by our external valuers as
at 31 March 2023, plus an allowance for estimated purchasers' costs. Estimated
purchasers' costs are determined by the relevant stamp duty liability, plus an
estimate by our valuers of agent and legal fees on notional acquisition. The
net rent deduction allowed for property outgoings is based on our valuers'
assumptions on future recurring non-recoverable revenue expenditure.
In calculating the EPRA 'topped-up' NIY, the annualised net rent is increased
by the total contracted rent from expiry of rent-free periods and future
contracted rental uplifts where defined as not in lieu of growth. Overall
'topped-up' NIY is calculated by adding any other contracted future uplift to
the 'topped-up' net annualised rent.
The net reversionary yield is calculated by dividing the total estimated
rental value (ERV) for the completed property portfolio, as determined by our
external valuers, by the gross completed property portfolio valuation.
The EPRA Vacancy Rate is calculated as the ERV of the unrented, lettable space
as a proportion of the total rental value of the completed property portfolio.
EPRA Vacancy Rate (Unaudited)
31 March 31 March
2023
2022
£m
£m
Annualised potential rental value of vacant premises 31 33
Annualised potential rental value for the completed property portfolio 496 526
EPRA Vacancy Rate 6.3% 6.3%
EPRA Cost Ratios (Unaudited)
2023 Restated1
£m
2022
£m
Property operating expenses 27 52
Administrative expenses 88 88
Share of joint ventures expenses 21 17
Less: Performance and management fees (from joint ventures) (13) (9)
Net other fees and commissions (5) (4)
Ground rent costs and operating expenses de facto included in rents (28) (25)
EPRA Costs (including direct vacancy costs) (A) 90 119
Direct vacancy costs (32) (42)
EPRA Costs (excluding direct vacancy costs) (B) 58 77
Gross Rental Income less ground rent costs and operating expenses de facto 294 325
included in rents
Share of joint ventures (GRI less ground rent costs) 168 140
Total Gross rental income less ground rent costs (C) 462 465
EPRA Cost Ratio (including direct vacancy costs) (A/C) 19.5% 25.6%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 12.6% 16.5%
Impairment of tenant debtors, tenant incentives and accrued income (D) (6) (1)
Adjusted EPRA Cost Ratio (including direct vacancy costs and excluding 20.8% 25.8%
impairment of tenant debtors, accrued income, tenant incentives and contracted
rent increases) (A-D)/C
Adjusted EPRA Cost Ratio (excluding direct vacancy costs and excluding 13.9% 16.8%
impairment of tenant debtors, accrued income, tenant incentives and contracted
rent increases) (B-D)/C
Overhead and operating expenses capitalised (including share of joint 10 7
ventures)
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
In the current year, employee costs in relation to staff time on development
projects have been capitalised into the base cost of relevant development
assets. In addition to the standard EPRA Cost Ratios (both including and
excluding direct vacancy costs), adjusted versions of these ratios have also
been presented which remove the impact of the impairment of tenant debtors,
tenant incentives and accrued income, to show the impact of these items on the
ratios.
Table C: Gross rental income (Audited)
2023 Restated1
£m
2022
£m
Rent receivable2 463 479
Spreading of tenant incentives and contracted rent increases 27 11
Surrender premia 3 3
Gross rental income 493 493
1. Prior year comparatives have been restated for a change in accounting
policy in respect of rental concessions. Refer to Note 1 for further
information.
2. Group gross rental income includes £9m (2021/22: £7m) of
all-inclusive rents relating to service charge income.
The current and prior year information is presented on a proportionally
consolidated basis, excluding non-controlling interests.
Table D: Property related capital expenditure (Unaudited)
Year ended 31 March 2023 Year ended 31 March 2022
Group Joint ventures Total Group Joint Total
£m
£m
£m
£m
ventures
£m
£m
Acquisitions 158 - 158 596 34 630
Development 156 106 262 175 33 208
Investment properties
Incremental lettable space - - - 1 - 1
No incremental lettable space 60 26 86 12 25 37
Tenant incentives 2 1 3 21 3 24
Other material non-allocated types of expenditure 3 3 6 2 3 5
Capitalised interest 10 3 13 6 1 7
Total property related capital expenditure 389 139 528 813 99 912
Conversion from accrual to cash basis (50) (6) (56) 42 (7) 35
Total property related capital expenditure on cash basis 339 133 472 855 92 947
The above is presented on a proportionally consolidated basis, excluding
non-controlling interests and business combinations. The 'Other material
non-allocated types of expenditure' category contains capitalised staff costs
of £6m (2021/22: £5m).
Table E: EPRA LTV (Unaudited)
Year ended 31 March 2023 Year ended 31 March 2022
Proportionately consolidated Proportionately consolidated
Group Share Non-controlling interests Total Group Share Non-controlling interests Total
£m
of Joint
£m
£m
£m
of Joint
£m
£m
Ventures
Ventures
£m
£m
Include:
Gross debt 2,250 1,198 - 3,448 2,562 1,086 - 3,648
Net payables 271 93 - 364 261 97 - 358
Exclude:
Cash and cash equivalents (125) (152) 1 (276) (111) (141) 1 (251)
EPRA Net Debt (A) 2,396 1,139 1 3,536 2,712 1,042 1 3,755
Include:
Property portfolio valuation 5,595 3,316 (13) 8,898 6,944 3,538 (15) 10,467
Other financial assets 50 - - 50 32 - - 32
Intangibles 8 - - 8 9 - - 9
EPRA Total Property Value (B) 5,653 3,316 (13) 8,956 6,985 3,538 (15) 10,508
EPRA LTV (A/B) 42.4% 39.5% 38.8% 35.7%
Supplementary Tables
Data includes Group's share of Joint Ventures
FY23 rent collection
Rent due between 25 March 2022 and 24 March 2023 Offices Retail Total
Received 100% 98% 99%
Outstanding 0% 2% 1%
Total 100% 100% 100%
£187m £260m £447m
March quarter 2023 rent collection
Rent due between 25 March 2023 and 9 May 2023 Offices Retail Total
Received 99% 91% 95%
Outstanding 1% 9% 5%
Total 100% 100% 100%
£44m £51m £95m
Purchases
Since 1 April 2022 Sector Price Price Annualised
(100%)
(BL Share)
Net Rents
£m
£m
£m1
Completed
DFS, Cambridge Retail Parks 7 7 1
Solartron Retail Park Retail Parks 35 35 3
Capitol Retail Park Retail Parks 51 51 5
Westwood Retail Park, Thanet Retail Parks 55 55 4
Mandela Way, Southwark London Urban Logistics 22 22 -
Peterhouse Extension, Cambridge Office 25 25 -
South Trumpington Land Office 8 8 -
Total 203 203 13
1. British Land share of annualised rent topped up for rent frees
Sales
Since 1 April 2022 Sector Price Price Annualised
(100%)
(BL Share)
Net Rents
£m
£m
£m1
Completed
Debenhams, Chester Other Retail 1 1 -
Deepdale Shopping Park, Preston Retail Park 61 31 2
Debenhams, Cardiff Other Retail 3 3 -
Paddington Central (75% sale) Campuses 939 694 27
Exchanged
126-134 Baker Street(2) Office 17 17 1
Total 1,021 746 30
1. British Land share of annualised rent topped up for rent frees
2. Exchanged and completed post period end
Portfolio Valuation by Sector
Change1
At 31 March 2023 Group Joint ventures Total H1 H2 FY
£m
£m
£m
West End 2,208 330 2,538 (2.5) (11.2) (11.3)
City 494 2,072 2,566 (3.6) (11.8) (14.8)
Canada Water & other Campuses 171 285 456 (1.6) (16.2) (17.4)
Residential(2) 90 - 90 13.2 (11.2) 0.8
Campuses 2,963 2,687 5,650 (2.7) (11.9) (13.1)
Retail Parks 1,800 176 1,976 (3.7) (6.9) (10.2)
Shopping Centre 309 437 746 (2.1) (5.6) (7.6)
London Urban Logistics 258 5 263 (6.0) (19.3) (24.2)
Other Retail 252 11 263 (4.2) (6.1) (9.7)
Retail & London Urban Logistics 2,619 629 3,248 (3.6) (7.7) (10.9)
Total 5,582 3,316 8,898 (3.0) (10.4) (12.3)
Standing Investments 4,745 2,798 7,543 (3.2) (9.4) (11.7)
Developments 837 518 1,355 (1.5) (15.5) (15.7)
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
1. Valuation movement during the period (after taking account of capital
expenditure) of properties held at the balance sheet date, including
developments (classified by end use), purchases and sales
2. Standalone residential
Gross Rental Income1
12 months to 31 March 2023 Annualised as at 31 March 2023
Accounting Basis £m Group Joint ventures Total Group Joint ventures Total
West End 89 23 112 85 15 100
City 15 90 105 15 93 108
Other Campuses 11 3 14 9 3 12
Residential(2) - - - - - -
Campuses 115 116 231 109 111 220
Retail Parks 139 16 155 137 14 151
Shopping Centre 40 40 80 39 41 80
London Urban Logistics 7 - 7 8 - 8
Other Retail 19 1 20 20 1 21
Retail & London Urban Logistics 205 57 262 204 56 260
Total 320 173 493 313 167 480
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
1. Gross rental income will differ from annualised valuation rents due
to accounting adjustments for fixed & minimum contracted rental uplifts
and lease incentives
2. Standalone residential
Portfolio Net Yields1,2
As at 31 March 2023 EPRA net EPRA topped up net initial yield Overall topped up net initial yield Net equivalent yield Net equivalent yield movement Net reversionary yield ERV Growth
initial yield
%3
%4
%
bps
%
%5
%
West End 3.3 4.4 4.4 5.0 72 5.4 4.0
City 4.0 4.8 4.8 5.0 69 5.5 1.3
Other Campuses 5.3 5.3 5.7 5.5 43 6.2 (0.2)
Campuses 3.7 4.6 4.6 5.0 70 5.5 2.6
Retail Parks 7.0 7.4 7.5 6.6 71 6.6 2.8
Shopping Centre 7.9 8.3 8.5 7.9 39 7.8 1.2
London Urban Logistics 3.2 3.2 3.3 4.6 187 4.9 29.4
Other Retail 6.8 7.1 7.3 7.0 75 6.4 (0.3)
Retail & London Urban Logistics 6.9 7.3 7.4 6.8 72 6.8 3.0
Total 5.1 5.7 5.8 5.8 71 6.0 2.8
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
Residential consists of only developments and ground rents, thereby excluded
from yield analysis
1. Including notional purchaser's costs
2. Excluding committed developments, assets held for development and
residential assets
3. Including rent contracted from expiry of rent-free periods and fixed
uplifts not in lieu of rental growth
4. Including fixed/minimum uplifts (excluded from EPRA definition)
5. As calculated by MSCI
Total Property Return (as calculated by MSCI)
12 months to 31 March 2023 Offices Retail Total
% British Land(2) MSCI British Land(2) MSCI British Land MSCI
Capital Return (14.2) (15.3) (11.1) (12.7) (13.1) (16.1)
- ERV Growth 2.6 1.6 3.0 0.4 2.8 3.5
- Yield Movement1 70 bps 104 bps 72 bps 67 bps 71 bps 109 bps
Income Return 2.7 3.6 6.8 5.4 4.1 4.1
Total Property Return (11.9) (12.3) (5.0) (7.9) (9.5) (12.6)
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
1. Net equivalent yield movement
2. British Land Offices reflects Campuses; British Land Retail reflects
Retail & London Urban Logistics
Top 20 Occupiers by Sector
As at 31 March 2023 % of As at 31 March 2023 % of
Retail & London Urban Logistics rent Campuses rent
Retail & London Urban Logistics Campuses
Next 5.1 Meta 20.3
Walgreens (Boots) 4.3 dentsu 5.5
M&S 3.7 Herbert Smith Freehills 3.4
JD Sports 3.2 SEFE Energy 3.1
Currys Plc 3.1 Vodafone 2.8
TJX (TK Maxx) 2.9 Sumitomo Mitsui 2.6
Sainsbury 2.6 Deutsche Bank 2.2
Frasers Group 2.4 Janus Henderson 2.0
DFS Furniture 2.1 TP ICAP Plc 1.8
Asda Group 2.0 The Interpublic Group 1.8
Tesco Plc 2.0 Softbank Group 1.8
Kingfisher 2.0 Reed Smith(1) 1.7
TGI Friday's 1.9 Mayer Brown 1.7
Hutchison Whampoa 1.8 Mimecast Plc 1.5
Homebase 1.4 Milbank LLP 1.5
Primark 1.4 Credit Agricole 1.4
River Island 1.4 Accor 1.3
Pets at Home 1.3 Monzo Bank 1.3
Wilkinson 1.2 Visa International 1.2
H&M 1.0 Dimensional Fund Advisors 1.0
Total top 20 46.8 Total top 20 59.9
1. Taking into account their pre-let of 114,000 sq ft at Norton Folgate,
% contracted rent would rise to 3.7%.
Major Holdings
As at 31 March 2023 Sector BL Share Sq ft Rent (100%) Occupancy Lease
%
'000
£m pa1,4
rate %2,4
length yrs3,4
Broadgate Office 50 4,468 192 94.9 6.0
Regent's Place Office 100 1,740 83 96.0 8.9
Paddington Central Office 25 958 13 99.4 8.5
Teesside, Stockton Retail Park 100 569 15 99.1 2.2
Glasgow Fort, Glasgow Retail Park 100 510 17 99.9 5.1
Giltbrook, Nottingham Retail Park 100 198 7 100.0 6.1
Hannah Close, Wembley London Urban Logistics 100 246 4 100.0 2.8
Meadowhall, Sheffield Shopping Centre 50 1,500 71 96.8 3.8
Drake's Circus, Plymouth Shopping Centre 100 1,190 17 92.4 5.0
Ealing Broadway, London Shopping Centre 100 540 12 94.9 4.2
1. Annualised EPRA contracted rent including 100% of joint ventures
2. Includes accommodation under offer or subject to asset management
3. Weighted average to first break
4. Excludes committed and near term developments
Lease Length & Occupancy
Average lease length yrs Occupancy rate %
As at 31 March 2023 To expiry To break EPRA Occupancy Occupancy1,2,3
West End 8.9 8.3 91.9 96.8
City 7.1 6.1 92.4 95.2
Other Campuses 6.9 6.0 100.0 100.0
Residential(4) 13.2 13.2 100.0 100.0
Campuses 8.0 7.2 92.4 96.2
Retail Parks 6.0 4.5 96.1 98.8
Shopping Centre 5.5 4.2 92.5 94.1
London Urban Logistics 3.7 2.6 99.8 99.8
Other Retail 8.0 7.6 95.0 96.4
Retail & London Urban Logistics 5.9 4.6 95.1 97.3
Total 6.8 5.7 93.7 96.7
1. Space allocated to Storey is shown as occupied where there is a
Storey tenant in place otherwise it is shown as vacant. Total occupancy for
Campuses would rise from 96.2% to 96.4% if Storey space were assumed to be
fully let
2. Includes accommodation under offer or subject to asset management
3. Where occupiers have entered administration or CVA but are still
liable for rates, these are treated as occupied. If units in administration
are treated as vacant, then the occupancy rate for Retail & London Urban
Logistics would reduce from 97.3% to 96.8%, and total occupancy would reduce
from 96.7% to 96.4%
4. Standalone residential
Portfolio Weighting
As at 31 March 2023 2022 2023 2023
%
%
£m
West End 34.5 28.5 2,538
City 27.3 28.9 2,566
Canada Water & other Campuses 4.1 5.1 456
Residential(1) 0.7 1.0 90
Campuses 66.6 63.5 5,650
Retail Parks 20.2 22.2 1,976
Shopping Centre 7.6 8.4 746
London Urban Logistics 3.0 3.0 263
Other Retail 2.6 2.9 263
Retail & London Urban Logistics 33.4 36.5 3,248
Total 100 100 8,898
London Weighting 73% 69% 6,174
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests
1. Standalone residential
Annualised Rent & Estimated Rental Value (ERV)
Annualised rent (valuation basis) ERV Average rent
£m1
£psf
£m
As at 31 March 2023 Group Joint ventures Total Total Contracted2 ERV
West End(3) 67 15 82 127 67.3 74.5
City(3) 8 80 88 120 56.1 61.8
Other Campuses 6 - 6 7 27.0 34.5
Residential(4) - - - - - -
Campuses 81 95 176 254 55.1 60.2
Retail Parks 144 14 158 144 23.2 20.3
Shopping Centre 40 42 82 77 26.1 23.6
London Urban Logistics 7 - 7 12 13.9 21.2
Other Retail 20 - 20 18 14.3 12.6
Retail & London Urban Logistics 211 56 267 251 22.5 20.3
Total 292 151 443 505 30.4 30.4
On a proportionally consolidated basis including the group's share of joint
ventures and funds, excluding committed, near term and assets held for
development
1. Gross rents plus, where rent reviews are outstanding, any increases
to ERV (as determined by the Group's external valuers), less any ground rents
payable under head leases, excludes contracted rent subject to rent free and
future uplift
2. Annualised rent, plus rent subject to rent free
3. £psf metrics shown for office space only
4. Standalone residential
Rent Subject to Open Market Rent Review
For year to 31 March 2024 2025 2026 2027 2028 2024-26 2024-28
As at 31 March 2023
£m
£m
£m
£m
£m
£m
£m
West End 5 15 9 22 1 29 52
City 15 8 27 5 1 50 56
Other Campuses - 1 - - - 1 1
Residential(1) - - - - - - -
Campuses 20 24 36 27 2 80 109
Retail Parks 10 11 8 9 4 29 42
Shopping Centre 4 3 2 3 2 9 14
London Urban Logistics - 1 - - - 1 1
Other Retail 1 1 1 2 1 3 6
Retail & London Urban Logistics 15 16 11 14 7 42 63
Total 35 40 47 41 9 122 172
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests as well as committed, near
term and assets held for development
1. Standalone residential
Rent Subject to Lease Break or Expiry
For year to 31 March 2024 2025 2026 2027 2028 2024-26 2024-28
As at 31 March 2023
£m
£m
£m
£m
£m
£m
£m
West End 5 7 14 5 6 26 37
City 13 11 13 3 3 37 43
Other Campuses 3 - - 1 - 3 4
Residential(1) - - - - - - -
Campuses 21 18 27 9 9 66 84
Retail Parks 30 20 25 19 15 75 109
Shopping Centre 16 10 14 8 13 40 61
London Urban Logistics - 1 4 1 1 5 7
Other Retail 4 2 1 1 1 7 9
Retail & London Urban Logistics 50 33 44 29 30 127 186
Total 71 51 71 38 39 193 270
% of contracted rent 14 10 14 8 8 38 54
On a proportionally consolidated basis including the Group's share of joint
ventures and excluding non-controlling interests as well as committed, near
term and assets held for development
1. Standalone residential
Committed Developments
As at 31 March 2023 Sector BL Share 100% sq ft PC Calendar Year Current Value Cost to come ERV Pre-let & under offer Forecast IRR %(5) Rebased IRR %(6)
%
'000
£m
£m1
£m2
£m(4)
The Priestley Centre Life Science 100 83 Q4 2023 24 15 3.2 2.0 14 21
Norton Folgate Office 100 335 Q4 2023 318 93 23.8 7.8 5 14
3 Sheldon Square Office 25 140 Q1 2024 29 10 2.5 1.7 16 17
Aldgate Place, Phase 2 Residential 100 137 Q2 2024 86 44 6.4 - 6 10
1 Broadgate(4) Office 50 544 Q2 2025 124 188 20.7 13.6 7 12
Canada Water(3)
Roberts Close (Plot K1) Residential 50 62 Q3 2023 - 5 - - Blended 10 Blended 13
The Dock Shed (Plot A2) Mixed use 50 246 Q4 2024 26 48 5.5 -
1-3 Deal Porters Way (Plot A1) Mixed Use 50 270 Q4 2024 41 85 3.6 -
Total Committed 1,817 648 488 65.7 25.1
On a proportionally consolidated basis including the group's share of joint
ventures and funds (except area which is shown at 100%)
1. From 31 March 2023. Cost to come excludes notional interest as
interest is capitalised individually on each development at our capitalisation
rate
2. Estimated headline rental value net of rent payable under head leases
(excluding tenant incentives)
3. The London Borough of Southwark has confirmed they will not be
investing in Phase 1, but retain the right to participate in the development
of subsequent plots up to a maximum of 20% with their returns pro-rated
accordingly
4. Pre-let & under offer excludes 114,000 sq ft of office space
under option
5. Forecast IRRs reflect the land value of the point of commitments
6. Rebase IRRs reflect current site values
Near Term Development Pipeline
As at 31 March 2023 Sector BL Share 100% sq ft Earliest Start on Site Current Value Cost to come ERV Planning Status
%
'000
£m
£m1
£m2
2 Finsbury Avenue Office 50 747 Q2 2023 72 410 35.4 Consented
Peterhouse Extension, Cambridge Life Science 100 96 Q3 2023 22 50 4.7 Consented
Verney Road, Southwark London Urban Logistics 100 200 Q4 2023 26 75 7.1 Submitted
Mandela Way, Southwark London Urban Logistics 100 144 Q4 2023 17 53 4.7 Submitted
The Box, Paddington London Urban Logistics 100 121 Q4 2023 42 41 5.5 Consented
5 Kingdom Street Office 100 211 Q2 2024 60 226 19.0 Consented
Canada Water
Printworks, H1 & H2 Mixed Use 50 281 Q3 2024 6 92 8.6 Outline Consented
Total Near Term 1,800 245 947 85.0
On a proportionally consolidated basis including the group's share of joint
ventures and funds (except area which is shown at 100%)
1. From 31 March 2023. Cost to come excludes notional interest as
interest is capitalised individually on each development at our capitalisation
rate
2. Estimated headline rental value net of rent payable under head leases
(excluding tenant incentives)
Medium Term Development Pipeline
As at 31 March 2023 Sector BL Share 100% Sq ft Planning Status
%
'000
1 Appold Street Office 50 404 Consented
International House, Ealing Office 100 165 Consented
Euston Tower Office 100 571 Pre-submission
Finsbury Square London Urban Logistics 100 81 Pre-submission
Thurrock London Urban Logistics 100 644 Submitted
Enfield, Heritage House London Urban Logistics 100 437 Submitted
Hannah Close, Wembley London Urban Logistics 100 668 Pre-submission
Meadowhall London Urban Logistics 50 611 Consented
West One Development Mixed Use 25 73 Consented
Ealing - 10-40, The Broadway Mixed Use 100 320 Consented
Canada Water
Plot H3 Office 50 313 Outline consent
Zone L Residential 50 200 Consented
Plot F2 Mixed Use 50 447 Consented
Future phases(1) Mixed Use 50 3,260 Outline consent
Total Medium Term 8,194
On a proportionally consolidated basis including the group's share of joint
ventures and funds (except area which is shown at 100%)
1. The London Borough of Southwark has the right to invest in up to 20%
of the completed development. The ownership share of the joint venture between
British Land and AustralianSuper will change over time depending on the level
of contributions made, but will be no less than 80%
Forward-looking statements
This Press Release contains certain (and we may make other verbal or written)
'forward-looking' statements. These forward-looking statements include all
matters that are not historical fact. Such statements reflect current views,
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among other things, our markets, activities, projections, strategy, plans,
initiatives, objectives, performance, financial condition, liquidity, growth
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Recipients should not place reliance on, and are cautioned about relying on,
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Important factors that could cause actual results (including the payment of
dividends), performance or achievements of British Land to differ materially
from any outcomes or results expressed or implied by such forward-looking
statements include, among other things, changes and/or developments as
regards: (a) general business and political, social and economic conditions
globally, (b) the United Kingdom's withdrawal from, and evolving relationship
with the European Union, (c) industry and market trends (including demand in
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competition, (e) the behaviour of other market participants, (f) government,
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tenant law, health and safety and taxation (in particular, in respect of
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consumer confidence, (h) labour relations, work stoppages and increased costs
for, or shortages of, talent, (i) climate change, natural disasters and
adverse weather conditions, (j) terrorism, conflicts or acts of war, (k)
British Land's overall business strategy, risk appetite and investment choices
in its portfolio management, (l) legal or other proceedings against or
affecting British Land, (m) cyber-attacks and other disruptions and
reliability and security of IT infrastructure, (n) occupier demand and tenant
default, (o) financial and equity markets including interest and exchange rate
fluctuations, (p) accounting practices and the interpretation of accounting
standards (q) the availability and cost of finances, (r) public health crises
(including but not limited to the Covid-19 pandemic), (s) changes in
construction supplies and labour availability or cost inflation and (t) the
Ukraine conflict and its impact on supply chains and the macroeconomic
outlook. The Company's principal risks are described in greater detail in the
section of this Press Release headed "Risk Management and Principal Risks" and
in the Company's latest annual report and accounts (which can be found at
www.britishland.com). Forward-looking statements in this Press Release, or the
British Land website or made subsequently, which are attributable to British
Land or persons acting on its behalf, should therefore be construed in light
of all such factors.
Information contained in this Press Release relating to British Land or its
share price or the yield on its shares are not guarantees of, and should not
be relied upon as an indicator of, future performance, and nothing in this
Press Release should be construed as a profit forecast or profit estimate, or
be taken as implying that the earnings of British Land for the current year or
future years will necessarily match or exceed the historical or published
earnings of British Land. Any forward-looking statements made by or on behalf
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officers, employees or advisers), including as to their completeness,
accuracy, fairness, reliability, the basis on which they were prepared, or
their achievement or reasonableness.
Other than in accordance with our legal and regulatory obligations (including
under the UK Financial Conduct Authority's Listing Rules, Disclosure Guidance
and Transparency Rules, the UK Market Abuse Regulation, and the requirements
of the Financial Conduct Authority and the London Stock Exchange), British
Land does not intend or undertake any obligation to update or revise publicly
forward-looking statements to reflect any changes in British Land's
expectations with regard thereto or any changes in information, events,
conditions or circumstances on which any such statement is based. This
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has been no change in the business or affairs of British Land since the date
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