REG - British Land Co PLC - Half-year Report - Part 1 <Origin Href="QuoteRef">BLND.L</Origin> - Part 2

British LandAnnouncement

16/11/2017 07:19

- Part 2: For the preceding part double click  ID:nRSP6456Wa 

    
 Net Investment     (163)   (509)    (116)        11            (777)  
 Gross Investment   433     641      122          11            1,207  
 
 
On a proportionally consolidated basis including the Group's share of joint
ventures and funds 
 
1 Includes £575 million Leadenhall Building disposal exchanged during the year
ended 31 March 2017 and completed this period 
 
The gross value of our investment activity since 1 April 2017, as measured by
our share of acquisitions, disposals, capital spend on developments and other
capital projects was over £1 billion.  This includes the completion of the
£1.15 billion sale of The Leadenhall Building (our share £575 million).
Excluding this, we completed £417 million of sales 2% above book value, and
£92 million of purchases. 
 
Development activity 
 
 At 30 September 2017   Sq ft  Current Value  Cost to complete  ERV   ERVlet/under offer  Resi Exchanged  
                        '000   £m             £m                £m    £m                  £m              
 Committed              1,453  810            446               54.7  31.5                344²            
 Near term              562    131            218               20.6  4.4                 n/a             
 Medium term            3,216                                                                             
 Canada Water Phase 11  1,835                                                                             
 
 
On a proportionally consolidated basis including the Group's share of joint
ventures and funds (except area which is shown at 100%) 
 
1Total site area is 5.5 million sq ft 
 
² of which £66m exchanged post period end 
 
Development is a key component of our value creation activity and, over the
medium term, we have the potential to develop over 10.7 million sq ft of
opportunities, subject to market conditions. These are predominantly located
in and around our investment portfolio, enabling us to enhance our existing
campus and multi-let assets through adjacent development projects in line with
creating Places People Prefer. 
 
When considering an opportunity for development, we balance phasing, potential
returns and risk. 37% of sites are currently income producing and a further
26% are held at low carrying value within our medium term pipeline. In a
strong investment market, where prices for standing assets substantially
dilute potential returns, it is a distinct competitive advantage to be able to
create growth through considered development. Consequently, while carefully
managing our risk profile, we are progressing the projects that offer the best
long-term growth prospects. 
 
We will shortly complete the final phase of our mixed-use development at
Clarges, comprising office space and high end residential. The development
generated substantial interest with £344 million of apartments pre-sold. 
 
Development spend in the period totalled £84 million with the majority
relating to 100 Liverpool Street at Broadgate. Capital expenditure in the
period of £39 million relates to income enhancing investment in our assets
including Teesside and Meadowhall. 85% of the £446 million of costs to come
from the committed pipeline will be funded through £381 million of receipts
still to come from residential sales. 
 
We take a careful approach to development risk, maintaining exposure at a
comfortable level through our pre-let programme. 57% of the £55 million ERV
from our committed development pipeline is pre-let or under offer and our
speculative development exposure is comfortable at 4.0% (March: 3.7%). In
addition, 21% of the £21 million ERV from our near-term pipeline is pre-let or
under offer. 
 
Construction cost forecasts continue to suggest that the rate of growth will
moderate this year and next, with input costs increasing slightly before
levelling out in late 2018. Whilst our experience suggests that cost inflation
is marginally lower than it has been over the last two years, this may not be
consistent throughout all trade contractors. To manage this, 89% of the costs
on our committed development programme have been fixed and we maintain
allowances within project budgets to reflect specific sectors and locations. 
 
With the investment market precluding accretive acquisitions, we have focused
resources on progressing our unique development programme in a de-risked
manner that offers consecutive, significant opportunities for growth over the
next decade. This positions us well to increase value for shareholders through
a range of channels as the market evolves. 
 
More details on the portfolio, property performance, individual developments
and assets sold and acquired during the year can be found in the detailed
supplementary tables on pages 60 to 68. 
 
London Offices 
 
Key metrics 
 
 As at:                                        31 March 2017  30 September 2017  
 Portfolio Valuation (BL share)                £6,844m        £6,519m            
 -       Of which campuses                     £4,960m        £5,120m            
 Occupancy                                     97.7%          96.9%              
 Weighted average lease length to first break  7.8 yrs        7.7 yrs            
                                                                                 
 6 months to:                                  31 March 2017  30 September 2017  
 Total property return                         +4.7%          +4.8%              
 -       Yield shift                           -6 bps         -6 bps             
 -       ERV growth                            +0.4%          +1.2%              
 -       Valuation movement                    +2.8%          +2.6%              
                                                                                 
 Lettings/renewals                             211,000 sq ft  741,000 sq ft      
 Lettings/renewals vs ERV                      0.1%           +2.8%              
 
 
On a proportionally consolidated basis including the Group's share of joint
ventures and funds 
 
Strategy 
 
Our campus strategy focuses on how our customers want to spend their time. As
a result, we focus on the quality and opportunity of the wider neighbourhood
rather than isolated buildings. We enhance and enliven the whole environment
to create places where people can move seamlessly between work and leisure
activities before, during and after their working day. From surveys to online
discussion platforms, we are engaging with the people working within our
buildings, enabling us to respond to their needs with space that is more
flexible, events and activities that are more attractive and a growing mix of
food and retail.  It is our focus on the overall campus that makes this mix
possible. For employers looking to attract and retain key talent, as well as
the growing number of small and medium sized businesses who want affordable
and well connected space in a vibrant location, our offer is proving
compelling. 
 
Market 
 
Investment markets have been mixed, with the London office market continuing
to be buoyant, particularly in the City where overseas demand for trophy
assets has remained strong and deals have transacted on tight yields, ahead of
valuation. The market for secondary assets has been slower. 
 
As expected, occupier take up is diversifying. In particular, we are seeing
more flexible workspace, which accounted for 17% of new leasing in the six
months. Vacancy rates in Central London have increased slowly, and are now
slightly above their long term average at 4.6%. Supply of new build is
reflecting changing market conditions with supply continuing to be pushed
back, helping to balance the market. There is a growing focus on attractive
design, quality and environments, with employers actively targeting space that
helps them attract and retain talent: increasingly "prime" is about the
quality of the space and its proximity to first class amenities rather than
traditional locations, and on these spaces rents have proved robust. Although
we expect rental growth across the market to be flat-to-down over the next 12
months, we believe that this polarisation by occupiers towards the best space
will continue to be to our advantage. 
 
Portfolio Performance 
 
Office values were up 2.6% during the period, with total inward yield shift of
6 bps. This was weighted towards the West End, which saw yield compression of
11 bps compared to expansion of 1 bp at our City properties. Both portfolios
experienced similar ERV growth, at or above 1%. Paddington Central was our
strongest performing campus, experiencing inward yield shift of 15 bps and ERV
growth of 3.8%. This reflects our recent investment into the public realm, and
successful leasing of the speculative 4 Kingdom Street development. 
 
Operational Performance 
 
We were delighted to complete 741,000 sq ft of lettings and renewals in the
half year, adding £29 million to future rent, with investment lettings and
renewals 2.8% ahead of ERV. We are under offer, or in advanced negotiations on
a further 570,000 sq ft. This demonstrates the resilience of the market for
the best available space. We have completed rent reviews on 123,000 sq ft,
9.2% ahead of passing rent, benefitting from the success of our leasing, to
raise the rental tone across our campuses. Overall, this activity has
supported like-for-like income growth of 1.9%. 
 
Campuses 
 
We currently have three operational campuses, Broadgate, Regents Place and
Paddington Central, all located to benefit from vibrant neighbourhoods and
excellent transport links. 
 
Broadgate 
 
At Broadgate, we are working to transform this 30 acre campus into a world
class, seven day, mixed-use London destination with potential to generate
substantial returns for shareholders. During the period under review, we have
attracted a broader range of occupiers to the location and continued to create
new space suitable for different uses, bringing us closer to realising this
vision. 
 
At 2 Finsbury Avenue, we signed new technology occupiers for Broadgate with
Starling Bank, the first mobile-only bank to launch a current account, and
Innovate Finance, the UK membership association for the global FinTech
community, in total taking 16,000 sq ft of space. These new occupiers join the
digital team from Kingfisher, which leased 25,000 sq ft of space for a two
year term through our flexible workspace brand, Storey, within the building,
reinforcing this location's emerging reputation as a technology and creative
hub. 
 
Our re-development of neighbouring 1 Finsbury Avenue will introduce a cinema,
retail and restaurants on the ground floor and we are delighted to be under
offer to technology company, Mimecast, for 78,000 sq ft - close to one third
of the office space. 
 
At 100 Liverpool Street, we are under offer to a single occupier on 37% of the
office space. This building, which will open soon after Crossrail services
begin running through neighbouring Liverpool Street Station, will bring 90,000
sq ft of retail and restaurants to Broadgate as well as 430,000 sq ft of
office space. The floors are highly divisible, catering for businesses of
various sizes. 
 
We have also made progress de-risking our near term pipeline, where plans for
the redevelopment of 135 Bishopsgate have resulted in 125,000 sq ft of the
office space going under offer. The development includes a substantial retail
allocation, and we are under offer to a global brand for a 43,000 sq ft
flagship presence across the ground and first floors, which would increase the
attractiveness of the overall campus while improving permeability with
neighbouring Spitalfields. We will commit to this redevelopment once we have
secured these substantial pre-lets on the space. 
 
In these three buildings we are delivering over 1 million sq ft of space at
Broadgate, 36% of this space is now let or under offer. 16% of this new space
will be retail, restaurants and leisure, broadening Broadgate's appeal, as
shown during the period, to a wider range of occupiers. 
 
These development opportunities will enhance the attractiveness of our
existing space at Broadgate, which is effectively full. We expect the campus
to benefit further when Crossrail starts through services in 2019, enabling
occupiers to reach Heathrow in just 35 minutes. 
 
We continue to forge links with local communities through Broadgate Connect,
part of our Bright Lights skills and employment programme. 67 East London
jobseekers have been engaged through the programme in the half year, 20 of
whom have secured jobs and apprenticeships with Broadgate suppliers and
occupiers in the half year, bringing the total supported into employment since
2012 to 250. 
 
Regent's Place 
 
Regent's Place is at the heart of London's Knowledge Quarter: within 1 mile of
the campus there are 3,000 scientists, 8 universities and 30,000 employees
working at world renowned organisations such as Wellcome Trust, the Francis
Crick Institute and the British Library. This proximity to exceptional talent
is highly attractive to occupiers. 
 
Our greatest leasing success during the half year was the 310,000 sq ft
pre-let of all the office space within 1 Triton Square. This is the largest
pre-let in the West End for over 20 years and will increase the lettable area
by 127,000 sq ft. Dentsu Aegis Network, the brand, media and digital
communication specialist, has taken a 20 year lease on the entire office
space, enabling us to commit to the re-development of the 366,000 sq ft
building which stands at the heart of Regent's Place and, after
re-development, will feature retail on the ground floor. We anticipate a start
on site in March 2018. As part of this letting, Dentsu Aegis have an option to
return their existing space at 10 Triton Street to British Land in 2021. If
this option is exercised, there would be a compensating adjustment covering
the rent free period of the letting at 1 Triton Square. 
 
Facebook have also increased their total occupation at Regent's Place to
nearly 185,000 sq ft. This follows an extension to the original 107,000 sq ft
agreed earlier in the year, and demonstrates their continued commitment to the
campus. 
 
Paddington Central 
 
We bought Paddington Central in 2013, and over the last four years have
invested in the public realm and canal side, adding more retail and catering
as well as committing to development. The campus will benefit from the arrival
of Crossrail which will run cross-London services from 2019. 
 
Our completed speculative development of 4 Kingdom Street (147,000 sq ft), is
substantially let, with Vertex (pharmaceuticals), Finastra (software), Sasol
(energy and chemicals) and Mars (food products) together taking over 100,000
sq ft in the period, at average rents 5% ahead of pre-referendum ERV. We
allocated the remaining space to Storey where we are in active negotiations on
9,000 sq ft, representing two thirds of their space in the building. 
 
We have also made great progress with the Gateway Building, which will become
a 20 storey premium boutique hotel covering 105,000 sq ft of space, with
retail on the ground floor. We have now secured a resolution to grant planning
consent and are in advanced negotiations for a pre-let of this space, ahead of
construction. 
 
The opening this year of Pergola, the restaurant concept, has proved a
resounding success. The attraction drew 130,000 people to Paddington Central
over the Summer, and the line-up of catering is now being refreshed ahead of
the Christmas season, giving people another reason to visit. 
 
A review by independent consultancy Happy City has highlighted the positive
impact of our £10 million investment to improve the public realm. Wellbeing
and productivity are benefitting from the introduction of pocket parks; while
new social spaces, walkways and games areas encourage active living and
promote social relationships. 
 
With occupiers focused on attracting and retaining key talent this review
demonstrates how we are achieving the new rental tone at the campus, 40%
higher than the best rents achieved when we acquired the campus four years
ago. 
 
Storey 
 
To ensure we closely match our customers' evolving requirements, we launched
our branded flexible workspace, Storey, this summer. 
 
Unlike co-working facilities, the median headcount of Storey occupiers is
around 50 people. Now operating across 85,000 sq ft in three buildings (2
Finsbury Avenue and Appold Studios at Broadgate and International House at
Ealing) we are pleased to have let 59,000 sq ft since its launch in June.
Occupiers joining Kingfisher Digital include WiredScore and Platform 360,
diversifying further the range of occupiers signing for space at Broadgate. 
 
Supported by this good take-up, we are now fitting out a further 50,000 sq ft
of space split between Paddington Central and Regent's Place for delivery
early next year, so Storey will shortly be available campus-wide. 
 
Residential 
 
In Residential, all units at the Hempel have been sold, overall achieving
prices ahead of our investment case assumptions. Following further successful
sales activity at Clarges, Mayfair, we have only £127 million remaining to
sell and marketing is expected to commence following its completion next
spring. 
 
London Office Development 
 
Development is an important method of value creation for British Land,
enabling us to enhance the quality of the overall campus while increasing its
lettable area. With the office portfolio effectively full, we have focused
resources on progressing the planning status of our development opportunities,
securing pre-lets to de-risk the pipeline and committing to further
development on all three campuses. 
 
Committed Pipeline 
 
Since 1 April, we have secured 1.1 million sq ft of positive planning
resolutions. These include 1 Triton Square at Regents' Place, 1 Finsbury
Avenue and 135 Bishopsgate at Broadgate and the Gateway Building at Paddington
Central. 
 
The total ERV of our committed office development pipeline is now £50 million,
59% of which is pre-let or under offer. 
 
Our most significant office commitment is 100 Liverpool Street, at Broadgate,
where work has now started on the steel frame: costs to come currently stand
at £136 million, of which 87% are fixed. 37% of the office space is now under
offer to an international financial institution. 
 
In addition, we have now committed to the development of 1 Triton Square where
the entire 310,000 sq ft of office space is pre-let to Dentsu Aegis Network on
a 20 year lease, and we are on-site with a 288,000 sq ft refurbishment of 1
Finsbury Avenue, where nearly 30% of the office space is under offer to
Mimecast, a technology company. 
 
Near-Term Pipeline 
 
Our near-term office development pipeline now amounts to 430,000 sq ft. 
 
At Broadgate we are under offer for a substantial pre-let at 135 Bishopsgate,
which will enable us to commit to its £57 million redevelopment, amounting to
325,000 sq ft. 
 
At Paddington Central, we expect to commit to the premium hotel on the Gateway
site once terms of the lease are agreed and start on site during 2018. 
 
Medium-Term Pipeline 
 
Our medium-term development pipeline covers 1.7 million sq ft. 
 
At Broadgate, we have resolution to grant planning consent for a 563,000 sq ft
re-development of 2&3 Finsbury Avenue which would increase the existing space
by 374,000 sq ft. To drive income and retain flexibility over the timing of
its redevelopment, the space is fully occupied on a short term basis and
64,000 sq ft has been allocated to Storey. UBS remain in occupation at 3
Finsbury Avenue, with a lease break late in 2018. 
 
At 1-2 Broadgate, we are currently undergoing feasibility works for a
significant scheme here which would increase the retail element at Broadgate,
enhancing the attractive retail and leisure options across the campus. 
 
At Paddington Central, following the leasing success at 4 Kingdom Street, we
expect to submit a planning application for an office-led scheme at 5 Kingdom
Street. The site is currently let on a short term basis to Pergola, an
850-capacity pop up dining concept which attracted 130,000 visitors in the
first 3 months, driving footfall to the campus and broadening the mix of
visitors. 
 
Canada Water 
 
Our most significant mixed use scheme will be at Canada Water in central
London located in Zone 2, on which we are working closely with the London
Borough of Southwark, the Greater London Authority, Transport for London and
the local community. 
 
The gross valuation was broadly unchanged, but net values fell 4.5% reflecting
feasibility costs in connection with our masterplanning work, which are
irrecoverable through the valuation. 
 
In September 2017, Heads of Terms for the 46 acre site were agreed for a
long-term partnership with the London Borough of Southwark, simplifying the
structure and bringing our combined land holdings together in a single
500-year lease.  We are now finalising Phase 1, which covers 1.8 million sq ft
of the 5.5 million sq ft development, with 1 million sq ft of offices and
250,000 sq ft of retail and leisure around the Canada Water Dock and station
as well as approximately 650 homes. 
 
We expect to submit a planning application in the Spring, seeking outline
permission for the masterplan as well as detailed permission for a number of
the Phase 1 buildings, to expedite our start on site. The earliest we could be
on site is 2019, and potential funding structures relating to the development
will be explored when we have greater visibility on timing. We are already
seeing interest from a range of sectors and have active discussions underway
on several buildings. 
 
In the meantime, we are driving income and building awareness through an
exciting new events space we have created at the Printworks (formerly
Harmsworth Quays), which provides over 119,000 sq ft of space with capacity
for 5,000 people. A year after opening, this was named by the London Venue
Awards as the Best New Venue 2017 and Best London Venue 2017, beating The O2,
Alexandra Palace and Battersea Evolution. It has attracted over 180,000
visitors to the area since it launched, hosting major music events including
the Gorrillaz album launch, festivals including Beavertown Brewery, and film
sets including "Avengers: Age of Ultron" and "Lucky Man".  The Printworks is
also home to The Paper Garden, run by educational charity Global Generation.
This aims to connect local young people with the development of the public
realm and is one of our early plans to ensure our investment in Canada Water
generates an enduring social and economic contribution to the surrounding
community. 
 
Retail 
 
Key metrics 
 
 As at:                                        31 March 2017  30 September 2017  
 Portfolio valuation (BL share)                £6,654m        £6,592m            
 -       Of which multi-let                    £5,102m        £5,193m            
 Occupancy                                     98.3%          98.3%              
 Weighted average lease length to first break  8.6 yrs        8.3 yrs            
                                                                                 
 6 months to:                                  31 March 2017  30 September 2017  
 Total property return                         +3.4%          +3.0%              
 -       Yield shift                           -3 bps         +5 bps             
 -       ERV growth                            +0.7%          +1.0%              
 -       Multi-let ERV growth                  +1.1%          +1.1%              
 -       Valuation movement                    +0.7%          +0.3%              
                                                                                 
 Lettings/renewals                             616,000 sq ft  578,000 sq ft      
 Lettings/renewals vs ERV                      +7.3%          +11.9%             
 
 
On a proportionally consolidated basis including the Group's share of joint
ventures and funds 
 
Strategy 
 
Our retail strategy starts with the consumer. We are re-shaping our portfolio
based on our data-driven understanding of why, how and where they want to
shop.  As a result, our centres attract consistently superior footfall,
creating a healthy market for our occupiers. 
 
Our core Regional and Local centres are within easy reach of 59% of the UK
population: we know that consumers shop for multiple reasons and the extensive
reach of our network enables a retailer to optimise their store portfolio to
capture the balance of these motivations - from leisure through to convenience
- that works best for their brand. 
 
At Regional centres, our data show that eating or drinking increases retail
spend by an average of 25%. People who visit these centres to dine and watch a
film tend to spend 56% more on the catering than those visiting only to eat or
drink. This growing consumer data set has anchored our decisions on tenant
mix. Further, analysis of the positive impact of the 2013 leisure extension at
Glasgow Fort resulted in our commitment to similar developments at Whiteley,
Broughton and Fort Kinnaird. Equally positive results from these three
developments resulted in our current commitments to leisure expansion at New
Mersey, Speke and Drake Circus, Plymouth. 
 
Our data illustrate that proximity and ease of access are increasingly
important. As a result we invest in centres with extensive catchments, making
them convenient for many people to reach and shop. This demonstrably increases
retail spend, as seen at six centres where we undertook a recent programme of
improvement: here our data show the work resulted in an 11.4% increase in
consumers' satisfaction with the overall shopping experience, and also a 5.3%
increase in retail spend. 
 
Our research supports a growing awareness in the market of how the line
between digital and physical retail is blurring. Any purchasing journey has
three stages: discovery; the financial transaction; and its fulfilment, when
the shopper receives the goods. In an omni-channel environment, our research
shows that we can play a role by focusing on the discovery and fulfilment
stages. We know that 89% of retail sales touch the physical store in some way:
a quarter of online sales are first browsed instore before the consumer
commits, and 13% of online purchases are picked up from a physical store
rather than delivered. Last mile delivery continues to suppress retailers'
margins while consumers want certainty over delivery, speed of fulfilment and
a low or zero cost. With fulfilment of an ecommerce order costing at least
twice as much to deliver to the home than fulfil through in-store Click &
Collect, many retailers are incentivising customers, through low or no cost,
to pick up their packages from physical stores. This dovetails lower costs for
retailers with consumers' desire for predictability. This is reflected in our
data, which show that the proportion of shoppers at our Local centres using
Click & Collect has grown from 19% to over 30% in the last three years.
Importantly, 67% of our shoppers make an additional purchase while doing so, a
rate that has now stayed at around this level for three years, so our
retailers benefit from lower fulfilment costs and additional sales. 
 
Retailers are also seeking to reduce the cost of returns by making it easy for
consumers to complete the return and refund through their store networks. CACI
data show that 39% of online purchases returned by shoppers are now accepted
through a store. We have this year started to measure the proportion of those
who made a new purchase in store while returning an online purchase: the
initial results are powerful, with 80% of people at our centres going on to
buy an additional product when making an online return. 
 
At our Local centres the frequency of Click & Collect is almost 50% higher
than the national average, which suggests that British Land's focus on
designing these centres for convenience is helping retailers lower their
fulfilment costs and capture additional sales, leading to more healthy
margins. 
 
We have also begun to explore the impact of physical stores on online sales.
The results of our research show that when a physical store opens, traffic to
the retailer's website from the surrounding postal area increases by an
average of 52% within 6 weeks of opening. Importantly, it then stays around
this level, demonstrating that a physical store has a significant, positive
and sustained impact on the brand. 
 
These data demonstrate that physical retail centres continue to play an
important role in both the discovery and fulfilment stages of a consumer
purchase, regardless of where the financial transaction takes place. Consumers
want a seamless purchasing experience across their chosen channels and we
believe this is reflected in the growing number of previously pure-play
ecommerce retailers who are now taking physical space, such as Joe Browns
which opened its first store in Meadowhall in October. 
 
Our space is also affordable, with an occupancy cost ratio of 16%, falling to
under 14% once the estimated benefit of online sales is included. Reflecting
the combination of these factors, our total occupancy remains high at 98%. 
 
Market 
 
Investment demand for retail assets during the period has increasingly focused
on lot sizes below £50 million with secure income streams. We have also seen a
resurgence of activity in supermarkets where they offer long index-linked
income, which is reflected in a tightening of yields. There has been limited
equivalent transactional evidence in prime, with little quality stock brought
to market beyond the non-controlling stake in Bluewater. 
 
With retailer margins under pressure due to rising costs and structural
change, polarisation of occupier demand has accelerated sharply. The focus now
is on rightsizing store networks. As a result, retailers are targeting the
best space in the strongest locations, as illustrated by recent data showing
that more than 60% of UK shopping centre lettings this year have been on new
or refurbished space. In view of tightening retail margins, over the next 12
months we expect rents across the market as a whole to be flat or slightly
down, with the best space attracting the strongest demand as retailers
optimise their portfolios. 
 
Portfolio Performance 
 
The value of our Retail portfolio rose 0.3% during the period, with ERV growth
of 1.0%, primarily in multi lets. Regional and Local centres performed in
line, though values were offset by yield shift. As a result, Locals were down
0.9% whilst Regionals were up 0.1%. Many of our solus properties saw valuation
gains as a result of the long term nature of their leases. Our work on
planning and asset management has realised underlying land values generating
some very strong individual performances, for example at Richmond, where our
Homebase store saw a valuation gain of 60%. Although outside the core Retail
business, many of our solus properties have attractive alternative use value
and will remain a part of the portfolio, delivering income for the Group,
until this value has been maximised. 
 
Capital spend in the period was £43 million of which c.60% were initiatives
delivering an immediate increase in income, with the remainder delivering
longer term benefits for our assets. 
 
Capital Activity 
 
Over the last three years we have sold £1.7 billion of off-strategy assets,
£298 million of which were during the period. These included B&Q stores in
Bury and Grimsby for £56 million. 
 
We acquired 10-40 The Broadway, Ealing, for £49 million, which links our
Ealing Broadway Local retail centre to the new Crossrail station, and offers
significant mixed-use development potential. 
 
Over the next 12 months, we expect to sell an additional £500 million of
retail assets while investing in several of our Regional centres where we will
create leisure extensions, and in our Locals through amenity improvements. 
 
Operational Performance 
 
Our Retail strategy has positioned us to benefit from polarisation and the
growing symbiosis between digital and physical retail, and this is reflected
in our performance, with strong leasing and ERV growth, and footfall and sales
all ahead of benchmark. 
 
We signed 578,000 sq ft of lettings and renewals in the half year, with
investment lettings and renewals on average 11.9% ahead of ERV.  Our Regional
centres, which represent 58% by value, accounted for around two-thirds of this
activity, with both Regionals and Locals achieving terms similarly ahead of
ERV. Rent reviews covered over 500,000 sq ft, and were completed on average
4.0% ahead of passing rent and ahead of valuation assumptions. In total, this
activity has supported like-for-like income growth of 1.7%. 
 
Our centres outperformed their benchmarks on footfall and sales in the period
by 340 bps and 50 bps respectively. At our Regional centres, footfall was up
1.3% with some very strong individual performances, including Teesside
(+11.4%), benefitting from a newly reconfigured car park, and Bath, SouthGate
(+6.1%) where "Umbrella Street" an art installation featuring 1,000 umbrellas
proved highly attractive: footfall grew by a million people over the last
twelve months. Footfall at our Local centres rose 0.4%. Sales, which are
calculated on a like-for-like basis and therefore do not include the notable
positive impact of new signings or click and collect, were down 1.4% and 0.5%
at our Regional and Local centres respectively but still ahead of the
benchmark. 
 
In line with our strategy of introducing a better balance of activities to our
locations, 72,000 sq ft of food, beverage and leisure lettings were made in
the period, including Gourmet Burger Kitchen at Meadowhall, Bills at Plymouth
and Pure Gym at Fort Kinnaird: food and beverage was our strongest performing
category in the period, with sales up 0.9%. 
 
In addition, we are using our insight to demonstrate to premium operators the
benefits of opening in non-traditional locations. During the period Hotel
Chocolat and Lush opened their first out of town stores at Teesside and
Glasgow Fort respectively, and Footasylum, who opened their first new concept
store out of town at Broughton, Chester. Disney and Joules have also opened
pop-up stores at Glasgow, their first out of town space, providing them the
flexibility to trial this format whilst enabling us to refresh our offering
more regularly. 
 
We achieved notable success through HUT at Fort Kinnaird, where extensive work
has been undertaken to enhance the environment and introduce new brands.
135,000 sq ft of lettings and regears brought 13 new brands to the site,
including Schuh, Starbucks and Waterstones, which opened a 3,800 sq ft concept
store. 
 
Following our successful planning application, we are also undertaking a £30
million refurbishment of our Regional Teesside centre. This will create
modern, bespoke units for retailers, with improved customer facilities and an
enhanced public realm as well as an additional 120,000 sq ft of lettable
space. New leases agreed at Teesside in the period partly drove ERV growth of
3.7% across the asset. 
 
The refurbishment programme at Meadowhall stimulated existing occupiers to
invest a further £38 million on the redesign and refit of their stores to
match the modern contemporary feel of the centre. Our investment has created
an environment appealing to premium / lifestyle retailers including Joe Browns
and Godiva who signed in the period. They join 30 new brands taking space
since the refurbishment was announced, on terms ahead of ERV. The
refurbishment also created direct economic and social benefit for the local
community, with one in three of the construction jobs filled by people living
in Sheffield, creating over 200,000 hours of employment. 70% of construction
spend also went to local firms, boosting the regional economy by £32 million. 
 
As part of our focus on ensuring our assets directly benefit the local
community, we also support our occupiers with local training and recruitment. 
Launched in 2016, our Bright Lights 'Starting Out' training programme helps
unemployed young people build valuable skills that help them secure work in
the retail and hospitality industry.  This free programme has now been rolled
out across 13 Local and Regional retail centres, building on the success of
last year's pilot which placed 75% of participating graduates in employment.
Our research with CACI reveals that people who feel a strong community
association with a retail centre visit at least 30% more often and are over
50% more likely to recommend it to friends. We have therefore also expanded
our Young Readers Programme with the National Literacy Trust to take place at
28 predominantly retail assets, with over 7,500 children participating in the
half year, helping to foster strong community associations with our places. 
 
Retail Development 
 
Our increasing focus on mixed use development means that retail often forms
part of a wider scheme, as seen at Eden Walk and Canada Water. Within our
operational London campuses we are also improving the retail and leisure mix,
particularly at Broadgate where 100 Liverpool Street will include 90,000 sq
ft, and at 135 Bishopsgate where the whole ground floor will enhance the
attractiveness of the overall location by introducing new retail and leisure
space. 
 
Outside London, we are progressing extensions to some existing schemes where
an enhanced offering is designed to augment the performance of the asset.
During the period, we secured 20 planning approvals for retail schemes
amounting to 739,000 sq ft of space. 
 
Committed Pipeline 
 
We have two leisure extensions in our committed pipeline which will create a
higher quality of experience for our visitors in those locations. Our leisure
development at Speke, which completes next calendar year is 86% let or under
offer. It will add an 11-screen cinema, pre-let to Cineworld and six
restaurant units, of which half are pre-let. At Drake Circus, Plymouth, we
have received consent for our 107,000 sq ft leisure scheme and started on
site. 
 
Near-Term Pipeline 
 
We expect to start on site at two leisure extensions in the second half of
2018, subject to planning: at Bradford we will submit a revised planning
application for a 49,000 sq ft leisure extension by the end of the year; and
at Teesside, where a resolution to grant has been secured for an 83,000 sq ft
extension. 
 
Medium-term Pipeline 
 
Our medium-term pipeline currently includes two retail development extensions
for existing assets. 
 
At Serpentine Green in Peterborough, we have submitted planning permission for
a leisure extension. Subject to successful outcome, we would expect to start
construction towards the end of 2019. 
 
Our most substantial retail opportunity is the leisure extension at
Meadowhall, for which we secured a resolution to grant planning consent in
September 2017. The extension, which is designed to complete Meadowhall's
transformation into a flagship regional centre, will increase the lettable
area by 330,000 sq ft and the public realm by 300,000 sq ft. It will feature a
new high quality dining destination beneath a dramatic transparent roof that
links the two wings of the existing centre to improve visitor flow and enable
year-round use of the new space. Exceptional new entertainment options,
including a new cinema, café court, gym, open air terrace, foodstore and space
for leisure, event and community uses, will create additional reasons for
consumers to visit and we expect income to be enhanced through both the 20%
expansion in Meadowhall's lettable area and washover to ERVs within the
existing scheme.  Detailed designs will commence in the New Year, with a view
to starting on site in 2019, pending a significant pre-let and subject to
finalising planning. When we commit to this scheme, we will also commit to its
sustainable delivery, furthering the local economic and social benefits
achieved with the refurbishment we have just completed. 
 
Our portfolio is increasingly mixed-use: future such opportunities in London
include Eden Walk, Kingston, where we have planning consent for a 533,000 sq
ft regeneration scheme, and 10-40 The Broadway at Ealing, covering nearly
300,000 sq ft. Our plans at Eden Walk, which we own in joint venture with USS,
include 40 new retail and restaurant units, 380 homes and 35,000 sq ft of high
quality, modern and flexible office space; we are progressing plans to secure
vacant possession of the site, and would expect to commence development in
2019, subject to significant pre-lets. At Ealing, our plans are still at an
early stage, but we envisage a broad mix of uses next to the station, where
Crossrail trains will run a full service from December 2019. 
 
RISK MANAGEMENT AND PRINCIPAL RISKS 
 
For British Land, effective risk management is a cornerstone of delivering our
strategy and integral to the achievement of our objective of delivering
sustainable long term value. The Group's risk appetite and its integrated
approach to managing risk remains as set out on pages 46-48 of the Annual
Report and Accounts for the year to 31 March 2017. 
 
The Board has updated its assessment of the principal risks facing the Group
for the remaining six months of the financial year, including those that would
impact the business model, future performance, solvency or liquidity.  Whilst,
we consider there has been no material change to the Group's principal risks,
as set out on pages 50-53 of the Annual Report and Accounts published in May
2017, several risks are elevated as a result of the increased level of
political and economic uncertainty following the EU referendum vote last year
and the recent UK general election results. 
 
As a result of the increased economic and political risk, other principal
risks that are considered to be impacted whilst operating in an uncertain
environment are; occupier demand, catastrophic business event, execution of
investment strategy and income sustainability. 
 
We have continued to see healthy activity and interest in our portfolio, but
are mindful of the continued uncertainty; in this context we will benefit from
the resilience of our business, the quality of our portfolio and the strength
of our finances. 
 
Our principal risks and uncertainties which may impact the business over the
remaining six months of the year are summarised below. 
 
Principal External Risks 
 
Economic outlook - The UK economic climate and future movements in interest
rates present risks and opportunities in property and financing markets and
the businesses of our occupiers which can impact both the delivery of our
strategy and our financial performance. 
 
Political and regulatory outlook - Significant political events and regulatory
changes, including the UK's decision to leave the EU, bring risks both in
terms of uncertainty until the outcome is known, and the impact of policies
introduce. This could impact the businesses of our occupiers and the wider
investment case for the UK. 
 
Commercial property investor demand- Reduction in investor demand for UK real
estate may result in falls in asset valuations and could arise from variations
in the health of the UK economy, the attractiveness of investment in the UK,
availability of finance and the relative attractiveness of other asset
classes. 
 
Occupier demand and tenant default- Underlying income, rental growth and
capital performance could be adversely affected by weakening occupier demand
and occupier failures resulting from variations in the health of the UK
economy and corresponding weakening of consumer confidence, business activity
and investment. Changing consumer and business practices including the growth
of internet retailing, flexible working practices and demand for energy
efficient buildings, new technologies, new legislation and alternative
locations may result in earlier than anticipated obsolescence of our buildings
if evolving occupier and regulatory requirements are not met. 
 
Availability and cost of finance- Reduced availability of finance may
adversely impact British Land's ability to refinance debt and/or drive up
cost. These factors may also result in weaker investor demand for real estate.
Regulation and capital costs of lenders may increase cost of finance. 
 
Catastrophic business event- An external event such as a civil emergency,
including a large-scale terrorist attack, cyber crime, extreme weather
occurrence, environmental disaster or power shortage could severely disrupt
global markets (including property and finance) and cause significant damage
and disruption to British Land's portfolio and operations. 
 
Principal Internal Risks 
 
Investment strategy - In order to meet our strategic objectives we aim to
invest in and exit from the right properties at the right time.
Underperformance could result from changes in market sentiment as well as
inappropriate determination and execution of our property investment strategy,
including: sector selection and weighting; timing of investment and divestment
decisions; exposure to developments; asset, tenant, region concentration; and
co-investment arrangements. 
 
Development strategy - Development provides an opportunity for outperformance
but usually brings with it elevated risk.  This is reflected in our
decision-making process around which schemes to develop, the timing of the
development, as well as the execution of these projects. Development strategy
addresses several development risks that could adversely impact underlying
income and capital performance including: development letting exposure;
construction timing and costs (including construction cost inflation); major
contractor failure; and adverse planning judgements. 
 
People - A number of critical business processes and decisions lie in the
hands of a few people. Failure to recruit, develop and retain staff and
Directors with the right skills and experience may result in significant
underperformance or impact the effectiveness of operations and decision
making, in turn impacting business performance. 
 
Capital structure - leverage - Our capital structure recognises the balance
between performance, risk and flexibility. Leverage magnifies capital returns,
both positive and negative. An increase in leverage increases the risk of a
breach of covenants on borrowing facilities and may increase finance costs. 
 
Finance strategy - Finance strategy addresses risks both to continuing
solvency and profits generated. Failure to manage refinancing requirements may
result in a shortage of funds to sustain the operations of the business or
repay facilities as they fall due. 
 
Income sustainability - We are mindful of maintaining sustainable income
streams which underpin a stable and growing dividend and provide the platform
from which to grow the business.  We consider sustainability of our income
streams in: execution of investment strategy and capital recycling, notably
timing of reinvestment of sale proceeds; nature and structure of leasing
activity; and nature and timing of asset management and development activity. 
 
Statement of directors' responsibilities 
 
The directors' confirm that these condensed interim financial statements have
been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, namely: 
 
·      an indication of important events that have occurred during the first
six months and their impact on the condensed interim financial statements, and
a description of the principal risks and uncertainties for the remaining six
months of the financial year; 
 
and 
 
·      material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report. 
 
The directors of The British Land Company plc are listed on the Company
website www.britishland.com. 
 
By order of the Board 
 
Lucinda Bell 
 
Chief Financial Officer 15 November 2017 
 
Independent review report to The British Land Company PLC 
 
Report on the condensed interim financial statements 
 
Our conclusion 
 
We have reviewed The British Land Company PLC's condensed interim financial
statements (the "interim financial statements") in the half year results of
The British Land Company PLC for the six month period ended 30 September 2017.
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. 
 
What we have reviewed 
 
The interim financial statements comprise: 
 
·      the consolidated balance sheet as at 30 September 2017; 
 
·      the consolidated income statement and consolidated statement of
comprehensive income for the period then ended; 
 
·      the consolidated statement of cash flows for the period then ended; 
 
·      the consolidated statement of changes in equity for the period then
ended; and 
 
·      the explanatory notes to the interim financial statements. 
 
The interim financial statements included in the half year results have been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. 
 
As disclosed in note 1 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full
annual financial statements of the Group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union. 
 
Responsibilities for the interim financial statements and the review 
 
Our responsibilities and those of the directors 
 
The half year results, including the interim financial statements, are the
responsibility of, and have been approved by, the directors. The directors are
responsible for preparing the half year results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. 
 
Our responsibility is to express a conclusion on the interim financial
statements in the half year results based on our review. This report,
including the conclusion, has been prepared for and only for the company for
the purpose of complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and for no
other purpose.  We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing. 
 
What a review of interim financial statements involves 
 
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. 
 
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion. 
 
We have read the other information contained in the half year results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements. 
 
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 November 2017 
 
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