TIDMBLND
RNS Number : 8554L
British Land Co PLC
18 May 2022
The British Land Company PLC Full Year Results
Delivery against strategy driving strong performance
18 May 2022
Simon Carter, CEO said: "Over the past year we have delivered a
strong performance across all parts of our business as we continue
to execute against our strategy. Our total accounting return for
the year was 14.8% driven by a 6.8% increase in the valuation of
our portfolio and Underlying Profit is up 24.9%. Our balance sheet
remains strong with pro forma loan to value of 28.4%.
Operationally, our leasing volumes across Campuses and Retail &
Fulfilment were the highest in ten years and were ahead of ERV. In
London, demand continues to gravitate towards the best, most
sustainable space where our Campuses are at a distinct advantage.
Retail Parks are an attractive, cost-effective format for our
retail customers reflected in our very low vacancy of 2.6%, so we
are particularly pleased with our decision to allocate capital to
this segment, where valuations have increased 20.7%. The
fundamentals of Urban Logistics in London are compelling given the
chronic shortage of space. We have made a good start to building
our Urban Logistics business where we have assembled a c.GBP1.3bn
development pipeline in 12 months.
We are active recyclers of capital, releasing over GBP1bn since
April 2021 to invest into higher value-creating opportunities in
development and growth segments of the market. We have a wealth of
development opportunities across our London Campuses, including
Canada Water and in Urban Logistics which altogether we expect will
generate around GBP2bn of future profit.
We are mindful of current elevated economic and geo-political
uncertainties, but our strategic advantage in sectors with pricing
power means we can look ahead with confidence."
Performance summary
GBP2.2bn capital activity - actively recycling capital into
areas of growth and value
- GBP694m from the sale of 75% of majority of assets at
Paddington Central to GIC post year end, crystallising 9% p.a.
total property returns
- GBP290m from the sale of 50% of our share in the Canada Water
Masterplan to AustralianSuper, enabling us to accelerate delivery
and returns from the scheme
- On site with 1.7m sq ft of net zero carbon developments across
our Campuses; 91% of costs fixed
- GBP102m of acquisitions in Cambridge and Guildford, building
exposure to innovation sectors; on site with first lab enabled
scheme
- GBP350m investment into Retail Parks in the year with a
further GBP49m in FY21, exploiting the value opportunity
- Assembled an urban logistics development pipeline with a gross
development value of GBP1.3bn, focused on London where the
supply-demand imbalance is most acute
Strong operational performance - key themes playing out
- Portfolio value up 6.8% with Campuses up 5.4% and Retail &
Fulfilment up 9.9% driven by Retail Parks up 20.7%
- 42bps yield contraction overall; 11 bps yield contraction in
Campuses; 151bps yield contraction in Retail Parks
- 1.7m sq ft of Campus leasing, highest volume in 10 years; 5.4%
ahead of ERV; average lease length over 12 years
- 2.2m sq ft Retail & Fulfilment leasing, highest volume in
10 years, 2.8% ahead of ERV; Retail Park vacancy down to 2.6%
- Footfall and sales on our Retail Parks portfolio 99.5% and
100.2% of FY20, respectively
- Strong rent collection: 97% for the year, nearing pre-pandemic
levels, significantly reducing provisions
Excellent financial performance and strong balance sheet
- 14.8% Total Accounting Return, underpinned by our strategic
activity
- Underlying Profit up 24.9% reflecting a significant reduction
in provisions
- EPRA Net Tangible Assets (NTA) up 12.2% to 727p
- FY22 dividend of 21.92p per share
- Pro forma LTV at 28.4% adjusting for the Paddington Central
transaction
- GBP1.3bn undrawn facilities and cash. Interest rate on our
debt fully hedged on a spot basis with no requirement to refinance
until late 2025 following the Paddington transaction
- Fitch affirmed senior unsecured credit rating at 'A'
Further good progress against 2030 Sustainability strategy
- Awarded GRESB 5* rating and AAA rating from MSCI
- Delivered our second net zero carbon development at 1 Triton
Square, fully let to Meta (previously Facebook)
- Further accolades for 100 Liverpool Street including Green
Building Project of the Year by BusinessGreen, Project of the Year
at the Building Awards, a Civic Trust Award and Financing Deal of
the Year: UK by Real Estate Capital Europe for 2021.
- Completed net zero audits at our major assets; 70% portfolio
now EPC A-C rated
- First UK REIT to achieve the Disability Smart Standard
accreditation from the Business Disability Forum
Summary performance
31 March 31 March
Year ended 2022 2021 Change
Income statement
Underlying Profit GBP251m GBP201m 24.9%
Underlying earnings per share2 27.4p 18.8p 45.7%
IFRS profit/(loss) after tax GBP960m GBP(1,083)m
IFRS basic earnings per share 103.3p (111.2)p
Dividend per share 21.92p 15.04p
Total accounting return(2) 14.8% (15.1)%
Balance sheet
Portfolio at valuation (proportionally consolidated) GBP10,467m GBP9,132m 6.8%1
EPRA Net Tangible Assets per share(2) 727p 648p 12.2%
IFRS net assets GBP6,733m GBP5,983m
Loan to value ratio (proportionally consolidated)(3) 32.9% 32.0%
Fitch senior unsecured rating A A
Operational Statistics
2.9m sq 1.2m sq
Lettings and renewals over 1 year ft ft
3.9m sq 2.2m sq
Total lettings and renewals ft ft
2.1m sq 1.8m sq
Committed and recently completed development ft ft
Sustainability Performance
MSCI ESG AAA rating AAA rating
GRESB 5* and 5* and
Green Star Green Star
1. 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.
2. See Note 2 to the financial statements.
3. Following the sale of a 75% interest in the majority of our
assets at Paddington Central, LTV falls to 28.4% on a pro forma
basis.
Results Presentation and Investor Conference Call
A presentation of the results will take place at 9.00am on 18
May 2022 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: 0800 640 6441
Access code: 413285
Click for access: Audio weblink
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: 452061
Accompanying slides will be made available at britishland.com
just prior to the event starting.
For Information Contact
Investors
Jo Waddingham, British
Land 07714 901166
Media
Lizzie King, British Land 07808 912784
Guy Lamming/Gordon Simpson,
Finsbury 020 7251 3801
britishland@finsbury.com
Chief Executive's review
Delivery against strategy driving strong performance
We have a clear strategy to exploit our competitive strengths in
active management and sustainable development to drive value for
our shareholders across our Campuses, Retail Parks and London Urban
Logistics. Our platform makes us the partner of choice for
institutional investors, enabling us to recycle capital, earn fees
and crystallise returns. The success of this approach is reflected
in the strength of our leasing, where our Campus model is an
important differentiator, and by the exceptional performance of our
Retail Parks. In Urban Logistics, we have assembled a development
pipeline over the last year with a gross development value of
GBP1.3bn focused on London where the market dynamics are very
favourable. Our strategy and operational performance has delivered
a total accounting return of 14.8% for the year.
Operational performance
Campus leasing activity was strong at 1.7m sq ft of lettings and
renewals, 5.4% ahead of ERV. This includes letting or placing under
option all the office space at our 1 Broadgate development,
securing GBP13.7m of rent. Post year end, we were pleased to have
placed a further 103,000 sq ft under offer at our Norton Folgate
development, representing another GBP7.5m of rent. Today,
businesses have high expectations for their workspace with demand
focused on the best space, with an emphasis on sustainability,
wellness, shared and flexible space and excellent transport
connections. Our Campus model delivers against these customer
demands making it the premier office portfolio across London.
Campuses were up 5.4% in value, driven by our successful leasing
activity and inwards yield shift of 11bps.
In Retail & Fulfilment, lettings and renewals covered 2.2m
sq ft of space, including 1.5m sq ft of long term deals, overall
2.8% ahead of ERV. Retail Parks, where we are the UK number 1 owner
and operator, accounted for 60% of that activity. They are the
preferred format for retailers, reflecting their online channel
compatibility and affordability, underpinning improved occupational
demand. As a result, Retail Parks delivered 151 bps of yield
compression, driving values up 20.7%. This performance is a strong
endorsement of the value proposition we identified early, following
which we agreed GBP400m of acquisitions of Retail Parks. Shopping
centre values were down 6.1% although the rate of decline
decelerated in the second half.
Progress against the Priorities for our business
A year ago, we identified four clear priorities for our
business. We have delivered strong progress in each area since the
start of the financial year which is summarised below:
Priority Progress in FY22
Realising the potential - New joint venture with AustralianSuper at Canada Water
of our Campuses accelerating delivery and returns from the Masterplan
- Acquired GBP102m of assets outside of London aligned
to growth and innovation including Peterhouse Technology
Park in Cambridge, The Priestley Centre and Waterside
House in Guildford
- Attracted innovative and growing businesses to our
Campuses including lettings of 134,000 sq ft to JLL and
254,000 sq ft to Allen & Overy at 1 Broadgate and 315,000
sq ft to Meta at 1 Triton Square
- Storey occupancy improved to 86%
Progressing value - Delivered 1 Triton Square, our second net zero development,
accretive development fully let to Meta
- On site with 1.7m sq ft of net zero development, with
new commitments including Phase 1 of Canada Water and
Phase 2 at Aldgate, our first build to rent residential
development
- On site at The Priestley Centre, Guildford, our first
lab enabled office
- 91% of costs fixed across committed developments; benefitting
from excellent, long term relationships with Tier 1 contractors
- 1.3m sq ft planning consents received in the year with
a further 2.5m sq ft under submission (based on gross
area)
Targeting the opportunities - Assembled an urban logistics development pipeline with
in Retail & Fulfilment a gross development value of GBP1.3bn including acquisition
of a 12.5 acre site in Wembley for GBP157m
- GBP350m retail park acquisitions in the year including
the remaining 22% in HUT at GBP148m GAV and NIY of 8%
taking our ownership to 100%
- Increased retail park occupancy by 270bps to 97.4%
Active capital - Total capital activity of GBP2.2bn
recycling - GBP694m sale of 75% of majority of assets at Paddington
Central post year end
- GBP290m sale of 50% in the Canada Water Masterplan
- GBP645m Retail & Fulfilment acquisitions
- GBP102m additions to our Campuses portfolio
- GBP1.1bn of financing activity in the year
Strategy
We focus our activities on two strategic themes which play best
to our skill set and where we currently see the most attractive
opportunities to drive future returns:
- Campuses - Dynamic neighbourhoods focused on customers in
growth and innovation sectors including technology, science,
engineering and health; and
- Retail & Fulfilment - retail parks and urban logistics
aligned to the growth of convenience, online and last mile
fulfilment
Campuses
The key theme underpinning our focus on Campuses is that demand
will gravitate to the best, most sustainable space. Building on our
success at Broadgate, Regent's Place and Paddington Central, we are
delivering a fourth Campus at Canada Water, a 53 acre development
opportunity. In order to accelerate the delivery and returns of
that scheme we sold 50% of our share to AustralianSuper for GBP290m
in March 2022 creating a new joint venture with a partner who
shares our vision for Canada Water. This project will be a key
driver of value for our business; Phase 1 delivers an IRR for
British Land of c.11% and the whole project is expected to deliver
c. GBP2bn of value for British Land and AustralianSuper, equating
to an IRR in the low teens. In April 2022, we also announced that
we had exchanged on the sale of 75% of the majority of assets in
Paddington Central. This has been an excellent investment for
British Land, delivering a total property return of 9% per annum
since acquisition. The proceeds from this transaction will be
invested in value accretive development opportunities across our
portfolio, as well as the other growth areas we have
identified.
We continue to evolve our Campus model to align with high growth
and innovation sectors. Our model is particularly attractive to
businesses which like to cluster together, in sectors such as
technology, science and engineering. Regent's Place, given its
location in the Knowledge Quarter provides an exciting opportunity
in this regard. We also see the potential to drive value by taking
the Campus model outside of London. We are targeting development
opportunities in innovation hubs such as the Golden Triangle and
made GBP102m of acquisitions in Cambridge and Guildford in the
year. These are opportunities which play to our Campus skills,
including asset management, development, placemaking and community
engagement. We are on site with our first lab enabled office at The
Priestley Centre which is one of two properties we acquired on
Surrey Research Park, together totalling GBP27m and in Cambridge,
we acquired the Peterhouse Technology Park for GBP75m in
August.
Retail & Fulfilment
In Retail, last year, we identified a value opportunity in
Retail Parks reflecting attractive relative yields coupled with
customer preference for this format. Our portfolio is now valued at
GBP2.1bn which includes acquisitions of GBP350m in the year (in
addition to the GBP49m in FY21). This timely investment meant we
benefitted from significant yield compression to deliver a 31.6%
total property return on the retail park portfolio as a whole. We
expect to make further, selective acquisitions given our
competitive advantage in sourcing, underwriting and asset managing
but we will maintain our discipline on returns.
In Urban Logistics, the chronic shortage of space in London is
the key theme underpinning our focus on this part of the market.
Demand is strong reflecting the growth of e-commerce and in
particular rising consumer expectations for same day / next day
delivery. This has been supplemented by new sources of demand such
as "quick commerce" and "dark kitchens". Supply of the right kind
of space in London is highly constrained and requires innovative
solutions to increase density and repurpose space which plays well
to our skill set in site assembly, planning and delivering complex
developments in Central London.
In the first year of our strategy, we have established a
pipeline of urban logistics development opportunities totalling
GBP1.3bn of gross development value which focuses on London and
will deliver a sizeable platform for British Land in this exciting
growth market. Hannah Close in Wembley, our most recent
acquisition, is an excellent example of how even in a highly
competitive market, we can leverage our skills in planning and
development to intensify existing buildings through multi-storey
development to create value. We also invest in repurposing
opportunities including the Finsbury Square car park, centrally
located in the City as well as other opportunities across our
portfolio. Overall, the blended forecast IRR from acquisition for
our urban logistics opportunities is c.15% which is at the top end
of our target range of 10%-15%.
Capital allocation and balance sheet
A key priority for our business is to actively recycle capital.
We have demonstrated our nimble and value driven approach with
GBP1.2bn of asset sales and GBP747m of acquisitions. The recent
Paddington Central transaction has further strengthened our balance
sheet with pro forma loan to value now at 28.4%, well positioned in
current markets. Our performance demonstrates that we are
allocating capital smartly, with strong valuation uplifts on our
developments and our Retail Parks.
We target an average total accounting return of 8-10% through
the cycle. This is based on a total property return of around 7-8%,
adjusted for administration costs and the positive impact of
leverage. We seek to create value through active management and
development. We target development IRRs of 10-15% compared to our
standing investments where returns and risks are typically lower.
We will remain focused on actively recycling capital and will look
to crystallise value from mature and lower returning assets and
reinvest into higher returning opportunities.
We maintain good long term relationships with debt providers
across the markets and have completed GBP1.1bn of financing
activity in the year. This included a five year 'Green Loan' in our
Broadgate joint venture, secured on 100 Liverpool Street which was
voted Financing Deal of the Year: UK by Real Estate Capital Europe
for 2021.
We are pleased to be announcing a full year dividend of 21.92p,
in line with our policy of setting the dividend at 80% of
Underlying EPS.
Our people
We are delighted to see our people back in the office. Like so
many of our customers, we continue to recognise the benefits that
hybrid working brings and to support our people with more flexible
arrangements, whilst also reaping the benefits of working more
collaboratively when together in the office.
I recognise the important contribution that diversity plays in
delivering our strategy so was pleased that we ranked 15th in the
FTSE Women Leadership Review for FTSE 100 women representation and
we have exceeded the recommendations of the Parker Review on ethnic
diversity at Board level. We were also pleased to be the first UK
REIT to achieve Disability Smart Accreditation from the Business
Disability Forum.
Bhavesh Mistry joined us as Chief Financial Officer in July 2021
and we are already benefitting from the fresh perspective he
brings. We were also pleased to welcome Mark Aedy to the Board as a
Non-Executive Director in September 2021. Nicholas Macpherson has
decided not to seek re-election as a Non-Executive Director at the
AGM in July 2022, at the conclusion of which he will stand down
from the Board. Nicholas has served with distinction on the Board
since joining it in 2016 and we thank him for his valuable
contribution.
Outlook
We are mindful that the year ahead will be impacted by
heightened macroeconomic and geo-political uncertainty. In the
context of higher inflation, we are seeing investors rotate out of
bonds and increase their allocations to real estate, particularly
in subsectors with strong pricing power and affordable rents. We
are well positioned in this respect across both Campuses and in
Retail & Fulfilment. In addition, we are pleased with our
financial position and that our strong momentum has continued into
the new financial year.
Our Campus offering provides customers in London with
best-in-class space where we expect demand to remain strong,
particularly from the growing, innovative businesses we are
targeting. Rents typically represent a small proportion of salary
costs, meaning demand is less sensitive to price and for prime
London office space, vacancy remains low and new supply is
constrained. Reflecting these dynamics, and continued gravitation
to the best space, our central case is for rental growth on our
Campuses of 1-3% with the potential for some further yield
compression.
We expect the strong occupational demand for our Campus
developments to continue, reflecting their market leading
sustainability credentials. We target BREEAM Outstanding ratings on
developments and just 1% of available London office buildings are
BREEAM Outstanding. This year construction cost inflation is likely
to be between 8-10% and we are pleased to have fixed 91% of the
cost on our committed development programme of 1.7m sq ft.
Forecasting is difficult with elevated uncertainty, but our base
case is for construction cost inflation to moderate to 4-5% over
the next 18 months as commodity, transportation and energy prices
continue to increase but at a lower rate and capacity in the
construction industry slowly increases. The attractive IRRs we are
forecasting on our development pipeline of 10-15% incorporate these
levels of construction cost inflation and additional contingencies.
Higher land values mean that returns from London development are
more insulated to cost inflation than development in other parts of
the country and we anticipate being able to achieve the modest
increase in rents needed to offset any further cost inflation above
our base case.
In Retail Parks, we attract a broad tenant base and space is
more affordable than alternative formats, thereby making them
attractive for retailers facing increased margin pressures due to
rising input prices and labour costs; supply is relatively tight,
with retail parks accounting for around 10% of the total retail
market and vacancy falling. We expect the value play opportunity in
retail parks to continue and our ability to unlock value through
asset management means we are well placed to make further
acquisitions whilst retaining a strong focus on returns. Overall,
we expect rents to be stable with some growth for smaller,
well-located parks with further yield compression likely. For
shopping centres, we have seen ERV decline moderating, and yields
were flat in the second half of the year. We expect that yields
could compress for the best centres, given increasing investor
interest delivering attractive medium term returns.
In Urban Logistics, the market in London is chronically
undersupplied and demand remains strong, underpinned by the
continued growth of same day delivery. We expect strong rental
growth of over 5% p.a. with stable yields - a good backdrop for
delivering new space via our repurposing and intensification
strategy.
Market backdrop
Macro-economic context
The UK economy responded well to the lifting of Covid-19
restrictions, expanding by 7.4% in the calendar year and by March
was 1.2% above pre-Covid levels. However, the combination of Covid,
Brexit and rising energy prices has reduced capacity in the
economy, putting pressure on prices towards the end of the year.
Inflation has risen faster than expected, up 7% in March 2022
compared to up 6.2% the previous month and in response, interest
rates have been increased. Consumer confidence has weakened since
the summer with concerns around rising prices and the prospect of a
real income squeeze weighing on sentiment but unemployment has
quickly recovered to pre pandemic levels at under 4 %. Most
forecasters are still expecting growth for the 2022 calendar year
but with risks to the downside if the economic impact of the war in
Ukraine worsens. Given this broader macro context and with
investors concerned about the impact of rising inflation and
interest rates, they are rotating out of bonds and increasing their
allocation to direct real estate, focused on subsectors with
pricing power and affordable rents.
London office market
The investment market has returned to strong volumes with
confidence strengthening as the economy recovers from the pandemic
and employees returned to the office. The period under review saw
more than GBP17bn of investment activity across the City and the
West End with pricing strong reflecting pent up investor demand and
a lack of available stock. Prime yields currently average 3.5% for
the West End, stable over the year and 3.75% for the City, an
inwards shift of 25bps.
In the Central London occupational market, take up remains below
its long term average, but is recovering well following very low
levels last year. Take up for the period was 9.5m sq ft for Central
London, more than double the 12 months to March 2021. Technology,
Banking & Finance and Professional Services (most notably
legal) were the largest sources of take up. Demand is clearly
gravitating towards the very best space, with an emphasis on
sustainability, wellness, shared and flexible space and excellent
transport connections. This part of the market is achieving premium
prices and vacancy is estimated at under 4% compared to c.8% for
the whole market. In the context of a more uncertain macro
environment with elevated input prices, it is becoming apparent
that more projects are being delayed and as a result, the supply
pipeline is tight, with speculative developments committed and
under construction (to 2026) representing 1.8 years average take
up. Reflecting the strong preference for new and high quality
refurbished space, 32% of development under construction is
currently pre-let.
Retail market
Investment activity continues to be dominated by retail parks,
which have seen volumes of GBP4.5bn in the period, compared to
GBP1.7bn in the 12 months to March 2021. Confidence in the sector
is strong, reflecting lower occupancy costs for retailers and the
important role retail parks can play in online fulfilment. In
particular, the market has focused on assets which are
small-to-medium in lot size and offer secure, sustainable income
streams. As a result, average market yields have moved in 200bps
over the year to 5%. The investment market for shopping centres is
slowly improving as investors begin to see value despite continuing
weakness in the occupational market. GBP1.2bn transacted in the
period compared to GBP430m last year and yields shifted out 25bps
to 7.75%.
After a challenging few years reflecting the structural shift to
online and impact of Covid-19 there were signs of a pick up in
activity in retail occupational markets. Activity has been skewed
towards retail parks which are more affordable and where footfall
and sales are near pre-pandemic levels, and in some cases ahead.
However, as we move into a more inflationary environment, consumers
will be more focused on value and occupiers will need to mitigate
the impact of higher input costs. This will focus attention on the
affordability of retail space which plays to the retail park
proposition.
Logistics market
In logistics, investment volumes remained very high at GBP18.9bn
over the period, the strongest ever year of investment activity.
Strong occupier demand, underpinned by structural trends in
e-commerce has led to attractive rental growth which continues to
appeal to long income investors. In the occupational market, take
up in London and the South East was c.8m sq ft and in London,
demand is particularly broad reflecting the emergence of "quick
commerce" and "dark kitchens", although take up is limited by
available stock with vacancy low at around 1.5%. In these cases,
central locations are critical to the occupiers' business models
and are commanding a rental premium as a result. Forecast rental
growth in London is expected to average over 5% p.a. over the next
five years.
Business review
Key metrics
31 Mar 31 Mar
Year ended 2022 2021
Portfolio valuation GBP10,467m GBP9,132m
Occupancy(1) 96.5% 94.1%
Weighted average lease length to first break 5.8 yrs 5.3 yrs
Total property return 11.7% (7.0)%
- Yield shift (42) bps +33 bps
- ERV movement (1.2)% (7.6)%
- Valuation movement 6.8% (10.8)%
Lettings/renewals (sq ft) over 1 year 2.9m 1.2m
Lettings/renewals over 1 year vs ERV +4.5% (8.9)%
On a proportionally consolidated basis including the Group's
share of joint ventures
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 96.5% to 95.6%.
Portfolio performance
Valuation Total property
Valuation movement ERV movement Yield shift return
At 31 March 2022 GBPm % % bps %
Campuses 6,967 5.4 0.0 (11) 8.5
Central London 6,460 4.6 (0.1) (11) 7.7
Canada Water & other Campuses 430 12.9 6.4 +1 17.0
Retail & Fulfilment 3,500 9.9 (2.8) (97) 19.1
Retail Parks 2,114 20.7 (2.0) (151) 31.6
Shopping Centres 800 (6.1) (5.2) +3 1.4
Urban Logistics 319 0.0 6.3 (75) 8.3
Total 10,467 6.8 (1.2) (42) 11.7
See supplementary tables for detailed breakdown
The value of the portfolio was up 6.8% driven by an
exceptionally strong year for Retail Parks and a good performance
across our Campuses.
Retail Parks delivered a valuation uplift of 20.7% driven by
yield compression of 151bps reflecting a strong investment market
and improving occupational market given their relative
affordability and compatibility with online retail. This fully
offset an ERV decline of 2.0% which was weighted towards the first
half. Shopping Centres also saw some mild yield compression in the
second half, reversing the previous trend and there are signs that
rents are stabilising with the rate of ERV decline moderating in
the second half; overall shopping centres were down 6.1% in value.
Urban Logistics was flat on the year with strong yield contraction
and ERV growth of 6.3% offsetting purchasers' costs which drove a
negative movement in the first half; excluding the impact of
purchasers' costs, the value of the Urban Logistics portfolio was
up 5.4%.
Campus valuations were up 5.4% with our West End and City
portfolios delivering uplifts of 4.5% and 4.7% respectively. These
performances were driven by our leasing activity, in particular the
Meta letting at Regent's Place and progress on our 1 Broadgate
development which is now fully let or under option on the office
space. Both portfolios benefitted from some mild yield compression
with investment markets strengthening post pandemic. Campus
developments were up GBP201m, (+11.7%) including a very strong
performance at Canada Water of 18.3% reflecting the new joint
venture agreed with AustralianSuper and progress on Phase 1.
Campus offices outperformed the MSCI benchmark for All Offices
and Central London Offices by 150 bps and 100 bps respectively on a
total returns basis. Retail outperformed the MSCI All Retail
benchmark on a total returns basis by 510 bps due to our weighting
towards retail parks. Reflecting the continued strength of
industrials, our portfolio overall underperformed the MSCI All
Property total return index by 790 bps over the year.
Capital activity
Retail
Campuses & Fulfilment Total
From 1 April 2021 GBPm GBPm GBPm
Purchases 102 645 747
Sales1 (1,063) (117) (1,180)
Development Spend 205 3 208
Capital Spend 28 10 38
Net Investment (728) 541 (187)
Gross Capital Activity 1,398 775 2,173
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Includes 75% sale of majority of assets in Paddington Central
for GBP694m which exchanged post year end and St Anne's (GBP6m)
which exchanged prior to 1 April 2021.
The total gross value of our investment activity since 1 April
2021 was GBP2,173m. The scale of our activity reflects our
strategic priority to more actively recycle capital and this has
been achieved with GBP1,180m of sales and GBP747m invested into
acquisitions in retail parks, urban logistics opportunities and
assets aligned to innovation and growth outside of London.
The most significant transaction, which exchanged post year end
in April 2022, was the sale of a 75% interest in the majority of
our assets at Paddington Central to GIC for GBP694m, this was 1%
below September 2021 book value and represented a net initial yield
of 4.5%. The transaction, which is expected to complete within two
months, establishes a new venture, with ownership split 75:25 for
GIC and British Land respectively and the partners having joint
control. The 5 Kingdom Street development site and the Novotel at 3
Kingdom Street currently sit outside the structure but GIC have
options over both assets. At 5 Kingdom Street, their option (which
is over a 6 month period) enables them to acquire 50% of the
development, creating a second joint venture and for 3 Kingdom
Street, their option enables them to acquire the asset at
prevailing market value, via the first joint venture within five
years. We will continue to act as development and asset manager for
the campus, earning fees. During the year, we also sold a 50% share
in the Canada Water Masterplan for GBP290m to AustralianSuper,
representing a 12% premium to the 30 September 2021 book value
after taking into account capital expenditure. Again, this
transaction provides the opportunity to leverage our operational
platform as we will act as the asset manager and development
manager for the scheme for which we will earn fees. Other disposals
included GBP79m of residential sales, of which Wardrobe Court
accounted for GBP70m, overall 6% ahead of book value and GBP117m of
retail sales of which the Virgin Active at Chiswick was GBP54m,
overall 9% ahead of book value.
In Urban Logistics, we acquired GBP295m of assets, most
significantly Hannah Close in Wembley for GBP157m. This is a
development-led opportunity where our plans will intensify usage of
the existing buildings to deliver a multi-storey urban logistics
hub for Central and West London. The warehouses, which sit within
the M25, close to the M1 and outside the North Circular, are
ideally located for vehicles coming into London and subsequently
out for delivery. We are working on feasibility options for the
site and expect to achieve vacant possession in 2027. In the
meantime, we are working towards outline planning consent and
managing the asset which offers considerable reversionary
potential. We also acquired a development site on Verney Road in
Southwark for GBP31m. This comprises low rise industrial buildings
over two acres and is located on the Old Kent Road (A2) providing
excellent access to Central London as well as the M25. The site
offers immediate redevelopment potential for a multi-storey urban
logistics schemes, subject to planning. This follows acquisitions
in the first half, including Heritage House in Enfield, an existing
warehouse we plan to intensify through redevelopment as well as
Thurrock Shopping Park and Finsbury Square Car Park where we have
an opportunity to repurpose the existing sites into urban logistics
hubs. Our latest acquisitions bring the gross development value of
our urban logistics pipeline to GBP1.3bn with an average IRR from
acquisition of 15%, which is at the top end of our target range of
10-15%.
We also acquired further assets targeting the value opportunity
in Retail Parks totalling GBP350m (including Thurrock Shopping Park
which has logistics potential). This includes the remaining units
in HUT, acquired for GBP148m and three shopping parks in
Farnborough, Reading and Enfield (adjacent to our Heritage House
warehouse). These represent opportunities where we expect to
deliver attractive financial returns utilising our asset management
expertise which has played out well this year.
In Campuses, we acquired GBP102m of assets aligned to innovation
sectors including The Peterhouse Technology Park in Cambridge for
GBP75m representing a NIY of 4.15%. This 8.25 acre site just
outside the centre of Cambridge comprises four buildings covering
140,000 sq ft and is fully let to technology business ARM for its
global headquarters. The buildings are held on a long leasehold
with significant reversionary potential and benefit from their
location in an emerging part of south Cambridge, close to the
Cambridge Biomedical Campus. We also acquired The Priestley Centre
in Guildford on Surrey Research Park for GBP12m and adjacent
Waterside House for GBP15m giving us a combined footprint in
Guildford of over 11 acres. This provides an opportunity to deploy
our Campus proposition and development skills to deliver high
quality space for the innovative industries in this affluent
town.
Sustainability
We have maintained our firm focus on delivering our 2030
sustainability ambitions. This year we were delighted to retain our
GRESB 5 star rating as well as our AAA rating from MSCI and A- from
CDP. 100 Liverpool Street, our first net zero carbon development,
has continued to pick up industry accolades for its sustainability
credentials including Green Building Project of the year in the
BusinessGreen Leaders awards, Project of the Year at the Building
Awards and most recently a Civic Trust Award.
Net Zero
We are delivering against the commitments we set out in our
Pathway to Net Zero, our roadmap to achieving a net zero carbon
portfolio by 2030. We conduct whole life carbon assessments on all
our developments and refurbishments and we are currently
forecasting that embodied carbon on our offices development
pipeline will be 632kg CO(2) per sqm including completed
developments. This compares well to our 2030 target of 500kg CO(2)
e per sqm from a baseline of 1000kg CO(2) e per sqm, which was the
industry benchmark at the launch of our strategy. We completed our
second net zero carbon development at 1 Triton Square which
achieved a BREEAM Outstanding rating. Like 100 Liverpool Street, we
were able to re-use most of the superstructure, keeping the
embodied carbon on completed developments low at 408kg CO(2) per
sqm. Residual embodied carbon at 1 Triton Square was fully offset
through certified, nature-based solutions - a teak afforestation
project in Mexico and a community reforestation project in
Ghana.
We made further development commitments at Canada Water where we
are committed to achieving BREEAM Outstanding on all commercial
space, BREEAM Excellent on retail and a minimum of Home Quality
Mark 3* for residential. Canada Water is a ground-up redevelopment,
so our ability to re-use existing materials is limited and our
focus is on using the more sustainable materials and processes. Our
use of Earth Friendly Concrete in the permanent piling works was a
UK industry first and saved 240 tonnes of carbon emissions. Other
low carbon initiatives include the use of cross laminated timber,
high recycled content in concrete, electric arc furnace steel and
recycled raised access floors. As a result, embodied carbon for the
offices space at A1 and A2 at Canada Water is expected to be 682 kg
CO(2) per sqm and 666 kg CO(2) per sqm respectively, in line with
our glidepath to 2030.
We are also on site at 1 Broadgate, which is expected to be in
line with our 2030 office targets for operational efficiency of
95kWhe per sqm on a whole building basis and is on track for a
NABERS 5 star rating. Embodied carbon on this building is above our
2030 target at 901 kg CO2 per sqm, but we continue to make
improvements throughout the design and delivery process. At Norton
Folgate, which will be all electric, we are adding roof top solar
panels and like 1 Broadgate, it will be fully smart enabled to
optimise performance in operation, delivering an estimated energy
intensity which is in line with the trajectory to our 2030 energy
performance targets. Embodied carbon on this building is also low
at 434kg CO(2) e per sqm, reflecting our ability to reuse the
existing materials.
MEES Legislation and EPCs
In offices, we are already fully compliant with 2023 MEES
legislation which stipulates a minimum EPC rating of E and 46% of
our offices space is currently rated A or B (by ERV). For the whole
portfolio, 36% is currently A or B rated, significantly above the
level of 29% in September reflecting a number of recertifications
which have captured improvements delivered in recent years. 70% of
the portfolio is now A-C rated. To meet our 2030 objectives and
comply with expected MEES legislation requiring our whole portfolio
to be a minimum EPC B by 2030, we appointed external consultants to
conduct net zero audits identifying opportunities to improve energy
efficiency and raise the EPC rating. These audits, which covered 29
of our major assets have now completed. We expect that the total
cost for retrofitting the portfolio to be in the region of GBP100m,
which covers the standing portfolio and excludes major developments
and refurbishments where energy efficient fixtures and fittings are
already incorporated within our development briefs. This investment
will be focused on energy efficient interventions which typically
have an attractive payback and in the current environment, with
energy prices escalating, represent a compelling investment for
occupiers and we are already engaged in productive conversations
with occupiers across the portfolio. Overall, we expect that two
thirds of the cost will be funded through the service charge or by
customers directly. While we are making good progress, we are
primarily focused on improving energy efficiency and reducing
carbon intensity which is how we will deliver on our 2030 targets
of a 25% improvement in whole building energy efficiency and a 75%
reduction in operational carbon intensity, both against a 2019
baseline.
To fund any outstanding costs relating to these interventions,
we have established our "Transition Vehicle" comprising ring fenced
funds financed by our internal levy of GBP60 per tonne of embodied
carbon in developments supplemented by an internal float of GBP5m.
Total funding to date within the Transition Vehicle is
GBP15.6m.
Place Based approach
Our Place Based approach means understanding the most important
issues and opportunities in the communities around our places and
focusing our efforts collaboratively to deliver the biggest impact.
Building on the research we commissioned last year into the social
and economic situation around our assets, this year we identified
initiatives which target key local issues at each of our places. At
our Campuses, one of the most effective ways of doing this is
through our Community Funds - a forum for connecting our customers
and local communities and supporting organisations who do vital
work locally. Following the success of the Regent's Place Community
Fund, this year we launched funds at Broadgate and Paddington
Central with 15 of our occupiers pledging GBP150,000.
One of our key initiatives this year was the launch of the New
Diorama Theatre at Broadgate, helping to bring people together post
Covid and supporting the revival of this part of the City. NDT
Broadgate is one of the biggest free rehearsal and artist support
spaces in the UK. The 20,000 sq ft space is provided completely
free of charge for independent and freelance artists to use and is
one of the highest profile artist support projects in recent years.
We also announced a partnership with The National Theatre to bring
creative events and experiences to our Campuses. This involves
monthly workshops led by creative experts focusing on theatrical
skills and exploring how these can be applied to enhance the
working day.
This year, Bright Lights, our skills and employment programme
reached over 130 people through virtual employment training and
one-to-one support at two of our Campuses and six retail sites.
Over 60% of candidates have already gained employment in a range of
sectors. Programmes we piloted this year and plan to expand include
ADcademy with the Brixton Finishing School. Over 110 young people
local to our London Campuses and Ealing Broadway took part in these
online workshops designed to develop skills in the creative,
technology and advertising sectors. Fort Kinnaird's recruitment
project with Capital City Partnership reached 128 beneficiaries
with 80% finding employment.
We continued to support the work of the National Literacy Trust,
encouraging 7,800 young people to read and bringing the total
number of children we have reached almost 56,000 since the launch
of our partnership in 2011. To support local businesses, we
provided affordable space across five of our priority assets, which
included places such as "Thrive" in Canada Water, a community
business hub providing workspace and meeting rooms to help local
start ups. At Regent's Place, through the Triton Café, we provided
space to BlackOut UK to run 5 events that provided peer support,
learning and debates for 75 black queer men.
Reflecting our continued focus on diversity, we were pleased to
become the first real estate organisation to achieve the Disability
Smart Standard, which is awarded by the Business Disability Forum
to organisations who can demonstrate a culture of inclusion for all
abilities.
Campuses
Key metrics
31 Mar 31 Mar
2022 2021
Portfolio Valuation (BL share) GBP6,967m GBP6,540m
Occupancy 96.7% 94.1%
Weighted average lease length to first break 7.0 yrs 5.6 yrs
Total property return 8.5% (1.0)%
- Yield shift (11) bps +9 bps
- ERV growth 0.0% 0.7%
- Valuation movement 5.4% (4.3)%
Total lettings/renewals (sq ft) 1,654,000 495,000
Lettings/renewals (sq ft) over 1 year 1,243,000 190,000
Lettings/renewals over 1 year vs ERV +5.4% +1.3%
Like-for-like income(1) +2.5% (1.0)%
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Like-for-like excludes the impact of surrender premia, CVAs
& admins and provisions for debtors and tenant incentives. 31
March 2021 comparative reflects the previous report segment Offices
with the exclusion of Canada Water being the primary
difference.
Campus operational and financial highlights
- Campus value of GBP7.0bn, up 5.4% driven by leasing activity
and development performance. Similar performance from City and West
End assets, up 4.7% and 4.5% respectively
- Strong performance from Canada Water up 18.3% reflecting the
joint venture with AustralianSuper and progress on Phase 1
- 11 bps yield contraction, weighted towards the City
- Weighted average lease length extended to 7.0 years reflecting
the completion of 1 Triton Square and our leasing activity
- ERV growth flat. Adjusting for changing valuation treatment
underlying ERV growth on our offices space was 1.5%
- Like-for-like income up 2.5%, driven primarily by strong
leasing at Broadgate and across Storey
- Strong rebound in leasing activity with 1.2m sq ft deals
(greater than one year) driven by development lettings
- Total lettings and renewals at 1.7m sq ft, including 187,000
sq ft Storey lettings
- Under offer on a further 318,000 sq ft, including a minimum of
103,000 sq ft at Norton Folgate
- Investment lettings and renewals over one year, 5.4% ahead of
ERV
- 555,000 sq ft rent reviews agreed 6.7% ahead of passing rent
adding GBP1.6m to rents
- Occupancy improved to 96.7%
- Rent collection 100% for FY22
Campus operational review
Campuses comprises our three London Campuses (Broadgate,
Regent's Place and Paddington Central), as well as Canada Water,
our recently acquired assets in Cambridge and Surrey Research Park,
standalone offices and residential.
Our London Campuses are located in some of London's most
exciting neighbourhoods and benefit from excellent transport
connections with two of our Campuses directly on the new Elizabeth
line which opens this month. Through our platform, we deliver best
in class space which meets the highest standards of sustainability
and wellbeing, provides a wide range of amenities and an engaging
public realm. Our skill set across investment, leasing, asset
management, property management and development is transferable to
new locations with occupiers focusing on space which best supports
their business and people, these advantages position us well to
attract a wide range of innovative, growing businesses to our
spaces.
We benefit from a diverse portfolio of high quality occupiers
focused on technology, financial, corporate and media sectors.
Occupancy is 96.6%, improving 270bps since March 2021 and we have
collected all our rent for the year.
Broadgate
Total leasing activity covered 751,000 sq ft in the year, of
which 680,000 sq ft were long term deals. We successfully let (or
placed under option) all the office space at 1 Broadgate four years
ahead of completion with Allen & Overy and JLL taking a minimum
of 254,000 sq ft and 134,000 sq ft respectively. The strong
sustainability credentials of this building were a key attraction
and in their press release, A&O commented that the building
"will contribute to an 80% reduction" in their annual London office
carbon emissions. We also completed the office letting at 100
Liverpool Street, with Hudson River Trading taking 20,300 sq ft on
level ten. Newly refurbished space is letting well with Braze, a
customer engagement platform, taking 49,900 sq ft at Exchange House
and Maven Securities, a proprietary trading firm taking 38,000 sq
ft at 155 Bishopsgate. Other lettings include legal firm Jenner
& Block at 10 Exchange Square (13,000 sq ft) and financial
services platform Symphony at 135 Bishopsgate (7,200 sq ft).
We have made excellent progress on the food & beverage
offer, with the launch of Revolve at 100 Liverpool Street, an
innovative concept with guest chefs and Shiro, a sushi restaurant ,
building Broadgate's reputation as a top culinary destination. We
have also let space at 155 Bishopsgate to Neat Burger (a plant
based burger restaurant backed by Lewis Hamilton), Nest (a bar and
restaurant run by Urban Pubs and Bars), Black Sheep coffee and
Hawaiian poké restaurant Honi Poké.
We continue to invest in our buildings and are on site with
asset management initiatives including the refurbishment of 155
Bishopsgate (our share GBP35m), Exchange House (our share GBP12.5m)
and 10 Exchange Square (our share GBP9m), where the first phase now
completed. We take the opportunity provided by lease events to
re-invest in existing buildings, to deliver energy efficient
interventions which raise the EPC rating and refurbish the space,
ensuring that they are well positioned to benefit as demand
gravitates towards the best, most sustainable space. We also
completed public realm improvements at Exchange Square, delivering
1.5 acres of green space, including amphitheatre style seating and
outside events space with a range of tree and plant life to support
biodiversity.
We refreshed our biodiversity framework for Broadgate,
establishing our guiding principles and identifying the key species
and habitats of relevance to the area. As well as the public
spaces, we have living roofs at seven locations with 12,800 sq ft
of planted space to come at 1 Broadgate and 3,000 sq ft at Norton
Folgate. We also launched an occupier led and funded Community
Fund, replicating the successful Regent's Place Community Fund
where we will work together with our occupiers to identify and
address key local issues.
The Campus saw a valuation gain of 5.1% reflecting 16bps of
inward yield shift and flat ERVs. 100 Liverpool Street, which
benefited from inward yield shift and the expiry of rent free
periods, and 1 Broadgate, reflecting significant letting activity,
were the key drivers of value. Broadgate occupancy is 96.7% up from
92.0% 12 months ago.
Regent's Place
The key transaction in the year was the letting of the office
space at 1 Triton Square to Meta which accounted for 315,000 sq ft
of the 388,000 sq ft of long term leasing activity. Meta has
expanded at Regent's Place and this deal is a testament to their
commitment to the Campus where total occupation will be 635,000 sq
ft. Dentsu International who had previously committed to taking 1
Triton Square will remain at 10 and 20 Triton Street (180,000 sq
ft). Rent reviews totalled 231,000 sq ft overall, 8.9% ahead of
previous passing rent adding GBP1.3m to rents.
Regent's Place is well located to attract innovative and growth
businesses looking to cluster around the academic, scientific and
research institutions in London's Knowledge Quarter. Reflecting
this we have signed life sciences business Babylon Health (12,000
sq ft) and Fabricnano (7,000 sq ft) both at Drummond Street.
In December 2021, we completed the first phase of our public
realm improvement programme and we are underway with the second
phase. This will include rolling out the biodiversity framework
following the model established at Broadgate.
The Campus was up 6.7% in value, benefitting from leasing
activity at 1 Triton Square and 10 Triton Street, driving yield
compression of 15 bps. ERVs were marginally down 0.7%, partly
driven by a change in valuation assumptions at 10 Triton Street
which no longer assume a refurbishment given Dentsu International
has recommitted to the building. Adjusting for changes in valuation
assumptions, underlying ERV growth on our offices was 3.0%.
Occupancy is now 95.2%.
Paddington Central
Total leasing activity covered 154,000 sq ft, of which the
re-gear of the Novotel lease at 3 Kingdom Street accounted for
111,000 sq ft. We also renewed our lease to Incipio Group, who
manage Pergola, the outdoor dining concept at the 5 Kingdom Street
development site, covering 20,000 sq ft.
The Campus saw a valuation increase of 1.7%, benefitting from
the regear of Novotel at 3 Kingdom Street and Vertex at 4 Kingdom
Street, offset by decline at 3 Sheldon Square where leases are
coming to an end and we are soon to commence refurbishment. ERVs
saw growth of 1.7% with yields moving in 1bp. Occupancy is
99.6%.
Post year end we established a new joint venture at Paddington
Central, with GIC owning 75% of the majority of assets and British
Land owning the remaining 25%. The Novotel at 3 Kingdom Street and
the 5 Kingdom Street development site sit outside of the structure
although GIC have options over both assets. We will continue to
manage the Campus for which we will earn fees and GIC are committed
to our future plans. This includes a comprehensive upgrade of 3
Sheldon Square, where we will deliver an all electric building,
targeting a BREEAM Excellent rating. This is estimated to reduce
operational energy consumption and carbon emissions by over 40% per
annum. We are planning an extensive upgrade to the public realm
which will transform the landscaping and have commenced works at
the amphitheatre which will revitalise this central part of the
Campus.
Storey: our flexible workspace offer
Storey is an important part of our Campus proposition, providing
occupiers with the flexibility to expand at short notice or to take
ad hoc meeting or events space. It is present on all our Campuses
and is operational across 338,000 sq ft (c.5% of Campuses).
Occupancy on stabilised buildings (those two years' post fit out or
fully let) has increased to 86% as we have seen rising customer
demand with confidence improving post Covid driving demand for
flexible space.
Since 1 April 2021, we have agreed leases and renewals on
187,000 sq ft of space and our retention rate remains high. 100
Liverpool Street is fully let with online signature service
Docusign taking 6,500 sq ft and the Levin Group, a health tech
recruitment business going under offer on the final unit post year
end. Levin also have 7,000 sq ft at 1 Finsbury Avenue and have
pre-let of all the Storey space at 155 Bishopsgate comprising
23,000 sq ft, again post period end. We are now fully let at Orsman
Road, with the Homerton Healthcare NHS Foundation Trust signing for
18,100 sq ft, representing half of the space in the building.
Viewings are back to pre pandemic levels and bookings at Storey
Club, which provides ad hoc meeting and events space at 100
Liverpool Street and 4 Kingdom Street, have increased over the
year. Rent collection was 100% reflecting the strength of Storey's
customer base, with the majority of occupiers being UK / European
headquarters, scale up businesses or large multinationals.
Looking forward, Storey will cease operations across 27,000 sq
ft at 3 Finsbury Avenue and International House at Ealing as we
prepare those sites for redevelopment. However, we are actively
considering opportunities for Storey on both our standing portfolio
and new developments.
Canada Water
In March 2022, we sold 50% of our share in the Canada Water
Masterplan, our 53 acre redevelopment scheme in Southwark to
AustralianSuper for GBP290m forming a 50:50 joint venture. Their
partnership will accelerate returns and the delivery of the
Masterplan, bringing new homes, workspace, retail and leisure
opportunities and an enhanced public realm to the local
community.
The joint venture is committed to developing Phase 1 of the
Masterplan covering 585,000 sq ft and to progressing subsequent
phases of the development, with funding split equally between
British Land and AustralianSuper. The total development cost of the
entire project is GBP3.6bn. It is expected to take ten years to
complete and should deliver a total development value of GBP5.6bn
of which the commercial element accounts for GBP3.4bn and
residential the remainder. British Land is targeting development
returns of 11% from commitment for Phase 1 and 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 GBP50 psf and a capital value psf of
around GBP1,000 on the residential, which are both highly
affordable relative to competing schemes.
Retail Residential
Sq ft Workspace & leisure units Total
A1 120,000 9,000 186 273,000
A2 185,000 65,000 - 250,000
K1 - - 79 62,000
Total 305,000 74,000 265 585,000
The joint venture's ownership is consolidated into a single
500-year lease with Southwark Council as the lessor. The London
Borough of Southwark have an initial 20% interest in the scheme and
the ability to participate in the development up to a maximum of
20% with returns pro-rated accordingly. They have elected not to
fully participate in Phase 1 but are pre-purchasing the 79
affordable homes at K1 and have part funded the 55,000 sq ft
leisure centre in A2.
This year, we completed the installation of a modular campus for
TEDI-London, a global partnership with King's College London,
Arizona State University and UNSW Sydney. Each module uses
lightweight steel frame boxes clad with insulation and requires no
deep piles or concrete. At the end of its life the building can be
reused on-site, relocated in its entirety or stripped and the
materials recycled. The 15,000 sq ft campus opened to the first
cohort of students in September and we are working with TEDI to
deliver a permanent home for around 1,000 students within the
Canada Water Masterplan. We see scope to expand this modular
approach which provides a quicker route to market for businesses
looking to expand without the formal commitment of a long term
lease. We are engaged in discussions to deliver a life sciences
enabled modular campus and have interest from other higher
education providers. We are exploring a range of alternative uses
across the Campus, uses which align to our wider strategy to focus
the business on growing sectors. Our permission is deliberately
flexible so as we move forward, we can take account of changes in
demand by amending our offices, residential and retail allocations
as appropriate.
The valuation of the Campus was up 18.3% in the year reflecting
the joint venture agreement and progress on Phase 1.
This has been a challenging year for many of our community
partners whom we have continued to support through the pandemic. We
have strengthened our built environment education and careers
partnership with Construction Youth Trust by bringing in a number
of our suppliers on the Masterplan including constructors Mace
Group, Aecom and Gardiner & Theobold. Many of our suppliers
have also contributed their time to building The Paper Garden, a
pioneering new community space for young people. This is managed by
Global Generation, one of our community partners and will be the
largest circular economy build in London.
Retail & Fulfilment
Key metrics
31 Mar 31 Mar
As at 2022 2021
Portfolio valuation (BL share) GBP3,500m GBP2,592m
- Of which Retail Parks GBP2,114m GBP1,367m
- Of which Shopping Centres GBP800m GBP896m
- Of which Urban Logistics GBP319m -
Occupancy1 96.3% 94.4%
Weighted average lease length to first break 4.6 yrs 5.1 yrs
Total property return 19.1% (19.1)%
- Yield shift (97) bps +81 bps
- ERV growth (2.8)% (16.8)%
- Valuation movement 9.9% (24.7)%
Total lettings/renewals (sq ft) 2,196,000 1,699,000
Lettings/renewals (sq ft) over 1 year 1,523,000 962,000
Lettings/renewals over 1 year vs ERV 2.8% (11.5)%
Like-for-like income(2) (0.8)% (9.2)%
On a proportionally consolidated basis including the Group's
share of joint ventures
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 96.3% to 94.5%.
2. Like-for-like excludes the impact of surrender premia, CVAs
& admins and provisions for debtors and tenant incentives.
Retail operational and financial highlights
- Retail & Fulfilment portfolio value at GBP3.5bn, up 9.9%,
with Retail Parks delivering an exceptional 20.7% uplift, more than
offsetting a decline in Shopping Centres (down 6.1%)
- Yield compression of 97bps overall, driven by Retail Parks
down 151bps with yield expansion of 3bps for the year in Shopping
Centres, but contraction of 4bps in the second half
- ERVs down 2.8%; weighted towards Shopping Centres, which are
down 5.2%; Retail Parks down 2.0%
- Like-for-like income down 0.8%. Including the impact of CVAs
and administrations, like-for-like income was down 6.0%
- Like-for-like income up 6.0% on our Retail Parks
- Strong leasing activity, with 1.5m sq ft deals greater than
one year; 2.8% ahead of March 2021 ERV and 21% below previous
passing rent
- Total lettings and renewals at 2.2m sq ft
- Strong pipeline with 679,000 sq ft under offer, 2.2% above
March 2021 ERV and 7.6% below passing rent
- Further 555,000 sq ft of rent reviews agreed 0.2% above
passing rent
- Retail Parks occupancy 97.4% up 270bps, reflecting strong
leasing activity
- Footfall and sales 91.9% and sales 98.4% respectively of same
period in FY20; 99.5% and 100.2% for Retail Parks
- 95% of FY22 rent collected
Retail & Fulfilment operational review
Operational performance
This has been a strong year for leasing volumes, with total
activity of 2.2m sq ft. Deals over one year were 2.8% ahead of
March 2021 ERV, with a particularly strong performance from Retail
Parks which were 5.9% ahead of March 2021 ERV. Total lease renewals
covering 949,000 sq ft have tended to outperform new lettings and
were on average 6.5% ahead of March 2021 ERV.
Overall, transactions were 21.2% below previous passing rent as
we have prioritised occupancy to deliver more sustainable rents
which are reflective of the current market. As a result, occupancy
levels are high at 96.3%. We have an encouraging pipeline of deals
under offer totalling 679,000 sq ft overall 2.2% ahead of March
2021 ERV.
Retail Parks, which account for 60% of the Retail &
Fulfilment portfolio have emerged as the preferred format for
retailers. They are well connected and affordable for retailers
meaning they play an important role in a successful online retail
strategy facilitating click and collect, returns and ship from
store. Their lower occupancy cost also makes them attractive to a
broad range of retailers. For example, we agreed three deals in our
Retail Parks with TK Maxx covering 64,800 sq ft, three with Asda
covering 57,400 sq ft, two with The Range (30,000 sq ft) and two
with Poundland (25,300 sq ft). Footfall on our Retail Parks was in
line with FY20 (which included two weeks of closure due to Covid)
and sales were ahead.
Shopping Centres now account for 23% of our Retail &
Fulfilment portfolio, with open air covered schemes comprising 6%
and traditional covered centres 17%. We are encouraged that the
rate of ERV decline has notably decelerated for shopping centres
and that yields on our portfolio contracted marginally in the
second half. With more investors targeting prime shopping centres,
we believe the outlook for the best centres is more attractive.
Following the acquisition of Heritage House, Enfield and the
Finsbury Square Car Park and including urban logistics
opportunities on our existing portfolio, Urban Logistics now
accounts for 9% of Retail & Fulfilment.
Footfall and sales recovered strongly following the reopening of
indoor hospitality on 17 May 2021 and sales are now close to
pre-pandemic levels, with the shortfall in footfall largely
compensated for by an increase in basket size, as set out
below:
1 April 2021 - 31 March
2022
Benchmark
% of FY20(1) outperformance2
Footfall
- Portfolio 91.9% +1172bps
- Retail parks 99.5% +369bps
Sales
- Portfolio 98.4% n/a
- Retail parks 100.2% n/a
1. Compared to the equivalent weeks in FY20 which includes two
weeks of closure in March 2020
2. Footfall benchmark: Springboard
With most Covid-19 related restrictions lifted before or during
the first quarter and only short term interruptions as a result of
the Omicron variant, most of our occupiers have been able to
operate as normal for the majority of the period. This is reflected
in our rent collection which at 95% of rent for the year is close
to historic levels.
CVAs and administrations
There have been relatively few new CVAs or administrations in
the year with just fifteen units impacted, of which seven were
unaffected, three saw rent reductions and five stores closed. This
resulted in GBP2.5m in lost contracted rent of which GBP2m related
to the Virgin Active restructuring in May 2021.
Developments
ERV
Current Cost to Let & under
Sq ft Value complete ERV offer
At 31 March 2022 '000 GBPm GBPm GBPm GBPm
Recently completed 369 545 - 24.3 23.9
Committed 1,682 487 648 60.4 21.2
Near term 1,925 219 963 76.6 -
Medium term 7,746
Total pipeline (ex. Recently Completed) 11,353 706 1,611 137.0 21.2
On a proportionally consolidated basis including the Group's
share of joint ventures (except area which is shown at 100%)
Portfolio
Progressing value accretive development is one of the four key
priorities for our business and a key driver of returns. We target
project IRRs of 10-12% and altogether, expect our development
pipeline to deliver profits of around GBP2bn. We actively manage
the risk associated with development by pre-letting space where
appropriate. We have made excellent progress this year with our
pre-letting activity securing GBP13.7m of future rent and post year
end, we placed a further 103,000 sq ft under offer at our Norton
Folgate development, representing another GBP7.5m of rent. This
brings total future rent secured to GBP45m across our recently
completed and committed pipeline of 2.1m sq ft representing 53% of
total ERV. Excluding build to sell residential and retail space
which we will let closer to completion, we are 60% pre-let or under
offer by ERV. Total development exposure is now 6.2% of portfolio
gross asset value with speculative exposure at 6.4% (which is based
on ERV and includes space under offer), within our internal risk
parameter of 12.5%.
The majority of space in our development pipeline is either
income producing or held at low cost, enhancing our flexibility, so
we have attractive options we can progress as and when
appropriate.
The construction market has changed significantly over the year.
Initial increases in raw material costs were due to the combination
of supply chain issues, sustained global demand and reduced supply
which were primarily Covid-19 related. Manufacturing closures,
reduced production and shipping provision, combined with increased
demand for raw materials, such as iron ore and timber, from China
and the USA as they emerged from the pandemic put upwards pressure
in input costs. These price rises were initially sheltered by
contractors keen to secure pipeline; however, the levels of
workload and magnitude of cost increases have inevitably pushed up
tender pricing. Wholesale energy cost increases, shortage of
labour, increased cost of materials, elongated supply programmes
and an increase in construction activity has resulted in upward
inflation pressure. These issues were beginning to reduce at the
end of 2021 and early part of 2022, with both supply improving and
costs decreasing. This changed with the Ukraine war, which has
further destabilised the global supply chain, removing Ukraine and
Russian goods and services from the market. This reduction in
supply, together with the spike in energy prices resulting from the
war, elevated tender price inflation once again.
Our inflation forecast (based on tender price inflation) has
increased to around 8-10% in 2022 from our previous forecast of
4.5%, but we expect that to moderate over the next 18 months as
wages and commodity prices remain elevated but do not increase at
the same rate. Our forecast for 2023 and 2024 is around 4-5% (from
3.5%). We expect the rate of increase to moderate and capacity to
emerge as some development projects in the market are deferred or
cancelled. We review inflation drivers to ensure our contingencies
and cost plans are robust to deal with the market fluctuations.
Having maintained momentum on our development programme throughout
the pandemic, we have been able to place contracts competitively
and 91% 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.
Higher land values mean that returns from London developments
are more insulated to cost inflation than development in other
parts of the country and we anticipate being able to achieve the
modest increase in rents required to offset any further cost
inflation above our base case.
Completed developments
We reached practical completion of 1 Triton Square (369,000 sq
ft) in May. Embodied carbon was low at 436 kg CO(2) e per sqm and
we offset residual embodied carbon through certified schemes making
this our second net zero carbon development. The offices space is
now fully let to Meta.
Committed developments
Our committed pipeline now stands at 1.7m sq ft following
commitments at Canada Water, Phase 2 at Aldgate Place and most
recently The Priestley Centre in Guildford. The Priestley Centre is
located on the University of Surrey Research Park where there is
strong demand from innovation sectors and we are on site with an
81,000 sq ft office development which will be partially lab
enabled.
At Canada Water, we are on site at the first three buildings
covering 585,000 sq ft. A1 is a 35 storey tower, including 186
homes and 120,000 sq ft of workspace; practical completion is
targeted for Q4 2024. A2 includes 185,000 sq ft of workspace as
well as the new leisure centre and K1 comprises 79 affordable
homes. The London Borough of Southwark are not participating in
Phase 1 but will take ownership of the affordable housing on
completion and have part-funded the leisure centre in A2. We expect
to sell the residential units in A1 closer to practical
completion.
Phase 2 at Aldgate Place is our first build to rent residential
scheme. It comprises 159 premium apartments with 19,000 sq ft of
best-in-class 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. Works have
now started on site with completion expected in Q2 2024.
We are also on site at Norton Folgate and 1 Broadgate. At 1
Broadgate (544,000 sq ft) we are fully pre-let or under option on
the office space to JLL and Allen & Overy. Norton Folgate is a
336,000 sq ft scheme, comprising 302,000 sq ft of office space,
alongside retail and leisure space creating a mixed use development
in keeping with the historic fabric of the area. We are under offer
on a minimum of 103,000 sq ft and continue to have encouraging
discussions with a range of occupiers.
Recently Completed and Committed Developments
100% sq Forecast
BL Share ft PC Calendar ERV IRR
As at 31 March 2022 Sector % '000 Year GBPm(1) %
1 Triton Square Office 100 369 Q2 2021 24.3 12
Total Recently Completed 369 24.3
Norton Folgate Office 100 336 Q4 2023 23.1 11
1 Broadgate Office 50 544 Q2 2025 20.2 12
Aldgate Place, Phase
2 Residential 100 136 Q2 2024 6.0 10
11
Canada Water, Plot A12 Mixed Use 50 273 Q4 2024 3.3 blended
Canada Water, Plot A22 Mixed use 50 250 Q3 2024 5.0
Canada Water, Plot K12 Residential 50 62 Q2 2023 -
The Priestley Centre Office 100 81 Q2 2023 2.8 22
Total Committed 1,682 60.4
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.
Near Term pipeline
Our near term pipeline covers 1.9m sq ft and includes 2 Finsbury
Avenue, where we have planning for a 718,000 sq ft office scheme.
Embodied carbon on this building is projected to be market leading
for a high rise tower below 750kg CO(2) per sqm benefiting from the
use of existing and other recycled materials. We expect to start on
site later this year. At 5 Kingdom Street, we have consent for a
438,000 sq ft office scheme; our ownership is currently 100% but
GIC, our new joint venture partner have an option to acquire 50%.
Start on site is expected in late 2023. At Meadowhall, we have
outline planning permission for our 604,000sq ft logistics scheme
which we expect to progress later this year.
Medium Term Pipeline
The further phases at Canada Water account for 4.5m sq ft of our
7.8m sq ft pipeline. At Euston Tower (578,000 sq ft) we have an
exciting opportunity to deliver a highly sustainable, substantial
redevelopment, targeting life sciences and other innovation
businesses leveraging its location in London's Knowledge Quarter.
We expect to submit planning next year.
Urban logistics opportunities account for 2.3m sq ft of medium
term opportunities. At Thurrock, where we acquired the Thurrock
Shopping Park in the year, we see an opportunity to deliver 559,000
sq ft of logistics space towards the east of London by repurposing
two-thirds of the retail space and utilising the site topography to
facilitate multi-level development. We see further opportunities to
intensify existing buildings at Hannah Close in Wembley and
Heritage House in Enfield, with potential to deliver 668,000 sq ft
and 431,000 sq ft respectively of well located, urban logistics
space. Both are in North London, within the M25 and close to the
North Circular. In addition, we have two centrally located
opportunities at Finsbury Square and Verney Road in Southwark
altogether totalling 213,000 sq ft. In addition opportunities on
our existing portfolio include, Teesside where we have identified
299,000 sq ft of land outside of the retail park we could
potentially repurpose for logistics.
Finance review
31 March 31 March
Year ended 2022 2021
Underlying Profit1,2 GBP251m GBP201m
Underlying earning per share1,2 27.4p 18.8p
IFRS profit/(loss) after tax GBP960m GBP(1,083)m
Dividend per share 21.92p 15.04p
Total accounting return1 14.8% (15.1)%
EPRA Net Tangible Assets per share1,2 727p 648p
IFRS net assets GBP6,733m GBP5,983m
LTV3,4,5 32.9% 32.0%
Weighted average interest rate 2.9% 2.9%
1. See Note 2 within condensed financial statements for
definition and calculation.
2. See Table B within condensed supplementary disclosure for
reconciliations to IFRS metrics.
3. See Note 14 within condensed financial statements for
definition, calculation and reconciliation to IFRS metrics.
4. On a proportionally consolidated basis including the Group's
share of joint ventures.
5. Following the sale of a 75% interest in the majority of our
assets at Paddington Central, LTV falls to 28.4% on a pro forma
basis.
Overview
Financial performance has improved significantly following the
easing of Covid-19 restrictions. Underlying Profit is up 24.9% at
GBP251m, while underlying earnings per share (EPS) is up 45.7% at
27.4p. Based on our policy of setting the dividend at 80% of
Underlying EPS, the Board have proposed a final dividend of 11.60p
per share, resulting in a full year dividend of 21.92p per
share.
Underlying Profit
GBPm
Underlying Profit for the year ended 31 March 2021 201
Like-for-like net rent (incl. CVA and administrations) (8)
Provisions for debtors and tenant incentives(1) 91
Net divestment (8)
Developments (12)
Net administrative expenses & fee income (13)
Underlying Profit for the year ended 31 March 2022 251
1. The year on year impact of provisions for debtors and tenant
incentives was GBP91m. This reflects the difference between the
GBP8m credit to the income statement in the year to 31 March 2022
(as disclosed in Note 7 and 10 of condensed financial statements)
and the GBP83m charge in the year to 31 March 2021.
Underlying Profit increased by GBP50m, primarily due to the
significant reduction in provisions for debtors and tenant
incentives, following improved rent collection driven by proactive
engagement with occupiers and the lifting of Covid-19 related
restrictions. This was partially offset by the impact of properties
entering vacant possession ahead of redevelopment, an increase in
administrative costs and the impact of CVA and administrations that
occurred in the prior year.
Net divestment decreased earnings by GBP8m in the year. Proceeds
from sales have been deployed into our value accretive acquisitions
and our development pipeline. The recently completed and committed
schemes are expected to generate an ERV of GBP85m, of which 53% is
already pre-let or under offer.
IFRS profit after tax for the year was GBP960m, compared with a
loss after tax for the prior year of GBP1,083m. The significant
movement year-on-year primarily reflects the upward valuation
movement on the Group's properties and those of its joint
ventures.
Overall valuations have increased by 6.8% on a proportionally
consolidated basis, resulting in an overall EPRA NTA per share
increase of 12.2%. Including dividends of 16.96p per share paid
during the year, we have delivered a total accounting return of
14.8%.
Financing activity included the refinance of 100 Liverpool
Street, completed in June 2021, with the Broadgate joint venture
raising a new GBP420m 5 year 'Green Loan' secured by the property
at an initial LTV of c.50%. As part of the refinance, this BREEAM
Outstanding and net zero carbon development was released from the
Broadgate securitisation alongside the redemption of GBP107m of
bonds.
In the year to 31 March 2022, LTV increased by 90bps to 32.9%.
In April 2022, we exchanged on the sale of a 75% interest in the
majority of our assets in Paddington Central to GIC; following its
unconditional completion LTV falls to 28.4% on pro forma basis.
Our weighted average interest rate remains low at 2.9%, in line
with 31 March 2021.
Our financial position remains strong with GBP1.3bn of undrawn
facilities and cash as at 31 March 2022 and, following the
completion of the Paddington Central sale, we have no requirement
to refinance until late 2025. We retain significant headroom to our
debt covenants, meaning the Group could withstand a fall in asset
values across the portfolio of 49% prior to taking any mitigating
actions.
Fitch Ratings, as part of their annual review in August 2021,
affirmed all our credit ratings with a Stable Outlook, including
the senior unsecured rating at 'A'.
Presentation of financial information and alternative
performance measures
The Group financial statements are prepared under IFRS 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 use a number of performance metrics in order to
assess the performance of the Group and allow for greater
comparability between periods, however, do 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) is also monitored by
management as a key measure of the level of debt employed by the
Group to meet its strategic objectives, along with a measurement of
risk. It also allows comparison to other property companies who
similarly monitor and report this measure. The definition of Loan
to value is shown in Note 14 of the consolidated financial
statements.
Income statement
1. Underlying Profit
Underlying Profit is the measure that we use to assess income
performance. This is presented below on a proportionally
consolidated basis. In the year to 31 March 2022, a GBP29m
surrender premium payment and a GBP12m 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 these Company adjusted
items. No Company adjustments were made in the prior year to 31
March 2021.
2022 2021
Year ended 31 March Section GBPm GBPm
Gross rental income 490 508
Property operating expenses (61) (141)
Net rental income 1.2 429 367
Net fees and other income 13 11
Administrative expenses 1.3 (89) (74)
Net financing costs 1.4 (102) (103)
Underlying Profit 251 201
Underlying tax credit/(charge) 4 (26)
Non-controlling interests in Underlying Profit 2 3
EPRA and Company adjustments(1) 703 (1,261)
IFRS profit/(loss) after tax 2 960 (1,083)
Underlying EPS 1.1 27.4p 18.8p
IFRS basic EPS 2 103.3p (111.2)p
Dividend per share 3 21.92p 15.04p
1. 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 and associated close out costs. Company adjustments
consist of items which are considered to be unusual and/or
significant by virtue to their size or nature. These items are
presented in the 'capital and other' column of the consolidated
income statement.
1.1 Underlying EPS
Underlying EPS is 27.4p, up 45.7%. This reflects the Underlying
Profit increase of 24.9% and the GBP30m movement in underlying tax.
Following the resumption of the dividend in November 2020, our REIT
property income distribution requirements have been satisfied and
therefore there has been no repeat of the underlying tax charge
recognised in the prior year.
1.2 Net rental income
GBPm
Net rental income for the year ended 31 March 2021 367
Disposals (41)
Acquisitions 28
Developments (8)
Like-for-like net rent -
CVA and administrations (8)
Provisions for debtors and tenant incentives(1) 91
Net rental income for the year ended 31 March 2022 429
1. The year on year impact of provisions for debtors and tenant
incentives was GBP91m. This reflects the difference between the
GBP8m credit to the income statement in the year to 31 March 2022
(as disclosed in Note 7 and 10 of condensed financial statements)
and the GBP83m charge in the year to 31 March 2021.
Disposals of income producing assets over the last 24 months
reduced net rents by GBP41m in the year, where the proceeds from
sales are being reinvested into value accretive acquisitions and
developments. Acquisitions have increased net rents by GBP28m,
primarily as a result of the purchase of the remaining 21.9%
interest of HUT, the acquisition of Heritage House in Enfield and
Retail Park acquisitions at Biggleswade and Thurrock. Developments
have reduced net rents by GBP8m, driven by the vacant possession of
Euston Tower as it moves into redevelopment. The completed and
committed development pipeline is expected to deliver GBP85m of ERV
in future years.
Campus like-for-like net rental growth was 2.5% in the period.
This was driven by letting activity, including Monzo at Broadwalk
House, Braze at Exchange House and various lettings across our
Storey spaces. Excluding the impact of CVAs and administrations,
like-for-like net rental growth for Retail Parks was 6% and
declined 6% for Shopping Centres. This reflects improved occupancy
on our Retail Parks, deals on our Shopping Centres transacting at
lower passing rents and normalised car park and turnover income
following the lifting of Covid-19 related restrictions. The impact
of CVA and administrations primarily relates to various retail CVAs
that occurred midway through 2020. When including the impact of
CVAs and administrations, like-for-like net rents for Retail &
Fulfilment decreased 6.0%.
Provisions made against debtors and tenant incentives decreased
by GBP91m compared to the prior year, with a net GBP8m credit
recognised in the year. We've made good progress on prior year
debtors; the GBP119m of tenant debtors and accrued income relating
to the year ending 31 March 2021 now stands at GBP35m, primarily
driven by cash collection and negotiations with occupiers. As of 31
March 2022, tenant debtors and accrued income totalled GBP72m of
which GBP61m (or 85%) is provided for, reflecting that the majority
of these debtors relate to amounts billed during Covid-19 related
lockdowns for which recovery is uncertain.
1.3. Administrative expenses
Administrative expenses have increased by GBP15m in the year to
GBP89m. This increase is driven by the following key drivers; added
lease depreciation on our offices at York House, following our sale
of a 75% interest in January 2021; a one off accelerated
depreciation charge of historic IT assets; the recognition of a
credit in the prior year following the closure of the Group's
defined benefit pension scheme to future accrual; and higher
variable pay reflecting strong financial performance this year.
The Group's EPRA operating cost ratio decreased to 24.2% (March
2021: 37.9%) as a result of a significant decrease in property
outgoing expenses due to provisions made in respect of debtors and
tenant incentives. Excluding provisions made in respect of debtors
and tenant incentives, the Group's operating cost ratio is 26.0%
(March 2021: 20.7%) and the increase from the prior year is a
result of lower rental income following sales activity and the
increase in administrative costs noted above. We expect our
operating cost ratio to decrease going forward, reflecting
continued cost discipline and the additional fee income that will
be generated from our new Canada Water and Paddington joint
ventures.
1.4 Net financing costs
GBPm
Net financing costs for the year ended 31 March 2021 (103)
Financing activity 1
Market rates (1)
Net divestment 5
Developments (4)
Net financing costs for the year ended 31 March 2022 (102)
Financing activity undertaken in the year has reduced costs by
GBP1m, including the impact of the 100 Liverpool Street refinance
and associated securitisation bonds redemption.
The impacts of net divestment and developments have been mostly
offset, with proceeds from sales being used to repay revolving
credit facilities, whilst interest on the funds drawn for our
completed developments is no longer capitalised.
We have a balanced approach to interest rate risk management. At
31 March 2022, the interest rate on our debt was fully hedged on a
spot basis. Following the completion of the Paddington Central
transaction, on average over the next five years we have interest
rate hedging on 79% of our projected debt with 61% fixed (including
swaps) and the balance capped. Our finance costs are affected by
market rates which apply to debt which is either unhedged or where
the cap strike rates are above the current rate. The strike rates
are limiting the adverse impact of rising rates on our finance
costs. The use of interest rate caps as part of our hedging means
we do not incur mark to market costs on any repayment of debt which
is capped, or on a floating rate, and the cost of this debt
benefits while market rates are below the strike rate. Our weighted
average interest rate remains low at 2.9% (March 2021: 2.9%).
During the year we completed the transition from LIBOR to SONIA
as the reference rate for Sterling under all our debt and
derivative agreements, in line with market practice.
2. IFRS profit after tax
The main differences between IFRS profit after tax and
Underlying Profit are that IFRS includes the valuation movements on
investment and trading properties, fair value movements on
financial instruments, 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 profit after tax for the year was GBP960m, compared
with a loss after tax for the prior year of GBP1,083m. IFRS basic
EPS was 103.3p per share, compared to (111.2)p per share in the
prior year. The IFRS profit after tax for the year primarily
reflects the upward valuation movement on the Group's properties of
GBP471m, the capital and other income profit from joint ventures of
GBP158m and the Underlying Profit of GBP251m. The Group valuation
movement and capital and other income profit from joint ventures
was driven principally by inward yield shift of 42bps and ERV
decline of 1.2% in the portfolio resulting in a valuation increase
of 6.8%.
The basic weighted average number of shares in issue during the
year was 927m (2020/21: 927m).
3. Dividends
In October 2020, we announced our new dividend policy, setting
the dividend as 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 2022 of 11.60p per share. Payment will be made on
Friday 29 July 2022 to shareholders on the register at close of
business on Friday 24 June 2022. The dividend will be a Property
Income Distribution and no SCRIP alternative will be offered.
Balance sheet
2022 2021
As at March 21 Section GBPm GBPm
Property assets 10,476 9,140
Other non-current assets 69 51
10,545 9,191
Other net current liabilities (316) (203)
Adjusted net debt 6 (3,458) (2,938)
Other non-current liabilities - -
EPRA Net Tangible Assets 6,771 6,050
EPRA NTA per share 4 727p 648p
Non-controlling interests 15 59
Other EPRA adjustments1 (53) (126)
IFRS net assets 5 6,733 5,983
Proportionally consolidated basis
1. 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 2021 648
Valuation performance 70
Underlying Profit 27
Dividend (17)
Finance liability management & other (1)
EPRA NTA per share at 31 March 2022 727
The 12.2% increase in EPRA NTA per share reflects a valuation
increase of 6.8% compounded by the Group's gearing.
Campus valuations were up 5.4%, driven by our actions with
strong leasing and development activity at Regent's Place and
Broadgate in particular generating uplifts of 6.7% and 5.1%
respectively. Yields moved in 11bps and ERVs were flat. Campus
developments were up 11.7% reflecting a very strong performance at
Canada Water of 18.3% which now reflects our new joint venture with
AustralianSuper.
Valuations in Retail & Fulfilment were up 9.9% overall, with
inward yield shift of 97bps and ERV decline of 2.8%. There is a
significant variance at a sub-sector level, with Retail Park
valuations showing a strong performance of 20.7%, driven by inward
yield shift of 151 bps underpinned by strong investment market and
improving occupational market given their relative affordability
and compatibility with online retail. Shopping Centres valuations
were down 6.1% in the year with ERVs down 5.2%; yields have moved
outwards by 3bps in the year, although we saw mild yield
compression in the second half.
5. IFRS net assets
IFRS net assets at 31 March 2022 were GBP6,733m, an increase of
GBP750m from 31 March 2021. This was primarily due to IFRS profit
after tax of GBP960m, offset by dividends paid in the year of
GBP157m and the purchase of the remaining 21.9% units in the
Hercules Unit Trust from non-controlling interests of GBP38m.
Cash flow, net debt and financing
6. Adjusted net debt1
GBPm
Adjusted net debt at 31 March 2021 (2,938)
Disposals 486
Acquisitions (730)
Development and capex (327)
Net cash from operations 245
Dividend (155)
Other (39)
Adjusted net debt at 31 March 2022 (3,458)
1. Adjusted net debt is a proportionally consolidated measure.
It represents the Group net debt as disclosed in Note 14 to the
condensed financial statements and the Group's share of joint
ventures' net debt excluding the mark-to-market on derivatives,
related debt adjustments and non-controlling interests. A
reconciliation between the Group net debt and adjusted net debt is
included in Table A within the supplementary disclosures.
Acquisitions net of disposals increased debt by GBP244m whilst
development spend totalled GBP266m with a further GBP61m on capital
expenditure related to asset management on the standing portfolio.
The value of recently completed and committed developments is
GBP1,032m, with GBP648m costs to come. Speculative development
exposure is 6.4% of ERV (includes space under offer). There are
1.9m sq ft of developments in our near term pipeline with
anticipated cost of GBP963m.
7. Financing
Proportionally
Group consolidated
2022 2021 2022 2021
Net debt / adjusted net debt1 GBP2,541m GBP2,249m GBP3,458m GBP2,938m
Principal amount of gross debt GBP2,562m GBP2,291m GBP3,648m GBP3,183m
Loan to value 26.2% 25.1% 32.9% 32.0%
Weighted average interest rate 2.4% 2.2% 2.9% 2.9%
Interest cover 5.6 4.3 3.5 3.0
Weighted average maturity of drawn debt 6.6 years 7.0 years 6.9 years 7.6 years
1. 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 exclude the
mark-to-market on derivatives and related debt adjustments and
non-controlling interests.
At 31 March 2022, our proportionally consolidated LTV was 32.9%,
up from 32.0% at 31 March 2021. The impact of positive valuation
movements decreased LTV by 210 bps. This was offset by acquisitions
net of disposals which added 150bps, as well as development spend
which added 200 bps. In April 2022, we exchanged on the sale of a
75% interest in the majority of our assets in Paddington Central to
GIC; following its completion LTV falls to 28.4% on pro forma
basis. Note 14 of the condensed financial statements sets out the
calculation of the Group and proportionally consolidated LTV.
In June 2021 we completed the refinance of 100 Liverpool Street
with the Broadgate joint venture raising a new GBP420m 5 year
'Green Loan' secured by the property at an initial LTV of c.50%. As
part of the refinance, this BREEAM Outstanding and net zero carbon
development was released from the Broadgate securitisation
alongside the redemption of GBP107m of bonds. The new financing was
voted Financing Deal of the Year: UK by Real Estate Capital Europe
for 2021.
In September our GBP138m US Private Placement matured and was
repaid as planned, using committed bank facilities.
In February , we extended our GBP450m ESG-linked Revolving
Credit Facility by a further year to 2027, with the agreement of
all eight banks in that facility.
In March, we signed a new GBP100m ESG-linked bilateral Revolving
Credit Facility with an initial five year term, which may be
extended up to seven years at British Land's request, subject to
the bank's consent. In keeping with our sustainability strategy,
the facility includes two ESG-related KPIs focused on the BREEAM
ratings of our developments and assets under management (aligned
with the KPIs in the GBP450m RCF). This brings our total Green /
ESG-linked finance to GBP1bn.
As a result of this financing activity, at 31 March 2022, we had
GBP1.3bn of undrawn facilities and cash. Based on our current
commitments and available facilities and following the completion
of the Paddington sale, the Group has no requirement to refinance
until late 2025.
Our debt and interest rate management approach has enabled us to
maintain a low weighted average interest rate of 2.9%.
Fitch Ratings, as part of their annual review in August 2021
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 enables 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 & Fulfilment assets throughout
the UK. We own or manage a portfolio valued at GBP14.3bn (British
Land share: GBP10.5bn) as at 31 March 2022 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 & Fulfilment.
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 67% of our portfolio.
Retail & Fulfilment accounts for 33% 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. In 2020, we
set out our sustainability strategy which focuses on two
time-critical areas where British Land can create the most benefit:
making our whole portfolio net zero carbon by 2030, and partnering
to grow social value and wellbeing in the communities where we
operate.
Further details can be found on the British Land website at
www.britishland.com
Risk management and principal risks
Risk Management
We maintain a comprehensive risk management process which serves
to identify, assess and respond to the range of financial and
non-financial risks facing our business, including those 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 across the
business, whilst at the same time making the most of our
opportunities. Our approach to risk management is centred on being
risk-aware, clearly defining our risk appetite, responding to
changes to our risk profile quickly and having a strong risk
management culture among employees with clear roles and
accountability. Our organisational structure ensures close
involvement of senior management in all significant decisions as
well as in-house management of our development, asset and property
management activities.
The volatile and uncertain environment created by the Covid-19
pandemic, coupled with a backdrop of increasing geopolitical and
macroeconomic uncertainty, has, and continues to present an
uncertain general risk environment for our business to navigate,
affecting our entire risk landscape. Looking forward, whilst the
removal of all Covid-19 restrictions in England from April 2022
following the successful vaccination programme reduces the risks
relating to Covid-19, it is likely that Covid-19 will still be
prevalent in society and the risk of further Covid-19 variants, and
whether current vaccines will deal with them effectively or not,
remains. There are also wider concerns that we are potentially
entering an extended period of global volatility with several
increasing macroeconomic headwinds including energy price
volatility, supply chain disruption and material and labour
shortages. These are all increasing inflationary pressures, and are
being compounded by the war in Ukraine, and may give rise to
further interest rate rises and in turn serve to dampen UK economic
growth. Whilst these headwinds continue to evolve, we have set out
in our principal risks table below the key potential impacts on our
business and how we plan to mitigate these.
Risk management, and the Group's continued ability to be
flexible to adjust and respond to these external risks as they
evolve, will be fundamental to the future performance of our
business. The challenges of the last two years have demonstrated
the resilience of our business model, and our robust risk
management approach, to protect our business through this period of
uncertainty and adapt to a rapidly changing environment.
The Board confirms that 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, was carried
out during the year taking into account the evolving Covid-19 risk
and the macroeconomic and geopolitical environment. Following a
thorough review exercise involving the Risk and Audit Committees,
we have also refreshed our principal risks to take into account how
our strategy and markets are evolving, together with combining
several interrelated risks. We have also added one new principal
risk category being 'Operational and Compliance risks' reflecting
the significance of several key operational risks to our business
involving information systems and cyber security, health and
safety, third party relationships and financial crime
compliance.
Our current assessment is that the general external environment
in which the Group operates remains uncertain, albeit several risks
to our business have reduced from their elevated position last year
reflecting the lessened impact of Covid-19; being (i) political,
legal and regulatory risks; (ii) property market outlook risk for
our Campuses; (iii) major events/business disruption risks and (iv}
our customer risks. At the same time, our (i) environmental
sustainability and (ii) people and culture risks have increased
slightly as detailed below.
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 2022 Annual Report.
External Principal Risks
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
1 Macroeconomic Risks
The UK economic climate - The Board, Executive Committee <--> Macroeconomic risk has
and changes to fiscal and Risk Committee regularly remained consistent during
and monetary policy assess the Company's strategy the year and is considered
presents risks and in the context of the wider a high impact risk with
opportunities in macroeconomic environment a medium to high probability.
property and financing in which we operate to assess The UK economy strengthened
markets and to the whether changes to the economic significantly in the period
businesses of our outlook justify a reassessment following the reopening
customers which can of our strategic priorities, of the economy with consumer
impact both the delivery our capital allocation plan confidence improving over
of our strategy and and the risk appetite of the summer, however, rising
our financial performance. the business. fuel and food prices have
- Our strategy team prepare affected confidence more
a quarterly dashboard for recently and there are
the Board, Executive and concerns that economic
Risk Committees which tracks momentum slows.
key macroeconomic indicators The current economic backdrop
both from internal and independent remains uncertain reflecting
external sources (see KRIs), the on-going Covid-19
as well as central bank risk and several macroeconomic
guidance and government headwinds, including inflationary
policy. pressures, which have
- Regular stress testing been compounded by the
our business plan against war in Ukraine, with potential
a downturn in economic outlook subsequent impacts on
to ensure our financial interest rates, rental
position is sufficiently income, construction costs
flexible and resilient. and property valuations.
- Our business model focuses Opportunity
on a high quality portfolio The strength of our balance
aligned to key trends in sheet, quality of our
our markets and active capital assets and experienced
recycling to maintain a Board and management team
strong financial position, put us in a strong position
which helps to protect us to help us to navigate
against adverse changes through these near term
in economic conditions. challenges and take advantage
KRIs: of opportunities as they
- Forecast GDP growth, inflation/deflation rise, including continuing
and interest rate forecasts to invest in growth sectors
- Consumer confidence and and our development pipeline.
unemployment rates
- Stress testing for downside
scenarios to assess the
impact of differing market
conditions
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
2 Political, Legal, and Regulatory Risks
Significant political - Whilst we cannot influence The political, legal and
events and regulatory the outcome of significant regulatory risk outlook
changes, including political events, the risks has reduced over the year
the impact of Government are taken into account when with Covid-19 related
policy response to setting our business strategy political uncertainty
the pandemic, bring and when making strategic eased, but still remains
risks principally investment and financing elevated with both a medium
in four areas: decisions. to high impact and probability.
- Reluctance of investors - Internally we review and Following the successful
and businesses to monitor proposals and emerging vaccination programme,
make investment and policy and legislation to political uncertainty
occupational decisions ensure that we take the due to the national and
whilst the outcome necessary steps to ensure global response to Covid-19
remains uncertain compliance, if applicable. has lessened, though risks
- The impact on the Additionally, we engage in response to the economic
case for investment public affairs consultants impact of the Covid-19
in the UK, and on to ensure that we are properly pandemic remain, including
specific policies briefed on the potential potential tax rises for
and regulation introduced, policy and regulatory implications businesses.
particularly those of political events. The rent moratorium recently
which directly impact - Where appropriate, we came to an end, with the
real estate or our act with other industry UK Government introducing
customers participants and representative a binding arbitration
- The potential for bodies to contribute to scheme for certain arrears
a change of leadership policy and regulatory debate. built up during lockdown
or political direction We monitor and respond to periods.
- The impact on the social and political reputational The global geopolitical
businesses of our challenges relevant to the environment remains uncertain,
occupiers as well industry and apply our own heightened by the recent
as our own business evidence-based research war in Ukraine, with potential
to engage in thought leadership impacts on security, cyber
discussions. risks, sanctions compliance,
KRIs: supply chains and reputational
- Monitor changes within risks.
the geopolitical environment, Opportunity
UK policies, laws or regulations 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.
-
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
3 Property Market Risks
Underlying income, - The Board, Executive Campuses
rental growth and Committee and Risk Committee Our Campus property market
capital performance regularly assess whether risk outlook has reduced
could be adversely any current or future in the year and is considered
affected by a reduction changes in the property a medium impact risk with
in investor demand market outlook present a medium probability.
or weakening occupier risks and opportunities As the economy strengthened
demand in our property which should be reflected over the last year, both
markets. in the execution of our investment and occupier
Structural changes strategy and our capital markets have improved for
in consumer and business allocation plan. London offices, with investment
practices such as - Our strategy team prepare activity particularly driving
the growth of online a quarterly dashboard yield compression. Take
retailing and flexible for the Board, Executive up has been mixed and polarised
working practices and Risk Committee's which towards best in class space.
(including more working tracks key investment Availability across the
from home) could and occupier demand indicators market remains above the
have an adverse impact both from internal and long term average but has
on demand for our independent external sources moderated; and is skewed
assets. (see KRIs below) which towards second hand, poorer
are considered alongside quality space.
the Committee members' Structural risks remain
knowledge and experience from increased working from
of market activity and home, accelerated by the
trends. impact of Covid-19, enabling
- We focus on prime assets some businesses to reassess
or those with repositioning their real estate options.
potential and sectors Opportunity
which we believe will Our Campus model is centred
be more resilient over on providing well connected,
the medium term to a reduction high quality and sustainable
in occupier and investor buildings with attractive
demand. amenity which aligns to
- We maintain strong relationships our customers' needs and
with our occupiers, agents expectations and is an important
and direct investors active differentiator of our space.
in the market and actively We have been encouraged
monitor trends in our by the strength of our leasing
sectors. activity across our Campuses
- We stress test our business this year.
plan for the effect of
a change in rental growth
prospects and property
yields.
KRIs:
- Occupier and investor
demand indicators in our
sectors
- Margin between property
yields and borrowing costs
- Online sales trends
- Footfall and retail
sales to provide insight
into consumer trends
- Campus occupancy to
provide insight into occupier
trends and people visiting
our Campuses
<--> Retail
Our Retail property market
risk outlook has remained
consistent and is considered
a medium impact risk with
a high probability.
The occupational market
for retail has endured a
challenging few years reflecting
the structural shift to
online which has accelerated
through Covid-19. Retailers'
profitability is continuing
to be put under pressure
due to increased costs,
such as rising input costs,
wages, business rates and
the erosion of margins from
online competition. Shopping
Centres have been impacted
more severely by this, whereas
retail parks, which are
more affordable and resilient
to online, have fared better.
As in the occupational market,
investment activity has
been skewed towards retail
parks reflecting lower occupancy
costs for retailers and
the important role retail
parks can play in online
fulfilment; and as a result,
yields have moved in. The
investment market for shopping
centres has continued to
be weak, although there
are signs of renewed investor
interest.
Opportunity
Our Retail portfolio focuses
on retail parks aligned
to the growth of convenience
and supports retailers omnichannel
strategy. Despite the 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 are focused
on maintaining high occupancy,
accepting appropriate rents
which are more sustainable
in the long term.
- Urban Logistics
The urban logistics property
market risk outlook has
been added as one of our
key sectors and is considered
a medium impact risk with
a low probability.
Both the occupational and
investment market outlook
remain favourable underpinned
by structural changes in
e-commerce. Supply of the
right kind of space remains
highly constrained and demand
is strong, driving rental
growth.
Opportunity
Our Urban Logistics portfolio
is focused on a development-led
pipeline through the intensification
and repurposing of existing
buildings in London.
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
4 Major Events/Business Disruption Risks
Major global, regional - The Group has comprehensive Our major events/business
or national events crisis response plans and disruption risk outlook
could cause significant incident management procedures has reduced over the year
damage and disruption both at head office and as Covid-19 related disruption
to the Group's business, asset-level that are regularly to our business has eased
portfolio, customers, reviewed and tested following the full opening
people and supply - Asset emergency procedures of our assets and the
chain. are regularly reviewed and return to the office of
Such incidents could scenario tested. Physical our people, but this remains
be caused by a wide security measures are in a medium to high impact
range of external place at properties and risk with a medium probability.
events such as civil development sites This risk was increased
unrest, an act of - The Group monitors the last year as the Group's
terrorism, pandemic Home Office terrorism threat operations were severely
disease, a cyber-attack, level, and we have access impacted by the Covid-19
an extreme weather to security threat information pandemic. Our core crisis
occurrence, environmental services to help inform management team, overseen
disaster or a power our security measures by the Executive Committee,
shortage. - We have robust IT security co-ordinated the Group's
This could result systems that support data operational response to
in sustained asset security, disaster recovery the pandemic, and the
value or income impairment, and business continuity resilience of our business
liquidity or business plans model, has enabled us
continuity challenges, - We have comprehensive to weather the impact
share price volatility property damage and business since its onset. We remain
or loss of key customers interruption insurance across mindful of the risks posed
or suppliers. the portfolio by any further Covid-19
KRIs: variants, and whether
- Security Service National current vaccines will
Threat level deal with them effectively.
- Security risk assessments We are also aware of the
of our assets increase in global uncertainty,
heightened by the war
in the Ukraine. Specifically,
terrorism remains a threat,
as is the risk of cyber
security breaches. Our
crisis management team
carry out event simulations
to test our processes
and procedures in response
to major incidents. We
also undertake regular
cyber security training
and testing.
Opportunity
The challenges of the
last two years have demonstrated
the resilience of our
business model and our
robust crisis management
and business continuity
plans. We remain vigilant
to the continued risk
from the pandemic and
other external threats.
Internal Principal Risks
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
5 Portfolio Strategy Risks
The Group's income - The Board carries out <--> Our portfolio strategy
and capital performance an annual review of the risk has remained the
could underperform overall corporate strategy same and is considered
in absolute or relative including the current and a medium impact risk with
terms as a result prospective portfolio strategy a medium probability.
of an inappropriate so as to meet the Group's During the year, external
portfolio strategy overall objectives impacts discussed in the
and subsequent execution. - Our portfolio strategy macroeconomic and property
This could result is determined to be consistent market outlook risks have
from: with our target risk appetite influenced our portfolio
- incorrect sector and is based on the evaluation strategy and performance.
selection and weighting of the external environment Whilst investment markets
- poor timing of - Progress against the strategy are increasingly competitive
investment and divestment and continuing alignment in certain subsectors,
decisions with our risk appetite is we continue to actively
- inappropriate exposure discussed regularly by both crystalise value from
to developments the Executive and Risk Committees mature and off strategy
- wrong mix of assets, with reference to the property assets into value accretive
occupiers and region markets and the external acquisitions and development
concentration economic environment opportunities.
- overpaying for - Individual investment Opportunity
assets through inadequate decisions are subject to Our portfolio strategy
due diligence or robust risk evaluation overseen to actively focus our
price competition by our Investment Committee capital on our competitive
- inappropriate co-investment including consideration strengths in development,
arrangements of returns relative to risk active asset management
adjusted hurdle rates. and repositioning of assets
- Review of prospective is a key opportunity.
performance of individual We remain active in the
assets and their business investment market and
plans continue to take advantage
- We foster collaborative of value opportunities
relationships with our co-investors and good market pricing
and enter into ownership of our assets, where available.
agreements which balance This year has marked the
the interests of the parties return to growth for both
KRIs: our Campuses and Retail
- Execution of targeted & Fulfilment portfolios.
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
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
6 Development Risks
Development provides - We apply a risk-controlled <--> Our development risk has
an opportunity for development strategy through remained the same and
outperformance but managing our exposure, pre-letting is considered a medium
usually involves strategy and fixing costs impact risk with a medium
elevated risk. This - We manage our levels of probability.
is reflected in our total and speculative development We are on site with 1.7m
decision making process exposure within targeted sq ft of developments,
around which schemes ranges considering associated with new commitments including
to develop and the risks and the impact on Phase 1 of Canada Water
timing of the development, key financial metrics. This and Phase 2 at Aldgate
as well as the execution is monitored quarterly by Place. Our development
of these projects. the Risk Committee along exposure remains well
Development strategy with progress of developments within our internal risk
addresses several against plan. parameters of 12.5%; and
development risks - Prior to committing to our total development
that could adversely a development, a detailed exposure is 6.2% of portfolio
impact underlying appraisal is undertaken. gross asset value with
income and capital This includes consideration speculative exposure of
performance including: of returns relative to risk 6.4% (which is based on
- development letting adjusted hurdle rates and ERV and includes space
exposure is overseen by our Investment under offer).
- construction timing Committee During the year, we saw
and costs (including - Pre-lets are used to reduce significant inflationary
construction cost development letting risk increases in the construction
inflation) where considered appropriate supply chain for certain
- major contractor - Competitive tendering materials and labour,
or subcontractor of construction contracts which have been further
failure and, where appropriate, compounded by the war
- adverse planning fixed price contracts are in Ukraine. Our inflation
judgements entered into. We measure forecast (based on tender
inflationary pressure on price inflation) has increased
construction materials and to around 8-10% in 2022
labour costs (and sensitise and around 4-5% for 2023
for a range of inflationary and 2024 based on an expectation
scenarios) and make appropriate of ongoing wage pressures
allowances in our cost estimates for construction workers
and include within our fixed and raw materials prices
price contracts. remaining elevated. This
- Detailed selection and is frequently under review
close monitoring of contractors to ensure our contingencies
and key subcontractors including and cost plans are robust
covenant reviews to deal with the market
- Experienced development fluctuations. Having maintained
management team closely momentum on our development
monitors design, construction programme throughout the
and overall delivery process pandemic we have been
- Early engagement and strong able to place contracts
relationships with planning competitively and 91%
authorities. The Board considers of costs are fixed on
the section 172 factors committed developments.
to ensure the impact on Opportunity
the environment and communities Progressing value accretive
is adequately addressed development is one of
- Through our Place Based our key priorities for
approach, we engage with our business and is a
communities where we operate fundamental driver of
to incorporate stakeholder value. The strength of
views in our development our balance sheet, our
activities, as detailed relationships with our
in our Sustainability Brief contractors and the experience
- We engage with our development of our management team
suppliers to manage environmental means we are well positioned
and social risks, including to progress our development
through our Supplier Code pipeline, whilst mitigating
of Conduct, Sustainability the risk through a combination
Brief and Health and Safety of timing, pre-lets, fixing
Policy costs and use of joint
- Management of risks across ventures.
our residential developments We will continue to actively
in particular fire and safety monitor the inflationary
requirements price increases or any
KRIs: potential delays in the
- Total development exposure construction supply chain
<=12.5% of portfolio by and work with our contractors
value to manage such issues.
- Speculative development We will also review the
exposure <=12.5% of portfolio impact on development
ERV returns prior to committing
- Residential development to future developments
exposure to ensure we meet our
- Progress on execution detailed pre-set criteria
of key development projects subject to approval by
against plan (including the Investment Committee.
evaluating yield on cost)
- Construction costs inflation
forecasts
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
7 Financing Risks
Failure to adequately - We regularly review funding <--> Our financing risks overall
manage financing requirements for our business have remained consistent
risks may result plans and commitments. We and are considered medium
in a shortage of monitor the period until impact with a low to medium
funds to sustain financing is required, which probability.
the operations of is a key determinant of The current uncertain
the business or repay financing activity. Debt environment reinforces
facilities as they and capital market conditions the importance of a strong
fall due. are reviewed regularly to balance sheet. We have
Financing risks include: identify financing opportunities continued to closely manage
- reduced availability that meet our requirements. our LTV which has increased
of finance - We maintain good long moderately to 32.9% as
- increased financing term relationships with a result of investment
costs our key financing partners. in growth sectors and
- leverage magnifying - We set appropriate ranges Campus development, offset
property returns, of hedging on the interest by sales and valuation
both positive and rates on our debt, with increases. However, following
negative a balanced approach to have the Paddington Central
- breach of covenants a higher degree of protection transaction post year
on borrowing facilities on interest costs in the end our LTV falls to 28.4%
short term and achieve market on a proforma basis.
rate finance in the medium We have retained significant
to longer term. headroom to our Group
- We work with industry covenants, which could
bodies and relevant organisations withstand a fall in asset
to participate in debate values across the portfolio
on emerging finance regulations of 49%, prior to taking
affecting our business. any mitigating actions.
- We manage our use of debt Market interest rates
and equity finance to balance have risen from very low
the benefits of leverage levels and further rises
against the risks, including are anticipated. In line
magnification of property with our interest rate
valuation movements. management policy, we
- We aim to manage our loan have hedging on 79% of
to value (LTV) through the our projected debt on
property cycle such that average over the next
our financial position would five years.
remain robust in the event Our strong senior unsecured
of a significant fall in rating 'A', long-term
property values. Alongside IDR credit rating 'A-'
LTV, we also consider net and short-term IDR credit
debt to EBITDA which measures rating 'F1' were all affirmed
income against our debt by Fitch during the year,
(with recourse to British with a stable outlook.
Land). With these metrics, During the year we have
we do not adjust our approach signed a new GBP100m ESG-linked
to leverage based only on revolving credit facility
changes in property market with an initial 5 year
yields. term, extended our GBP450m
- We manage our investment ESG-linked revolving credit
activity, the size and timing facility to 2027, and
of which can be uneven, raised a new GBP420m 'Green
as well as our development loan' for the Broadgate
commitments to ensure that joint venture, secured
our LTV and net debt to on 100 Liverpool Street.
EBITDA levels remain appropriate. We expect to continue
- Financial covenant headroom to be able to access funds
is evaluated regularly and from a range of sources
in conjunction with transaction in the debt capital markets,
approval. as required by the business,
- We spread risk through for unsecured and secured
joint ventures and funds debt.
which may be partly financed Opportunity
by debt without recourse The scale and quality
to British Land. of our business enables
KRIs: us to access a diverse
- Period until refinancing range of sources of finance
is required (not less than with a spread of repayment
two years) dates. Good access to
- LTV debt capital markets allows
- Net debt to EBITDA us to support business
- Financial covenant headroom requirements and take
- Percentage of debt with advantage of opportunities
interest rate hedging (average as they arise. At 31st
over next five years) March 2022, we have GBP1.3bn
of undrawn, committed,
unsecured revolving facilities
and cash; and post completion
of the Paddington Central
transaction we have no
requirement to refinance
until late 2025.
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
8 Environmental Sustainability Risks
A failure to anticipate - We have a comprehensive Our environmental sustainability
and respond appropriately ESG programme which is regularly risk outlook has increased
and sufficiently reviewed by the Board, Executive in the year and is considered
to (i) environmental Committee and CSR Committee a medium impact risk with
risks or opportunities - The Risk and Sustainability a medium probability.
and (ii) preventative Committees have overseen Overall, the environmental
steps taken by government our TCFD working group to sustainability risk outlook
and society could implement the TCFD recommendations continues to increase
lead to damage to including scenario analyses in prominence and importance
our reputation, disruption to assess our exposure to to our business, our customers
in our operations climate-related physical and other key stakeholders.
and stranded assets. and transition risks Also, regulatory requirements
This risk category - The Sustainability Committee and expectations of compliance
includes the: monitors our performance with best practice have
- increased exposure and management controls. increased and continue
of assets to physical Underpinned by our SBTi-climate to evolve.
environmental hazards, targets, our guiding corporate During the year, we have
driven by climate policies (the Pathway to worked closely with Willis
change Net Zero and the Sustainability Towers Watson to quantify
- policy risk from Brief) establish a series the key physical and transition
the cost of complying of climate and energy targets risks that climate change
with new climate to ensure our alignment poses to our business
regulations with with a societal transition and this is informing
specific performance to net zero that limits our long term strategy.
and/or technology global warming to 1.5degC The most material issues
requirements - Our property management include: flood risk vulnerability;
- overall compliance department operates an environmental the increasing price of
requirements from management system aligned carbon offsets; and the
existing and emerging with ISO 14001. We continue costs of complying with
environmental regulation to hold ISO 14001 and 50001 minimum EPC standards.
- leasing risk as accreditations at our commercial We are continuing to improve
a result of less offices and run ISO-aligned the energy efficiency
sustainable/non-compliant management systems at our of our standing portfolio
buildings retail assets and have completed net
- Climate change and sustainability zero audits of 29 of our
considerations are fully major office and retail
integrated within our investment assets, identifying energy
and development decisions efficient interventions
and are evaluated by the and action plans. Alongside
Investment Committee and this process, we are identifying
Board in all investment interventions which improve
decisions EPC rating of buildings
- Through our Place Based rated C and below to comply
approach to social impact with MEES (Minimum Energy
we understand the most important Efficiency Standard) legislation,
issues and opportunities which is expected to require
in the communities around buildings to be A or B
each of our places and focus rated (or valid exemptions
our efforts collaboratively registered) by 2030.
to ensure we provide places Opportunity
that meet the needs of all We have a clear responsibility
relevant stakeholders but also opportunity to
- We target BREEAM Outstanding manage our business in
on offices developments, the most environmentally
Excellent on retail and responsible and sustainable
HMQ3* on residential. We way we can. This is integral
have also adopted NABERS to our strategy; it creates
UK on all our new office value for our business
developments. and drives positive outcomes
- We undergo assurance for for our stakeholders.
key data and disclosures We have made good progress
across our Sustainability on our 2030 commitments
programme, enhancing the which include ambitious
integrity, quality and usefulness targets to be net zero
of the information we provide. carbon by 2030 and a focus
KRIs: on environmental leadership.
- Energy intensity and carbon We were pleased to retain
emissions. Specifically, our 5 star rating in GRESB,
energy performance certificates the global benchmark for
- Future cost of carbon real estate, achieving
offsets to meet our 2030 5 stars for both Standing
net zero carbon goal Investments and Developments
- Portfolio flood risk for the second year running.
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
9 People and Culture Risks
Inability to recruit, - Our HR strategy is designed Our people and culture
develop and retain to minimise risk through: risk has increased in
staff and Directors - informed and skilled recruitment the year and is considered
with the right skills processes a medium impact risk with
and experience required - talent performance management a medium to high probability.
to achieve the business and succession planning This risk has increased
objectives in a culture for key roles in the year reflecting
and environment where - highly competitive compensation the challenging operating
employees can thrive, and benefits environment caused by
may result in significant - people development and Covid-19, together with
underperformance training general rising wage expectations
or impact the effectiveness - our flexible working policy and a recent increase
of operations and helps retain employees while in employee mobility.
decision making, promoting work-life balance Following the easing of
in turn impacting and helping to improve productivity lockdown restrictions,
business performance. This risk is measured through we have successfully transitioned
employee engagement surveys, our people back to the
wellbeing surveys, employee office, whilst supporting
turnover, exit surveys and individuals with more
retention metrics. We engage flexible working arrangements.
with our employees and suppliers We have focused on staff
to make clear our requirements wellbeing and have actively
in managing key risks including sought feedback from staff
health and safety, fraud through pulse surveys
and bribery, modern slavery and taken several steps
and other social and environmental as a result to promote
risks, as detailed in our wellbeing.
policies and codes of conduct. We are committed to improving
KRIs: the diversity, equality
- Voluntary staff turnover and inclusivity (DE&I)
- Employee engagement and of our business and in
wellbeing November 2021, the CSR
- Diversity and inclusion Committee approved our
DE&I strategy which sets
out our 2030 ambitions
for the business.
Opportunity
We have a broad range
of expertise across our
business which is critical
to the successful delivery
of our strategy. Our staff
turnover remains relatively
low. We will assess our
employee proposition to
ensure it still delivers
what people most value
in a changing labour market.
We have an opportunity
to enhance our good employer
brand, but will continue
to keep this under review,
and will actively monitor
and promote wellbeing.
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
10 Customer Risks
The majority of the - We have a high quality, Our customer risk has
Group's income is diversified customer base reduced from its elevated
comprised of rent and monitor individual exposure position last year but
received from our to individual occupiers is still considered both
customers. This could or sectors. a medium to high impact
be adversely affected - We perform rigorous occupier and probability risk.
by non-payment of covenant checks ahead of Our customer risk was
rent; occupier failures; approving deals and on an heightened at last year
inability to anticipate ongoing basis so that we end as most of our customers
evolving customer can be proactive in managing were unable to operate
needs; inability exposure to weaker occupiers. their businesses due to
to re-let space on An occupier watchlist is Covid-19 related restrictions,
equivalent terms; maintained and regularly impacting their ability
poor customer service reviewed by Risk Committee to pay rent. Whilst our
as well as potential and property teams. performance continued
structural changes - We work with our customers to be impacted, our rent
to lease obligations. to find ways to best meet collection has recovered
their evolving needs. to close to pre-pandemic
- We take a proactive asset levels as the UK economy
management approach to maintain recovered across the year.
a strong occupier line-up. We have continued to work
We are proactive in addressing closely with our customers
key lease breaks and expiries to maximise occupancy
to minimise periods of vacancy and rent collection whilst
- We regularly measure customer monitoring their covenant
satisfaction across our strength and taking actions
customer base through customer appropriately. This is
surveys. reflected in our rent
KRIs: collection which is 97%
- Market letting risk including for the year.
vacancies, upcoming expiries As our markets have continued
and breaks, and speculative to polarise, customers
development demand more from the places
- Occupier covenant strength where they work and shop.
and concentration (including We are well positioned
percentage of rent classified across both our Campuses
as 'High Risk') and Retail & Fulfillment
- Occupancy and weighted portfolios where we focus
average unexpired lease on providing best-in-class-space;
term and this has been evidenced
by our strong leasing
activity.
Looking forward, we are
mindful that higher input
prices may impact the
profitability of our customers,
particularly on the retail
side.
Opportunity
Successful customer relationships
are vital to our business
and continued growth.
Our business model is
centred around our customers
and aims to provides them
with modern and sustainable
space which aligns to
their evolving needs and
that of our markets.
How we monitor and mitigate Change in risk assessment
Risks and impacts the risks in year
11 Operational and Compliance Risks
The Group's ability - The Executive and Risk Our Operational and Compliance
to protect its reputation, Committees maintain a strong risks have been elevated
income and capital focus on the range of operational to a new principal risk
values could be damaged and compliance risks to which is considered a
by a failure to manage our business. medium impact risk with
several key operational Information Systems and a medium probability.
risks to our business Cyber Security Key risks include Information
including: - The InfoSec Steering Committee Systems & Cyber Security,
- Information Systems chaired by the Head of Strategy, Health & Safety, Third
& Cyber Security Digital and Technology, Party Relationships and
- Health & Safety oversees our IT infrastructure, Financial Crime Compliance.
- Third Party relationships cyber security and key IT The wider use of digital
- Financial crime controls and reports to technology across the
compliance the Risk Committee and Audit Group increases the risks
Compliance failures Committee. associated with information
such as breaches - Cyber security risk is systems and cyber security
in regulations, third managed using a recognised such as ransomware, phishing,
party agreements, security framework, supported malware and social engineering.
loan agreements or by best practice security In the wider market, cyber
tax legislation could tools across our technology risks continue to be heightened
also damage reputation infrastructure, IT security due to the rise in attempted
and our financial policies, third party risk cyber attacks, in some
performance. assessments and mandatory cases exploiting changes
user cyber awareness training in working patterns due
Health & Safety to Covid-19.
- The Health, Safety and During the year, our Health
Environment Committee is & Safety team have continued
chaired by the Head of Property to prioritise the safety
Services and governs the of our people whilst working
Health & Safety management away from the office at
systems, processes and performance times as well as the management
in terms of KPIs and reports of our assets and developments
to the Risk, Audit and CSR to ensure the business
Committees is operating in a safe
- All our properties have and compliant manner.
general and fire risk assessments We continue to closely
undertaken annually and monitor the regulatory
any required improvements environment and respond
are implemented within defined to any new requirements,
time frames depending on for instance fire safety
the category of risk improvements, to ensure
- All our employees must compliance.
attend H&S training relevant The Group provides third
to their roles party services to a number
Third Party Relationships of key joint venture partners,
- We have a robust selection the number of which has
process for our key partners expanded in the year,
and suppliers; and contracts and ensuring that the
contain service level agreements provision of those services
which are monitored regularly. is at an appropriate level
- We maintain a portfolio continues to be a key
of approved suppliers to focus for the business.
ensure resilience within Opportunity
our supply chain. Our business is set up
Financial Crime Compliance to navigate and deal with
- We operate a zero tolerance complexity. Our ability
approach for bribery, corruption to manage and operate
and fraud and have policies large complex property
in place to manage and monitor portfolios and developments
these risks. is a key differentiator
- All employees must undertake and allows us to work
mandatory training in these with selected joint venture
areas. partners who value our
KRIs expertise. We will continue
- Information Systems Vulnerability to invest in and develop
Score our platform to deliver
- Cyber Security Breaches these services.
- H&S Risk Assessments
- H&S Incidents
Key: Change in risk assessment from last year
Increase <--> No change Decrease New risk
Directors' Responsibilities Statement
The Directors' Responsibilities Statement below has been
prepared in connection with the full Annual Report and financial
statements for the year ended 31 March 2022. Certain parts of the
Annual Report and financial statements 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 the financial statements and the financial statements 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 and
IFRSs issued by IASB, give a true and fair view of the assets,
liabilities, financial position and profit 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
17 May 2022
Consolidated Income Statement
For the year ended 31 March 2022
2022 2021
Capital Capital
Underlying1 and other Total Underlying1 and other Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 3 430 (20) 410 468 - 468
Costs2 3 (120) (9) (129) (180) - (180)
3 310 (29) 281 288 - 288
Joint ventures (see also below)
3 8 86 158 244 52 (409) (357)
Administrative expenses (88) - (88) (74) - (74)
Valuation movement 4 - 471 471 - (888) (888)
Profit on disposal of investment
properties and investments - 45 45 - 28 28
Net financing costs
financing income 5 - 67 67 - 15 15
financing charges 5 (55) (7) (62) (62) (3) (65)
(55) 60 5 (62) 12 (50)
Profit (loss) on ordinary activities
before taxation 253 705 958 204 (1,257) (1,053)
Taxation 6 4 (2) 2 (26) (4) (30)
Profit (loss) for the year after
taxation 257 703 960 178 (1,261) (1,083)
Attributable to non-controlling
interests 2 - 2 3 (55) (52)
Attributable to shareholders
of the Company 255 703 958 175 (1,206) (1,031)
Earnings per share:
basic 2 103.3p (111.2)p
diluted 2 103.0p (111.2)p
All results derive from continuing operations.
2022 2021
Capital Capital
Underlying1 and other Total Underlying1 and other Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
Results of joint ventures accounted
for using the equity method
Underlying Profit 86 - 86 52 - 52
Valuation movement(4) 4 - 162 162 - (409) (409)
Capital financing costs - (4) (4) - - -
Loss on disposal of investment
properties,
trading properties and investments - - - - (1) (1)
Taxation 6 - - - - 1 1
8 86 158 244 52 (409) (357)
1. See definition in Note 2 and a reconciliation between
Underlying Profit and IFRS profit in Note 17.
2. Included within 'Costs' is a credit relating to provisions
for impairment of tenant debtors, accrued income and tenant
incentives and contracted rent increases of GBP6m (2020/21: charge
of GBP60m). This is disclosed in further detail in Note 7 and Note
10.
3. Included within 'Joint ventures' is a charge relating to
provision for impairment of equity investments and loans to joint
ventures of GBP22m (2020/21: GBP144m), disclosed in further detail
in Note 8.
4. Included within the 'Valuation movement' of GBP162m is a net
valuation movement of GBP110m and the realisation of gain on
disposal of assets into joint ventures of GBP52m, disclosed in
further detail in Note 8.
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2022
2022 2021
GBPm GBPm
Profit (loss) for the year after taxation 960 (1,083)
Other comprehensive income (expense):
Items that will not be reclassified subsequently to profit
or loss:
Net actuarial loss on pension scheme - (13)
Valuation movement on owner-occupied properties - (1)
- (14)
Items that may be reclassified subsequently to profit or
loss:
Gains on cash flow hedges
- Group - 2
- Joint ventures 1 1
1 3
Reclassification of foreign exchange differences on disposal
of subsidiary net investment to the income statement (12) -
Deferred tax on items of other comprehensive income - 6
Other comprehensive expense for the year (11) (5)
Total comprehensive income (expense) for the year 949 (1,088)
Attributable to non-controlling interests 2 (52)
Attributable to shareholders of the Company 947 (1,036)
Consolidated Balance Sheet
As at 31 March 2022
2022 2021
Note GBPm GBPm
ASSETS
Non-current assets
Investment and development properties 7 7,032 6,326
Owner-occupied properties 7 - 2
7,032 6,328
Other non-current assets
Investments in joint ventures 8 2,511 2,120
Other investments 9 41 20
Property, plant and equipment 27 30
Interest rate and currency derivative assets 14 97 135
Debtors - 6
9,708 8,639
Current assets
Trading properties 7 18 26
Debtors 10 39 56
Corporation tax 3 -
Cash and short term deposits 14 74 154
134 236
Total assets 9,842 8,875
LIABILITIES
Current liabilities
Short term borrowings and overdrafts 14 (189) (161)
Creditors 11 (245) (219)
Corporation tax - (7)
(434) (387)
Non-current liabilities
Debentures and loans 14 (2,427) (2,249)
Other non-current liabilities1 12 (152) (128)
Interest rate and currency derivative liabilities 14 (96) (128)
(2,675) (2,505)
Total liabilities (3,109) (2,892)
Net assets 6,733 5,983
EQUITY
Share capital 234 234
Share premium 1,307 1,307
Merger reserve 213 213
Other reserves 5 16
Retained earnings 4,959 4,154
Equity attributable to shareholders of the Company 6,718 5,924
Non-controlling interests 15 59
Total equity 6,733 5,983
EPRA Net Tangible Assets per share2 2 727p 648p
1. See footnote 1 in Note 3.
2. See definition in Note 2.
Consolidated Statement of Cash Flows
For the year ended 31 March 2022
2022 2021
Note GBPm GBPm
Rental income received from tenants 358 320
Fees and other income received 30 38
Operating expenses paid to suppliers and employees (140) (125)
Indirect taxes paid in respect of operating activities - (15)
Sale of trading properties 8 -
Cash generated from operations 256 218
Interest paid (62) (70)
Corporation taxation payments (6) (33)
Distributions and other receivables from joint ventures 8 57 34
Net cash inflow from operating activities 245 149
Cash flows from investing activities
Development and other capital expenditure (259) (172)
Purchase of investment properties (596) (52)
Sale of investment properties 187 1,073
Sale of investment properties to Canada Water Joint
Venture 290 -
Purchase of investments (14) (5)
Sale of investments - 108
Indirect taxes paid in respect of investing activities (5) (2)
Loan repayments from joint ventures 133 40
Investment in and loans to joint ventures (121) (84)
Capital distributions from joint ventures - 4
Net cash (outflow) inflow from investing activities (385) 910
Cash flows from financing activities
Dividends paid 15 (155) (76)
Dividends paid to non-controlling interests (6) (1)
Capital payments in respect of interest rate derivatives (7) (10)
Purchase of non-controlling interests in Hercules Unit
Trust (38) -
Decrease in lease liabilities (4) (7)
Decrease in bank and other borrowings (213) (1,218)
Drawdowns on bank and other borrowings 483 214
Net cash inflow (outflow) from financing activities 60 (1,098)
Net decrease in cash and cash equivalents (80) (39)
Cash and cash equivalents at 1 April 154 193
Cash and cash equivalents at 31 March 74 154
Cash and cash equivalents consists of:
Cash and short term deposits 14 74 154
Consolidated Statement of Changes in Equity
For the year ended 31 March 2022
Hedging
and Re- Non-
Share Share translation valuation Merger Retained controlling Total
capital premium reserve1 reserve reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 April
2021 234 1,307 14 2 213 4,154 5,924 59 5,983
Profit for the year
after taxation - - - - - 958 958 2 960
Gains on cash flow
hedges -
joint ventures - - - 1 - - 1 - 1
Reclassification of
foreign
exchange
differences on
disposal
of subsidiary net
investment - - (12) - - - (12) - (12)
Other comprehensive
income - - (12) 1 - - (11) - (11)
Total comprehensive
(expense)
income for the
year - - (12) 1 - 958 947 2 949
Fair value of share
and share
option awards - - - - - 2 2 - 2
Purchase of the
units from
non-controlling
interests(2) - - - - - 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 4,959 6,718 15 6,733
Balance at 1 April
2020 234 1,307 12 26 213 5,243 7,035 112 7,147
Loss for the year
after taxation - - - - - (1,031) (1,031) (52) (1,083)
Revaluation of
owner-occupied
property - - - (1) - - (1) - (1)
Gains on cash flow
hedges -
Group - - 2 - - - 2 - 2
Gains on cash flow
hedges -
joint ventures - - - 1 - - 1 - 1
Reserves transfer
on disposal
of owner-occupied
property - - - (30) - 30 - - -
Net actuarial loss
on pension
scheme - - - - - (13) (13) - (13)
Deferred tax on
items of other
comprehensive
income - - - 6 - - 6 - 6
Other comprehensive
income - - 2 (24) - 17 (5) - (5)
Total comprehensive
income (expense)
for the year - - 2 (24) - (1,014) (1,036) (52) (1,088)
Fair value of share
and share
option awards - - - - - 3 3 - 3
Dividends payable
in year (8.40p
per share) - - - - - (78) (78) - (78)
Dividends payable
by subsidiaries - - - - - - - (1) (1)
Balance at 31 March
2021 234 1,307 14 2 213 4,154 5,924 59 5,983
1. The balance at the beginning of the current year includes
GBP15m in relation to translation and (GBP1m) in relation to
hedging (2020/21: GBP15m and (GBP3m)). Opening and closing balances
in relation to hedging relate to continuing hedges only.
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 GBP38m. 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 information. The book value of the net assets
purchased at 1 April 2021 were GBP40m and consequently GBP40m 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 2022 or
2021, but is derived from those accounts. Statutory accounts for
2021 have been delivered to the Registrar of Companies and those
for 2022 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 2022 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').
On 31 December 2020 EU-adopted IFRS was brought into UK law and
became UK-adopted International Accounting Standards, with future
changes to IFRS being subject to endorsement by the UK Endorsement
Board. The consolidated financial statements have transitioned to
UK-adopted International Accounting Standards for the year ended 31
March 2022. This change constitutes a change in accounting
framework. However, there is no impact on recognition, measurement
or disclosure in the year reported as a result of the change in
framework.
While the information included in this preliminary announcement
has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
('IFRSs'), this announcement does not itself contain sufficient
information to comply with IFRSs. The Company expects to publish
full financial statements that comply with IFRSs in June 2022.
In the current financial year the Group has adopted a number of
minor amendments to standards effective in the year, none of which
have had a material impact on the Group.
These amendments include IFRS 16 'Leases' - Covid-19-Related
Rent Concessions, and amendments to IFRS 9, IFRS 7, IFRS 4 and IFRS
16 Interest Rate Benchmark Reform - Phase 2.
A number of new standards and amendments to standards and
interpretations have been issued but are not yet effective for the
current accounting period. These amendments include amendments to
IAS 1 'Presentation of Financial Statements' on classification of
liabilities, a number of narrow-scope amendments to IFRS 3, IAS 16,
IAS 17, IAS 37, IAS 1, IAS 8, IAS 12, IFRS 10 and IAS 28 and some
annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16. The
above amendments are not expected to have a significant impact on
the Group's results.
Going concern
The financial information is prepared on a going concern basis.
The balance sheet shows that the Group is in a net current
liability position, predominantly due to short term borrowings and
overdrafts of GBP189m and other creditors of GBP245m. The Group has
access to GBP1.3bn 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 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.
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. 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
information.
The general risk environment in which the Group operates has
remained heightened during the period due to the continued impact
of Covid-19, and the emergence of the UK economy from the pandemic,
including related challenges in parts of the UK retail market and
macroeconomic headwinds through rising inflation. Despite this the
general risk environment is considered to have improved during the
year, with the lifting of lockdown restrictions resulting in
improvement in activity across the Group's segments, rents
stabilising, improved rental collection rates and footfall and
sales in retail parks returning close to, and in some cases above,
pre-pandemic levels.
The emergence of the conflict in Ukraine in February 2022 has
led to increased global economic uncertainty with sanctions imposed
upon Russia and heightened political and diplomatic tensions. The
Directors do not consider the conflict at this stage to have had a
material impact on the Group's financial information owing to the
nature of the Group's UK focused operations and limited exposure to
Ukrainian and Russian businesses. Additionally, our valuers
consider there to be no current evident impact of the conflict on
the UK property sector. The Directors and our valuers are closely
monitoring the conflict for any future developments that may change
the risk environment in which the Group operates.
Key sources of estimation uncertainty
Valuation of investment, development, trading and owner-occupied
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 are inherently subjective, as they
are based upon valuer assumptions and estimations, that form part
of the key unobservable inputs of the valuation, which may prove to
be inaccurate.
Impairment provisioning of lease debtors (including accrued
income) and lease incentives, which are presented within investment
properties: The impact of and emergence from Covid-19 has given
rise to an increase in lease 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 2022 the impairment provisions calculated using the expected
credit loss model under IFRS 9 against these balances are lower
than in the prior 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. The loss
rates attributed to each credit risk rating for tenant incentives
tends to be lower than that attributed to lease debtors on the
basis that the associated credit risk on these balances, which
relate to the tenant's future lease liabilities, is lower than that
associated to tenant debtors outstanding as a result of
Covid-19.
Other sources of estimation uncertainty that are not key 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 do not consider there to be any critical
accounting judgements in the preparation of the Group's financial
information.
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 in
respect of the Canada Water Joint Venture transaction that occurred
in the year ended 31 March 2022 (see Note 8].
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 the Canada Water Joint Venture transaction in the
year ended 31 March 2022 (see Note 8).
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. In
the current year to 31 March 2022, a GBP29m surrender premium
payment and a GBP12m 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. No Company
adjustments were made in the prior year to 31 March 2021.
2022 2021
Relevant Earnings Relevant Earnings
Relevant number per Relevant number per
earnings of shares share earnings of shares share
Earnings per share GBPm million pence GBPm million pence
Underlying
Underlying basic 255 927 27.5 175 927 18.9
Underlying diluted 255 930 27.4 175 930 18.8
EPRA
EPRA basic 238 927 25.7 175 927 18.9
EPRA diluted 238 930 25.6 175 930 18.8
IFRS
Basic 958 927 103.3 (1,031) 927 (111.2)
Diluted 958 930 103.0 (1,031) 927 (111.2)
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 is 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, 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.
2022 2021
Net asset Relevant Net asset
Relevant value number value
Relevant number per Relevant of per
net assets of shares share net assets shares share
Net asset value per share GBPm million pence GBPm million pence
EPRA
EPRA NTA 6,771 932 727 6,050 933 648
EPRA NRV 7,403 932 794 6,599 933 707
EPRA NDV 6,542 932 702 5,678 933 609
IFRS
Basic 6,733 927 726 5,983 927 645
Diluted 6,733 932 722 5,983 933 641
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.
2022 2021
Increase Dividend Decrease Dividend
in per in per
NTA per share Total NTA per share Total
share paid accounting share paid accounting
pence pence return pence pence return
Total accounting return 79 16.96 14.8% (125) 8.40 (15.1%)
3 Revenue and costs
2022 2021
Capital Capital
Underlying and other Total Underlying and other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Rent receivable 332 - 332 370 - 370
Spreading of tenant incentives and
contracted rent increases 5 - 5 7 - 7
Surrender premia(1) 1 (29) (28) - - -
Gross rental income 338 (29) 309 377 - 377
Trading property sales proceeds - 9 9 - - -
Service charge income 62 - 62 64 - 64
Management and performance fees (from
joint ventures) 9 - 9 7 - 7
Other fees and commissions 21 - 21 20 - 20
Revenue 430 (20) 410 468 - 468
Trading property cost of sales - (9) (9) - - -
Service charge expenses (55) - (55) (59) - (59)
Property operating expenses (54) - (54) (45) - (45)
Release (provisions) for impairment
of trade debtors and accrued income 7 - 7 (52) - (52)
Provisions for impairment of tenant
incentives and contracted rent increases (1) - (1) (8) - (8)
Other fees and commissions expenses (17) - (17) (16) - (16)
Costs (120) (9) (129) (180) - (180)
310 (29) 281 288 - 288
1. 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 GBP29m payment to one party for the surrender of an
agreement for lease, with a subsequent premium of GBP29m 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 GBP29m 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 GBP29m
surrender premium received was initially recognised as deferred
income on the balance sheet, with the remeasured amount as at 31
March 2022 principally within other non-current liabilities (see
Note 12).
The cash element of net rental income (gross rental income less
property operating expenses) recognised during the year ended 31
March 2022 from properties which were not subject to a security
interest was GBP232m (2020/21: GBP202m). Property operating
expenses relating to investment properties that did not generate
any rental income were GBPnil (2020/21: GBPnil). Contingent rents
of GBP6m (2020/21: GBP5m) 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
2022 2021
GBPm GBPm
Consolidated income statement
Revaluation of properties 471 (886)
Revaluation of owner-occupied properties - (2)
Revaluation of properties held by joint ventures accounted
for using the equity method(1) 162 (409)
633 (1,297)
Consolidated statement of comprehensive income
Revaluation of owner-occupied properties - (1)
633 (1,298)
1. Comprises net valuation movement of GBP110m and realisation
of gain on disposal of assets into joint ventures of GBP52m,
disclosed in further detail in Note 8.
5 Net financing costs
2022 2021
GBPm GBPm
Underlying
Financing charges
Facilities and overdrafts (20) (22)
Derivatives 29 31
Other loans (68) (74)
Obligations under head leases (3) (4)
(62) (69)
Development interest capitalised 7 7
(55) (62)
Financing income
Deposits, securities and liquid investments - -
- -
Net financing charges - Underlying (55) (62)
Capital and other
Financing charges
Valuation movement on fair value hedge accounted derivatives1 (67) (83)
Valuation movement on fair value hedge accounted debt1 61 83
Fair value movement on convertible bonds - (3)
Valuation movement on non-hedge accounted derivatives (1) -
(7) (3)
Financing income
Reclassification of foreign exchange differences on disposal
of subsidiary net investment from equity(2) 12 -
Valuation movement on non-hedge accounted derivatives 55 15
67 15
Net financing charges - Capital and other 60 12
Net financing costs
Total financing income 67 15
Total financing charges (62) (65)
Net financing costs 5 (50)
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 GBP6m (2020/21:
GBPnil).
2. GBP12m has been reclassified from the hedging and translation
reserve to the income statement in the year ended 31 March 2022,
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 GBP13m (2020/21: GBP11m). Interest on
development expenditure is capitalised at the Group's weighted
average interest rate of 2.4% (2020/21: 2.2%). The weighted average
interest rate on a proportionately consolidated basis at 31 March
2022 was 2.9% (2020/21: 2.9%).
6 Taxation
2022 2021
GBPm GBPm
Taxation income (expense)
Current taxation
Underlying Profit
Current period UK corporation taxation (2021/22: 19%; 2020/21:
19%) (2) (2)
Underlying Profit adjustments in respect of prior periods1,
2 6 (24)
Total current Underlying Profit taxation income (expense) 4 (26)
Capital and other profit
Current period UK corporation taxation (2021/22: 19%; 2020/21:
19%) - -
Capital and other profit adjustments in respect of prior
periods (2) 1
Total current Capital and other profit taxation income (2) 1
Total current taxation income (expense) 2 (25)
Deferred taxation on revaluations and derivatives - (5)
Group total taxation income (expense) 2 (30)
Attributable to joint ventures3 - 1
Total taxation income (expense) 2 (29)
Taxation reconciliation
Profit (loss) on ordinary activities before taxation 958 (1,053)
Less: (profit) loss attributable to joint ventures (244) 358
Group profit (loss) on ordinary activities before taxation 714 (695)
Taxation on (profit) loss on ordinary activities at UK corporation
taxation rate of 19% (2020/21: 19%) (136) 132
Effects of:
- REIT exempt income and gains 126 (134)
- Taxation losses 9 -
- Deferred taxation on revaluations and derivatives - (5)
- Adjustments in respect of prior years 3 (23)
Group total taxation income (expense) 2 (30)
1. The credit in the current year includes GBP4m as an
adjustment to the tax due in respect of the suspension on the
dividend in 2020/21 and other credits relating to prior periods of
GBP2m relating to tax provisions in respect of historic taxation
matters and points of uncertainty.
2. The charge in the prior year includes the GBP28m corporation
tax charge in relation to the year ended 31 March 2020 of the
agreed payment with HMRC for temporarily suspending the dividend
due to Covid-19, offset by other credits in respect of prior
periods of GBP4m relating to tax provisions in respect of historic
taxation matters and points of uncertainty.
3. A current taxation income of GBPnil (2020/21: GBP1m) and a
deferred taxation credit of GBPnil (2020/21: GBPnil) arose on
profits attributable to joint ventures.
Taxation income attributable to Underlying Profit for the year
ended 31 March 2022 was GBP4m (2020/21: GBP26m expense). Taxation
expense attributable to Capital and other profit was GBP2m
(2020/21: GBP1m income). Corporation tax receivable as at 31 March
2022 was GBP3m (2020/21: GBP7m payable) as shown on the balance
sheet.
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 2022
Investment
and
Retail development Owner-
Campuses & Fulfilment Developments properties Occupied
Level Level Level Level Trading Level
3 3 3 3 Properties 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Carrying value at 1 April 2021 3,465 2,139 722 6,326 26 2 6,354
Additions
- property purchases 110 486 - 596 - - 596
- development expenditure1 64 3 124 191 - - 191
- capitalised interest and staff
costs 2 - 6 8 - - 8
- capital expenditure on asset
management initiatives 5 13 - 18 - - 18
- right-of-use assets 4 - - 4 - - 4
185 502 130 817 - - 817
Disposals (501) (104) - (605) (8) (2) (615)
Reclassifications 181 - (181) - - - -
Revaluations included in income
statement 126 311 34 471 - - 471
Movement in tenant incentives
and contracted rent uplift
balances 21 2 - 23 - - 23
Carrying value at 31 March 2022 3,477 2,850 705 7,032 18 - 7,050
Lease liabilities (Notes 11
and 12)2 (105)
Less valuation surplus on
right-of-use
assets3 (9)
Valuation surplus on trading
properties 8
Group property portfolio valuation
at 31 March 2022 6,944
Non-controlling interests (15)
Group property portfolio valuation at 31 March
2022 attributable to shareholders 6,929
1. Development expenditure includes government grants received
for the development of affordable and social housing of GBP4m.
2. The GBP26m difference between lease liabilities of GBP105m
and GBP131m per Notes 11 and 12 relates to a GBP26m lease liability
where the right-of-use asset is classified as property, plant and
equipment.
3. 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 GBP6,944m
above.
The Group entered into a Joint Venture agreement with
AustralianSuper on 7 March 2022 in relation to the Canada Water
Campus, resulting in the Group disposing of GBP474m of investment
and development properties and a resulting gain in the Capital and
other column of the consolidated income statement of GBP44m.
As further explained in Note 17, from 1 April 2021, the Group
now reports under two operating segments, Campuses and Retail &
Fulfilment, in addition to Development properties which are
disclosed separately due to the differing basis of valuation as
discussed in further detail within this note.
Property valuation
The different valuation method levels are defined below:
Level Quoted prices (unadjusted) in active markets for identical assets
1: or liabilities.
Level Inputs other than quoted prices included within Level 1 that are
2: observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level Inputs for the asset or liability that are not based on observable
3: 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 and owner-occupied
properties, and costs to complete for development properties.
Further analysis and sensitivity disclosures of these key
unobservable inputs have been included on the following pages.
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 general risk environment in which the Group operates has
remained heightened during the period due to the continued impact
of Covid-19, and the emergence of the UK economy from the pandemic,
including related challenges in parts of the UK retail market and
macroeconomic headwinds through rising inflation. Despite this the
general risk environment is considered to have improved during the
year, with the lifting of lockdown restrictions resulting in
improvement in activity across the Group's segments, rents
stabilising, improved rental collection rates and footfall and
sales in retail parks returning close to, and in some cases above,
pre-pandemic levels.
The emergence of the conflict in Ukraine in February 2022 has
led to increased global economic uncertainty with sanctions imposed
upon Russia and heightened political and diplomatic tensions. The
Directors do not consider the conflict at this stage to have had a
material impact on the Group's financial information, owing to the
nature of the Group's UK focused operations and limited exposure to
Ukrainian and Russian businesses. Additionally, our valuers
consider there to be no current evident impact of the conflict on
the UK property sector. The Directors and our valuers are closely
monitoring the conflict for any future developments that may change
the risk environment in which the Group operates.
In preparing their valuations during the pandemic lockdown
periods in 2020/21, our valuers had considered the impact of
concessions agreed with tenants at the relevant balance sheet date,
which mainly related to rent deferrals and rent-free periods, on
valuations, primarily of retail assets. With the lifting of
lockdown restrictions during 2021/22, the number of concessions
agreed with tenants has decreased and following the cessation of
the general moratorium on commercial evictions and restrictions on
commercial rent arrears recovery on 25 March 2022, the valuers have
assumed that rental income will be received, unless there are
specific concession agreements in place. The valuers have also
given consideration to occupiers in higher risk sectors, and those
assumed to be at risk of default, in determining the appropriate
yields to apply.
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 and the Chief Financial
Officer. The valuers meet with the external auditors 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 risk 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.
Copies of the valuation certificates of Knight Frank LLP, CBRE,
Jones Lang LaSalle and Cushman & Wakefield can be found at
britishland.com/reports.
A breakdown of valuations split between the Group and its share
of joint ventures is shown below:
2022 2021
Joint Joint
Group ventures Total Group ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Knight Frank LLP 1,387 37 1,424 1,375 40 1,415
CBRE 1,906 448 2,354 1,642 124 1,766
Jones Lang LaSalle 3,330 638 3,968 849 506 1,355
Cushman & Wakefield 321 2,415 2,736 2,381 2,378 4,759
Total property portfolio valuation 6,944 3,538 10,482 6,247 3,048 9,295
Non-controlling interests (15) - (15) (137) (26) (163)
Total property portfolio valuation
attributable to shareholders(1) 6,929 3,538 10,467 6,110 3,022 9,132
1. The total property portfolio valuation for joint ventures is
GBP3,538m, compared to the total investment and trading properties
of GBP3,545 disclosed in Note 8. The GBP3,545m includes GBP12m of
trading properties and excludes GBP19m of headleases, both at Group
share.
Information about fair value measurements using unobservable
inputs (Level 3) for the year ended 31 March 2022
Costs to complete
ERV per sq ft Equivalent yield per sq ft
Fair value
at
31 March
2022 Valuation Min Max Average Min Max Average Min Max Average
Investment GBPm technique GBP GBP GBP % % % GBP GBP GBP
Investment
Campuses 3,419 methodology 9 159 56 3 7 4 - 234 24
Investment
Retail & Fulfilment 2,794 methodology 2 30 17 2 13 6 - 36 7
Residual
Developments 705 methodology 27 88 75 4 5 4 214 812 391
Total 6,918
Trading properties
at fair value 26
Group property
portfolio valuation 6,944
Provisions for impairment of tenant incentives and contracted
rent increases
A provision of GBP23m (31 March 2021: GBP23m) 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 GBP1m (2020/21: GBP8m) (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 2022 on a Group
and on a proportionally consolidated basis.
Proportionally
Group consolidated
Movement in provisions for impairment of tenant incentives GBPm GBPm
Provisions for impairment of tenant incentives as at 31
March 2021(1) 23 29
Increase in provisions for impairment of tenant incentives
due to acquisition on 1 April 2021(1) - 2
Provisions for impairment of tenant incentives as at 1
April 2021(1) 23 31
Write-offs of tenant incentives (1) (4)
Movement in provisions for impairment of tenant incentives 1 5
Total provision movement recognised in income statement 1 5
Provisions for impairment of tenant incentives as at 31
March 2022 23 32
1. The provisions for impairment of tenant incentives as at 1
April 2021 on a proportionately consolidated basis is GBP2m higher
than the proportionately consolidated provision recognised as at 31
March 2021. This is as a result of the acquisition of the remaining
21.9% units of Hercules Unit Trust on 1 April 2021.
8 Joint ventures
Summary movement for the year of the investments in joint
ventures
Equity Loans Total
GBPm GBPm GBPm
At 1 April 2021 1,459 661 2,120
Additions 252 57 309
Disposals (34) (70) (104)
Share of profit on ordinary activities after taxation1 264 (20) 244
Distributions and dividends:
- Capital - - -
- Revenue (59) - (59)
Hedging and exchange movements 1 - 1
At 31 March 2022 1,883 628 2,511
1. The share of profit on ordinary activities after taxation
comprises equity accounted profits of GBP266m and IFRS 9 impairment
charges against equity investments and loans of GBP22m, relating to
MSC Property Intermediate Holdings Limited (loan impairment of
GBP17m), WOSC Partners Limited Partnership (loan impairment of
GBP3m) and The Southgate Limited Partnership (equity impairment of
GBP2m). 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 Group entered into a new Joint Venture agreement with
AustralianSuper on 7 March 2022 in relation to the Canada Water
Campus. The Group has recognised a share of the joint venture's
loss of GBP6m in addition to the realisation of the gain on
disposal of assets into the joint venture of GBP52m. Therefore the
Group has recognised a share of total comprehensive income of
GBP46m and share of net assets less shareholders loans of GBP294m
in relation to this new joint venture in the year.
The summarised income statements and balance sheets below and on
the following page 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 2022
MSC Property BL West
Broadgate Intermediate End
REIT Holdings WOSC Partners Offices
Ltd Ltd5 Limited Partnership5 Limited
Partners Euro Bluebell Norges Bank Norges Bank
LLP Investment Investment Allianz
(GIC) Management Management SE
Property sector Shopping
City Offices Centres West End West End
Broadgate Meadowhall Offices Offices
Group share 50% 50% 25% 25%
Summarised income statements
Revenue4 228 75 10 26
Costs (76) (16) (4) (7)
152 59 6 19
Administrative expenses (1) - - -
Net interest payable (62) (27) - (5)
Underlying Profit 89 32 6 14
Net valuation movement 220 (20) (15) 4
Capital financing (costs) income (13) - - 9
Profit (loss) on disposal of investment - - -
properties and investments -
Profit (loss) on ordinary activities
before taxation 296 12 (9) 27
Taxation - - - -
Profit (loss) on ordinary activities
after taxation 296 12 (9) 27
Other comprehensive income - 3 - -
Total comprehensive income (expense) 296 15 (9) 27
Realisation of gain on disposal
of assets into joint ventures - - - -
British Land share of total comprehensive
income (expense) 148 6 (2) 7
British Land share of distributions
payable 34 2 - 4
Summarised balance sheets
Investment and trading properties 4,829 760 149 525
Other non-current assets 30 - - 9
Current assets 17 8 3 3
Cash and deposits 126 34 4 7
Gross assets 5,002 802 156 544
Current liabilities (89) (45) (4) (11)
Bank and securitised debt (1,570) (517) - (159)
Loans from joint venture partners (845) (523) (211) (15)
Other non-current liabilities - (12) (4) (11)
Gross liabilities (2,504) (1,097) (219) (196)
Net assets (liabilities) 2,498 (295) (63) 348
British Land share of net assets
less shareholder loans 1,249 - - 87
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.
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, BL Sainsbury's Superstores Limited and Reading Gate
Retail Park Co-Ownership. The Reading Gate Retail Park Co-Ownership
was acquired during the year ended 31 March 2022, with the Group
acquiring a 50% share from Reassure Limited, and The National
Farmers Union Mutual Insurance Society Limited owning the remaining
50% share.
4. Revenue includes gross rental income at 100% share of GBP290m
(2020/21: GBP262m).
5. In accordance with the Group's accounting policies detailed
in Note 1, the Group recognises a nil equity investment in joint
ventures in a net liability position at period end.
6. The Group entered into a new Joint Venture agreement with
AustralianSuper on 7 March 2022 in relation to the Canada Water
Campus. The transaction value of the assets transferred by the
Group on formation of the joint venture at 100% was GBP580m. On
disposal of the assets into the joint venture and in accordance
with IAS 28, the Group recognised a gain of GBP44m (net of
transaction costs of GBP9m) representing the gain realised to the
extent of AustralianSuper's interest in the joint venture. At the
disposal date, the remaining gain of GBP52m relating to the Group's
interest in the joint venture was unrealised and included within
the Group's investment in the joint venture which was based on the
carrying value of the assets transferred at the disposal date. As
the assets transferred relate to investment property measured at
fair value, this gain was subsequently realised and recognised when
the joint venture remeasured these assets to fair value at 31 March
2022. The Group has also recognised its share of the joint
venture's loss of GBP6m compared to the joint venture's total loss
of GBP12m, from 7 March 2022 to 31 March 2022.
7. Total Group share of GBP245m comprises of the Group's share
of total comprehensive income of GBP193m and the realisation of
gain on disposal of assets into joint ventures of GBP52m.
The SouthGate USS Hercules Total
BL CW Upper Limited joint Unit Trust Other Total Group share
Limited Partnership(6) Partnership ventures1 joint ventures2 joint ventures3 2022 2022(7)
Universities
Superannuation
Aviva Scheme Group
AustralianSuper Investors PLC
Canada Water Shopping Shopping Retail
Campus Centres Centres Parks
50% 50% 50% Various
1 13 12 26 2 393 189
(1) (3) (2) (5) - (114) (55)
- 10 10 21 2 279 134
- - - - - (1) (1)
- (1) - - - (95) (47)
- 9 10 21 2 183 86
(12) (7) 9 23 15 217 110
- - - - - (4) (4)
- - - - - - -
(12) 2 19 44 17 396 192
- - - - - - -
(12) 2 19 44 17 396 192
- - - - - 3 1
(12) 2 19 44 17 399 193
52 - - - - 52 52
46 1 10 22 8 245
- 3 4 12 - 59
565 139 140 261 83 7,451 3,545
- - - - - 39 17
6 2 - 1 1 41 31
39 8 7 12 3 240 117
610 149 147 274 87 7,771 3,710
(23) (6) (6) (6) - (190) (93)
- - - - - (2,246) (1,083)
- - (31) - (71) (1,696) (792)
- (28) - - - (55) (23)
(23) (34) (37) (6) (71) (4,187) (1,991)
587 115 110 268 16 3,584 1,719
294 58 55 133 7 1,883
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.
Operating cash flows of joint ventures (Group share)
2022 2021
GBPm GBPm
Rental income received from tenants 153 119
Operating expenses paid to suppliers and employees (28) (26)
Cash generated from operations 125 93
Interest paid (44) (47)
Interest received - -
UK corporation tax received (paid) 2 (2)
Cash inflow from operating activities 83 44
Cash inflow from operating activities deployed as:
Surplus cash retained within joint ventures 26 10
Revenue distributions per consolidated statement of cash
flows 57 34
Revenue distributions split between controlling and non-controlling
interests
Attributable to non-controlling interests - 2
Attributable to shareholders of the Company 57 32
9 Other investments
2022 2021
Fair Fair
value value
through through
profit Amortised Intangible profit Amortised Intangible
or loss cost assets Total or loss cost assets Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 6 2 12 20 111 3 11 125
Additions 14 2 2 18 3 - 5 8
Transfers / disposals - - - - (109) (1) - (110)
Revaluation 8 - - 8 1 - - 1
Amortisation - - (5) (5) - - (4) (4)
At 31 March 28 4 9 41 6 2 12 20
The amount included in the fair value through profit or loss
relates to private equity/venture capital investments of GBP28m
(2020/21: GBP6m) 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
2022 2021
GBPm GBPm
Trade and other debtors 24 38
Prepayments and accrued income 11 14
Rental deposits 4 4
39 56
Trade and other debtors are shown after deducting a provision
for impairment against tenant debtors of GBP47m (2020/21: GBP57m).
Accrued income is shown after deducting a provision for impairment
of GBP1m (2020/21: GBP5m). 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
GBP7m (2020/21: GBP52m charge), as disclosed in Note 3. Within this
credit, GBP8m (2020/21: GBP9m) represents a charge for provisions
for impairment made against receivable balances related to billed
rental income due on 25 March rent quarter day. Rental income is
recognised on a straight-line basis over the lease term in
accordance with IFRS 16. The majority of rental income relating to
25 March rent quarter day has, therefore, not yet been recognised
in the income statement in the current year and is instead
recognised as deferred income, within current liabilities as at 31
March 2022. As the rent due on 25 March has been billed to the
tenant, however, the Group is required to provide for expected
credit losses at the balance sheet date in accordance with IFRS 9.
This creates a mismatch in the period between the recognition of
rental income and the impairment of the associated rent
receivable.
The decrease in provisions for impairment of trade debtors and
accrued income of GBP15m (2020/21: GBP48m increase) is equal to the
release to the income statement of GBP7m (2020/21: GBP52m charge),
less write-offs of trade debtors of GBP8m (2020/21: GBP4m).
For the year ended 31 March 2022, the Group has made amendments
in the expected credit loss model that calculates the provision for
tenant debtors. As the UK economy emerges from the impact of the
Covid-19 pandemic, the amended model places greater emphasis on the
historical experience collection rate, in addition to the ageing
profile and tenant risk ratings. This amendment has led to a
release in the tenant debtor provision of GBP7m.
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 2022.
Proportionally
Movement in provisions for impairment of tenant debtors Group consolidated
and accrued income GBPm GBPm
Provisions for impairment of tenant debtors and accrued
income as at 31 March 2021(1) 62 78
Increase in provisions for impairment of tenant debtors
and accrued income due to acquisition on 1 April 2021(1) - 5
Provisions for impairment of tenant debtors and accrued
income as at 1 April 2021(1) 62 83
Write-offs of tenant debtors (8) (9)
Movement in provisions for impairment of tenant debtors (6) (12)
Movement in provisions for impairment of accrued income (1) (1)
Total provision movement recognised in income statement (7) (13)
Provisions for impairment of tenant debtors and accrued
income as at 31 March 2022 47 61
1. The provisions for impairment of tenant debtors and accrued
income as at 1 April 2021 on a proportionately consolidated basis
is GBP5m higher than the proportionately consolidated provision
recognised as at 31 March 2021. This is as a result of the
acquisition of the remaining 21.9% units of Hercules Unit Trust on
1 April 2021.
11 Creditors
2022 2021
GBPm GBPm
Trade creditors 74 55
Accruals 70 68
Deferred income 66 62
Other taxation and social security 25 25
Lease liabilities 6 5
Rental deposits due to tenants 4 4
245 219
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
2022 2021
GBPm GBPm
Lease liabilities 125 128
Deferred income 27 -
152 128
13 Deferred tax
The movement on deferred tax is as shown below:
Deferred tax assets year ended 31 March 2022
Debited
1 April to Credited 31 March
2021 income to equity 2022
GBPm GBPm GBPm GBPm
Temporary differences - - - -
Deferred tax liabilities year ended 31 March 2022
GBPm GBPm GBPm GBPm
Property and investment revaluations - - - -
Net deferred tax liabilities - - - -
Deferred tax assets year ended 31 March 2021
Debited
1 April to Credited 31 March
2020 income1 to equity2 2021
GBPm GBPm GBPm GBPm
Temporary differences 5 (5) - -
5 (5) - -
Deferred tax liabilities year ended 31 March 2021
GBPm GBPm GBPm GBPm
Property and investment revaluations (6) - 6 -
(6) - 6 -
Net deferred tax assets (liabilities) (1) (5) 6 -
The following corporation tax rates have been substantively
enacted; 19% effective from 1 April 2017 and 25% effective 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.
The Group has recognised a deferred tax asset calculated at 19%
(2020/21: 19%) of GBPnil (2020/21: GBPnil) in respect of capital
losses from previous years available for offset against future
capital profit. Further unrecognised deferred tax assets in respect
of capital losses of GBP137m (2020/21: GBP137m) exist at 31 March
2022.
The Group has recognised deferred tax assets on derivative
revaluations to the extent that future matching taxable profits are
expected to arise of GBPnil (2020/21: GBPnil). At 31 March 2022 the
Group had an unrecognised deferred tax asset calculated at 19%
(2020/21: 19%) of GBP47m (2020/21: GBP45m) in respect of UK revenue
tax losses from previous years.
Under the REIT regime development properties which are sold
within three years of completion do not benefit from tax exemption.
At 31 March 2022 the value of such properties is GBP1,429m
(2020/21: GBP801m) and if these properties were to be sold and no
tax exemption was available the tax arising would be GBP21m
(2020/21: GBP0.3m).
14 Net debt
2022 2021
Footnote GBPm GBPm
Secured on the assets of the Group
5.264% First Mortgage Debenture Bonds 2035 347 361
5.0055% First Mortgage Amortising Debentures 2035 88 89
5.357% First Mortgage Debenture Bonds 2028 227 241
Bank loans 1 347 358
1,009 1,049
Unsecured
4.635% Senior US Dollar Notes 2021 2 - 157
4.766% Senior US Dollar Notes 2023 2 101 102
5.003% Senior US Dollar Notes 2026 2 66 67
3.81% Senior Notes 2026 102 111
3.97% Senior Notes 2026 103 112
2.375% Sterling Unsecured Bond 2029 298 298
4.16% Senior US Dollar Notes 2025 2 77 77
2.67% Senior Notes 2025 37 37
2.75% Senior Notes 2026 37 37
Floating Rate Senior Notes 2028 80 80
Floating Rate Senior Notes 2034 102 102
Facilities and overdrafts 604 181
1,607 1,361
Gross debt 3 2,616 2,410
Interest rate and currency derivative liabilities 96 128
Interest rate and currency derivative assets (97) (135)
Cash and short term deposits 4,5 (74) (154)
Total net debt 2,541 2,249
Net debt attributable to non-controlling interests 1 (70)
Net debt attributable to shareholders of the Company 2,542 2,179
Total net debt 2,541 2,249
Amounts payable under leases (Notes 11 and 12) 131 133
Total net debt (including lease liabilities) 2,672 2,382
Net debt attributable to non-controlling interests (including
lease liabilities) 4 1 (75)
Net debt attributable to shareholders of the Company
(including lease liabilities) 2,673 2,307
1. These are non-recourse borrowings with no recourse for
repayment to other companies or assets in the Group.
2022 2021
GBPm GBPm
Hercules Unit Trust 347 358
347 358
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 2022 was
GBP2,562m (2020/21: GBP2,291m). Included in this is the principal
amount of secured borrowings and other borrowings of non-recourse
companies of GBP985m.
4. Included in cash and short term deposits is the cash and
short term deposits of Hercules Unit Trust, of which GBP1m is the
proportion not beneficially owned by the Group.
5. Cash and deposits not subject to a security interest amount
to GBP64m (2020/21: GBP145m).
Maturity analysis of net debt
2022 2021
GBPm GBPm
Repayable: within one year and on demand 189 161
Between: one and two years 279 169
two and five years 854 846
five and ten years 659 738
ten and fifteen years 485 496
fifteen and twenty years 150 -
2,427 2,249
Gross debt 2,616 2,410
Interest rate and currency derivatives (1) (7)
Cash and short term deposits (74) (154)
Net debt 2,541 2,249
Fair value and book value of net debt
2022 2021
Fair Book Fair Book
value value Difference value value Difference
GBPm GBPm GBPm GBPm GBPm GBPm
Debentures and unsecured bonds 1,745 1,665 80 1,978 1,871 107
Bank debt and other floating rate
debt 955 951 4 546 539 7
Gross debt 2,700 2,616 84 2,524 2,410 114
Interest rate and currency derivative
liabilities 96 96 - 128 128 -
Interest rate and currency derivative
assets (97) (97) - (135) (135) -
Cash and short term deposits (74) (74) - (154) (154) -
Net debt 2,625 2,541 84 2,363 2,249 114
Net debt attributable to non-controlling
interests 1 1 - (70) (70) -
Net debt attributable to shareholders
of the Company 2,626 2,542 84 2,293 2,179 114
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 value of gross debt less cash,
short term deposits and liquid investments to the aggregate value
of properties and investments, excluding non-controlling
interests.
Group LTV
2022 2021
GBPm GBPm
Group LTV 26.2% 25.1%
Principal amount of gross debt 2,562 2,291
Less debt attributable to non-controlling interests - (79)
Less cash and short term deposits (balance sheet) (74) (154)
Plus cash attributable to non-controlling interests 1 8
Total net debt for LTV calculation 2,489 2,066
Group property portfolio valuation (Note 7) 6,944 6,247
Investments in joint ventures (Note 8) 2,511 2,120
Other investments and property, plant and equipment (balance
sheet)1 46 26
Less property and investments attributable to non-controlling
interests (15) (163)
Total assets for LTV calculation 9,486 8,230
1. The GBP22m difference between other investments and plant,
property and equipment per the balance sheet totalling GBP68m,
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.
Proportionally consolidated LTV
2022 2021
GBPm GBPm
Proportionally consolidated LTV 32.9% 32.0%
Principal amount of gross debt 3,648 3,262
Less debt attributable to non-controlling interests - (79)
Less cash and short term deposits (191) (258)
Plus cash attributable to non-controlling interests 1 10
Total net debt for proportional LTV calculation 3,458 2,935
Group property portfolio valuation (Note 7) 6,944 6,247
Share of property of joint ventures (Note 7) 3,538 3,048
Other investments and property, plant and equipment (balance
sheet)1 46 26
Less property attributable to non-controlling interests (15) (163)
Total assets for proportional LTV calculation 10,513 9,158
1. The GBP22m difference between other investments and plant,
property and equipment per the balance sheet totalling GBP68m,
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.
British Land Unsecured Financial Covenants
The two financial covenants applicable to the Group unsecured
debt are shown below:
2022 2021
GBPm GBPm
Net Borrowings not to exceed 175% of Adjusted Capital and
Reserves 36% 33%
Principal amount of gross debt 2,562 2,291
Less the relevant proportion of borrowings of the partly
owned subsidiary/non-controlling interests - (79)
Less cash and deposits (balance sheet) (74) (154)
Plus the relevant proportion of cash and deposits of the
partly owned subsidiary/non-controlling interests 1 8
Net Borrowings 2,489 2,066
Share capital and reserves (balance sheet) 6,733 5,983
Trading property surpluses (EPRA Table A) 8 9
Exceptional refinancing charges (see below) 174 188
Fair value adjustments of financial instruments (EPRA Table
A) 46 115
Less reserves attributable to non-controlling interests (balance
sheet) (15) (59)
Adjusted Capital and Reserves 6,946 6,236
In calculating Adjusted Capital and Reserves for the purpose of
the unsecured debt financial covenants, there is an adjustment of
GBP174m (2020/21: GBP188m) to reflect the cumulative net amortised
exceptional items relating to the refinancing's in the years ended
31 March 2005, 2006 and 2007.
2022 2021
GBPm GBPm
Net Unsecured Borrowings not to exceed 70% of Unencumbered
Assets 30% 25%
Principal amount of gross debt 2,562 2,291
Less cash and deposits not subject to a security interest (64) (139)
Less principal amount of secured and non-recourse borrowings (985) (998)
Net Unsecured Borrowings 1,513 1,154
Group property portfolio valuation (Note 7) 6,944 6,247
Investments in joint ventures and funds (Note 8) 2,511 2,120
Other investments and property, plant and equipment (balance
sheet)1 46 26
Less investments in joint ventures (2,511) (2,120)
Less encumbered assets (Note 7) (1,915) (1,592)
Unencumbered Assets 5,075 4,681
1. The GBP22m difference between other investments and plant,
property and equipment per the balance sheet totalling GBP68m,
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 2022
Arrangement
Foreign costs
2021 Cash flows Transfers3 exchange Fair value amortisation 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Short term borrowings 161 (159) 189 - (4) 2 189
Long term borrowings 2,249 429 (189) 17 (76) (3) 2,427
Derivatives1 (7) 7 - (17) 16 - (1)
Total liabilities from financing
activities4 2,403 277 - - (64) (1) 2,615
Cash and cash equivalents (154) 80 - - - - (74)
Net debt 2,249 357 - - (64) (1) 2,541
Reconciliation of movement in Group net debt for the year ended
31 March 2021
Arrangement
Foreign costs
2020 Cash flows Transfers3 exchange Fair value amortisation 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Short term borrowings 637 (637) 161 - (2) 2 161
Long term borrowings 2,865 (367) (161) (44) (46) 2 2,249
Derivatives2 (62) 14 - 44 (3) - (7)
Total liabilities from financing
activities5 3,440 (990) - - (51) 4 2,403
Cash and cash equivalents (193) 39 - - - - (154)
Net debt 3,247 (951) - - (51) 4 2,249
1. Cash flows on derivatives include GBP15m of net receipts on
derivative interest.
2. Cash flows on derivatives include GBP24m of net receipts on
derivative interest.
3. Transfers comprises debt maturing from long term to short
term borrowings.
4. Cash flows of GBP277m shown above represents net cash flows
on capital payments in respect of interest rate derivatives of
GBP8m, decrease in bank and other borrowings of GBP213m and
drawdowns on bank and other borrowings of GBP483m shown in the
consolidated statement of cash flows, along with GBP15m of net
receipts on derivative interest.
5. Cash flows of GBP990m shown above represents net cash flows
on capital payments in respect of interest rate derivatives of
GBP10m, decrease in bank and other borrowings of GBP1,218m and
drawdowns on bank and other borrowings of GBP214m shown in the
consolidated statement of cash flows, along with GBP24m 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.
2022 2021
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Interest rate and currency
derivative assets - (97) - (97) - (135) - (135)
Other investments - fair
value through profit or
loss (Note 9) - - (28) (28) - - (6) (6)
Assets - (97) (28) (125) - (135) (6) (141)
Interest rate and currency
derivative liabilities - 96 - 96 - 128 - 128
Liabilities - 96 - 96 - 128 - 128
Total - (1) (28) (29) - (7) (6) (13)
Categories of financial instruments
2022 2021
GBPm GBPm
Financial assets
Amortised cost
Cash and short term deposits 74 154
Trade and other debtors (Note 10) 28 42
Other investments (Note 9) 4 2
Fair value through profit or loss
Derivatives in designated fair value hedge accounting relationships1,2 59 126
Derivatives not in designated hedge accounting relationships 38 9
Other investments (Note 9) 28 6
231 339
Financial liabilities
Amortised cost
Creditors (Note 11) (157) (141)
Gross debt (2,616) (2,410)
Lease liabilities (Notes 11 and 12) (131) (133)
Fair value through profit or loss
Derivatives not in designated accounting relationships (96) (128)
(3,000) (2,812)
Total (2,769) (2,473)
1. Derivative assets and liabilities in designated hedge
accounting relationships sit within the derivative assets and
derivative liabilities balances of the consolidated balance
sheet.
2. 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 costs), 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
2022 2021
GBPm GBPm
Maturity
date: over five years 70 347
between four and five years 401 1,049
between three and four years 406 294
Total facilities available for more than three years 877 1,690
Between two and three years 360 -
Between one and two years 50 -
Within one year - -
Total 1,287 1,690
The undrawn facilities are comprised of British Land undrawn
facilities of GBP1,287m.
15 Dividends
The Final dividend payment for the six-month period ended 31
March 2022 will be 11.60p. Payment will be made on 29 July 2022 to
shareholders on the register at close of business on 24 June 2022.
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.
Pence
per 2022 2021
Payment date Dividend share GBPm GBPm
Current year dividends
29.07.2022 2022 Final 11.60
07.01.2022 2022 Interim 10.32 95
21.92
Prior year dividends
06.08.2021 2021 Final 6.64 62
19.02.2021 2021 Interim 8.40 78
15.04
Dividends in consolidated statement of changes in equity 157 78
Dividends settled in shares - -
Dividends settled in cash 157 78
Timing difference relating to payment of withholding
tax (2) (2)
Dividends in cash flow statement 155 (76]
16 Share capital and reserves
2022 2021
Number of ordinary shares in issue at 1 April 937,981,992 937,938,097
Share issues 127,441 43,895
At 31 March 938,109,433 937,981,992
Of the issued 25p ordinary shares, 7,376 shares were held in the
ESOP trust (2020/21: 7,376), 11,266,245 shares were held as
treasury shares (2020/21: 11,266,245) and 926,835,812 shares were
in free issue (2020/21: 926,709,543). 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. The Group previously reported under three operating segments,
being Offices, Retail and Canada Water. From 1 April 2021, the
Group changed its reporting, to report under two operating
segments, Campuses and Retail & Fulfilment. The Campuses sector
includes the former segments of Offices and Canada Water in
addition to residential properties. These changes are in line with
our revised strategy and how Management now reviews the performance
of the business. Due to the changes in the segments, the
comparative figures have been restated in the below segmental
disclosures.
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 on the following page. 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
Retail &
Campuses Fulfilment Unallocated Total
Restated Restated Restated Restated
2022 2021 2022 2021 2022 2021 2022 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Gross rental income
British Land Group 143 166 193 195 - - 336 361
Share of joint ventures 91 86 56 56 - - 147 142
Total 234 252 249 251 - - 483 503
Net rental income
British Land Group 117 139 176 126 - - 293 265
Share of joint ventures 77 69 52 28 - - 129 97
Total 194 208 228 154 - - 422 362
Operating result
British Land Group 120 134 171 121 (60) (48) 231 207
Share of joint ventures 73 69 51 28 (2) - 122 97
Total 193 203 222 149 (62) (48) 353 304
2022 2021
Reconciliation to Underlying Profit GBPm GBPm
Operating result 353 304
Net financing costs (102) (103)
Underlying Profit 251 201
Reconciliation to profit (loss) on ordinary activities before
taxation
Underlying Profit 251 201
Capital and other 705 (1,257)
Underlying Profit attributable to non-controlling interests 2 3
Total profit (loss) on ordinary activities before taxation 958 (1,053)
Reconciliation to Group revenue
Gross rental income per operating segment result 483 503
Less share of gross rental income of joint ventures (147) (142)
Plus share of gross rental income attributable to non-controlling
interests 2 16
Gross rental income (Note 3) 338 377
Trading property sales proceeds 9 -
Service charge income 62 64
Management and performance fees (from joint ventures) 9 7
Other fees and commissions 21 20
Surrender premium payable (29) -
Revenue (consolidated income statement) 410 468
A reconciliation between net financing costs in the consolidated
income statement and net financing costs of GBP102m (2020/21:
GBP103m) in the segmental disclosures above can be found within
Table A in the supplementary disclosures. Of the total revenues
above, GBPnil (2020/21: GBPnil) was derived from outside the
UK.
Segment assets
Campuses Retail & Fulfilment Total
Restated Restated Restated
2022 2021 2022 2021 2022 2021
GBPm GBPm GBPm GBPm GBPm GBPm
Property assets
British Land Group 4,150 4,130 2,788 1,988 6,938 6,118
Share of joint ventures 2,826 2,418 712 604 3,538 3,022
Total 6,976 6,548 3,500 2,592 10,476 9,140
Reconciliation to net assets
2022 2021
British Land Group GBPm GBPm
Property assets 10,476 9,140
Other non-current assets 69 51
Non-current assets 10,545 9,191
Other net current liabilities (316) (203)
Adjusted net debt (3,458) (2,938)
Other non-current liabilities - -
EPRA NTA (diluted) 6,771 6,050
Non-controlling interests 15 59
EPRA adjustments (53) (126)
Net assets 6,733 5,983
18 Subsequent events
In April 2022, post year end, the Group exchanged contracts on
the sale of a 75% interest in the majority of the Paddington
Central campus to GIC, forming a new joint venture with an
ownership split 75:25 for GIC and British Land, respectively.
Completion is unconditional and will occur within three months of
the exchange date. The total consideration of GBP694m is marginally
below the associated investment property carrying value as at 31
March 2022, but not materially so.
On completion, two investment properties on the campus, 3
Kingdom Street and 5 Kingdom Street, will remain outside the joint
venture but will be subject to two different option agreements.
Firstly, upon completion the joint venture will be granted an
unconditional option to acquire 3 Kingdom Street at the prevailing
market rate, which expires five years from the completion date.
A second unconditional option to acquire the 5 Kingdom Street
development site will also be granted on completion, via a separate
50:50 joint venture with GIC, for a consideration of GBP68.5m,
which expires six months from the completion date. This amount
includes elements of contingent consideration and so the expected
gain or loss on sale is subject to future events.
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 2022
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 2022 Year ended 31 March 2021
Less non- Less non-
Joint controlling Proportionally Joint controlling Proportionally
Group ventures interests consolidated Group ventures interests consolidated
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Gross rental income1 345 147 (2) 490 382 142 (16) 508
Property operating
expenses (48) (13) - (61) (105) (45) 9 (141)
Net rental income 297 134 (2) 429 277 97 (7) 367
Administrative
expenses (88) (1) - (89) (74) - - (74)
Net fees and other
income 13 - - 13 11 - - 11
Ungeared income
return 222 133 (2) 353 214 97 (7) 304
Net financing costs (55) (47) - (102) (62) (45) 4 (103)
Underlying Profit 167 86 (2) 251 152 52 (3) 201
Underlying taxation 4 - - 4 (26) - - (26)
Underlying Profit
after
taxation 171 86 (2) 255 126 52 (3) 175
Valuation movement
(see Note 4) 633 (1,298)
Other capital and
taxation
(net)2 59 87
Result attributable
to
shareholders of the
Company 947 (1,036)
1. Group gross rental income includes GBP7m (2020/21: GBP5m) of
all-inclusive rents relating to service charge income and excludes
the GBP29m (2020/21: GBPnil) surrender premium payable within the
Capital and other column of the income statement.
2. Includes other comprehensive income, movement in dilution of
share options and the movement in items excluded for EPRA NTA.
Summary balance sheet based on proportional consolidation as at
31 March 2022
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 venture included on a
line-by-line basis, and excluding non-controlling interests, and
assuming full dilution.
Mark-to-
market
on Valuation EPRA Restated
Less derivatives surplus NTA EPRA
Share non- and related on 31 NTA
of joint controlling Share debt Lease trading March 31 March
Group ventures interests options adjustments liabilities properties Intangibles 2022 2021(2)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Campuses
properties 4,191 2,829 - - - (52) 8 - 6,976 6,548
Retail &
Fulfilment
properties 2,859 728 (15) - - (72) - - 3,500 2,592
Total
properties1 7,050 3,557 (15) - - (124) 8 - 10,476 9,140
Investments in
joint
ventures 2,511 (2,511) - - - - - - - -
Other
investments 41 16 - - - - - (9) 48 38
Other net
(liabilities)
assets (328) (100) 1 8 - 124 - - (295) (190)
Net debt (2,541) (962) (1) - 46 - - - (3,458) (2,938)
Net assets 6,733 - (15) 8 46 - 8 (9) 6,771 6,050
EPRA NTA per
share
(Note 2) 727p 648p
1. Included within the total property value of GBP10,476m (31
March 2020/21: GBP9,140m) are right-of-use assets net of lease
liabilities of GBP9m (31 March 2020/21: GBP8m), 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.
2. As explained in Note 17, from 1 April 2021, the Group now
reports under two operating segments, Campuses and Retail &
Fulfilment. Within this table, the comparative figures have been
restated in the relevant disclosures.
EPRA Net Tangible Assets movement
Year ended Year ended
31 March 2022 31 March 2021
Pence Pence
per per
GBPm share GBPm share
Opening EPRA NTA 6,050 648 7,202 773
Income return 255 27 175 19
Capital return 623 69 (1,249) (136)
Dividend paid (157) (17) (78) (8)
Closing EPRA NTA 6,771 727 6,050 648
Table B: EPRA Performance measures
EPRA Performance measures summary table
2022 2021
Pence Pence
GBPm per share GBPm per share
EPRA Earnings - basic 238 25.7 175 18.9
- diluted 238 25.6 175 18.8
EPRA Net Initial Yield 4.3% 4.6%
EPRA 'topped-up' Net Initial Yield 4.9% 5.2%
EPRA Vacancy Rate 6.3% 8.3%
2022 2021
Net asset Net asset
value value
per per
Net assets share Net assets share
GBPm (pence) GBPm (pence)
EPRA NTA 6,771 727 6,050 648
EPRA NRV 7,403 794 6,599 707
EPRA NDV 6.542 702 5,678 609
Calculation and reconciliation of Underlying/EPRA/IFRS Earnings
and Underlying/EPRA/IFRS Earnings per share (Audited)
2022 2021
GBPm GBPm
Profit (loss) attributable to the shareholders of the Company 958 (1,031)
Exclude:
Group - current taxation (2) 25
Group - deferred taxation - 5
Joint ventures - taxation - (1)
Group - valuation movement (471) 888
Group - profit on disposal of investment properties and investments (45) (28)
Group - capital and other surrender premia payable (see Note
3) 29 -
Joint ventures - net valuation movement (including result
on disposals) (see Note 4) (162) 410
Joint ventures - capital financing costs 4 -
Changes in fair value of financial instruments and associated
close-out costs (60) (12)
Non-controlling interests in respect of the above - (55)
Underlying Profit 251 201
Group - underlying current taxation 4 (26)
Underlying Earnings - basic and diluted 255 175
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 238 175
Profit (loss) attributable to the shareholders of the Company 958 (1,031)
IFRS Earnings - basic and diluted 958 (1,031)
2022 2021
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) 930 927
Net assets per share (Audited)
2022 2021
Pence Pence
GBPm per share GBPm per share
Balance sheet net assets 6,733 5,983
Deferred tax arising on revaluation movements - -
Mark-to-market on derivatives and related debt
adjustments 46 115
Dilution effect of share options 8 14
Surplus on trading properties 8 9
Intangible assets (9) (12)
Less non-controlling interests (15) (59)
EPRA NTA 6,771 727 6,050 648
Intangible assets 9 12
Purchasers' costs 623 537
EPRA NRV 7,403 794 6,599 707
Deferred tax arising on revaluation movements (2) (1)
Purchasers' costs (623) (537)
Mark-to-market on derivatives and related debt
adjustments (46) (115)
Mark-to-market on debt (190) (268)
EPRA NDV 6,542 702 5,678 609
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.
2022 2021
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 2 3
IFRS/EPRA number of shares (diluted) 932 933
EPRA Net Initial Yield and 'topped-up' Net Initial Yield
(Unaudited)
2022 2021
GBPm GBPm
Investment property - wholly owned 6,929 6,118
Investment property - share of joint ventures 3,538 3,022
Less developments, residential and land (1,168) (1,224)
Completed property portfolio 9,299 7,916
Allowance for estimated purchasers' costs 672 648
Gross up completed property portfolio valuation (A) 9,971 8,564
Annualised cash passing rental income 457 425
Property outgoings (33) (29)
Annualised net rents (B) 424 396
Rent expiration of rent-free periods and fixed uplifts1 61 51
'Topped-up' net annualised rent (C) 485 447
EPRA Net Initial Yield (B/A) 4.3% 4.6%
EPRA 'topped-up' Net Initial Yield (C/A) 4.9% 5.2%
Including fixed/minimum uplifts received in lieu of rental
growth 5 5
Total 'topped-up' net rents (D) 490 452
Overall 'topped-up' Net Initial Yield (D/A) 4.9% 5.3%
'Topped-up' net annualised rent 485 447
ERV vacant space 33 42
Reversions 4 12
Total ERV (E) 522 501
Net Reversionary Yield (E/A) 5.2% 5.9%
1. The weighted average period over which rent-free periods
expire is one year (2020/21: 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 2022, 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
2022 2021
GBPm GBPm
Annualised potential rental value of vacant premises 33 42
Annualised potential rental value for the completed property
portfolio 526 507
EPRA Vacancy Rate 6.3% 8.3%
EPRA Cost Ratios (Unaudited)
2022 2021
GBPm GBPm
Property operating expenses 48 96
Administrative expenses 88 74
Share of joint ventures expenses 14 45
Less: Performance and management fees (from joint ventures) (9) (7)
Net other fees and commissions (4) (4)
Ground rent costs and operating expenses de facto included
in rents (25) (21)
EPRA Costs (including direct vacancy costs) (A) 112 183
Direct vacancy costs (42) (31)
EPRA Costs (excluding direct vacancy costs) (B) 70 152
Gross Rental Income less ground rent costs and operating
expenses de facto included in rents 323 341
Share of joint ventures (GRI less ground rent costs) 139 142
Total Gross rental income less ground rent costs (C) 462 483
EPRA Cost Ratio (including direct vacancy costs) (A/C) 24.2% 37.9%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 15.2% 31.5%
Impairment of tenant debtors, tenant incentives and accrued
income (D) (8) 83
Adjusted EPRA Cost Ratio (including direct vacancy costs
and excluding impairment of tenant debtors, accrued income,
tenant incentives and contracted rent increases) (A-D)/C 26.0% 20.7%
Adjusted EPRA Cost Ratio (excluding direct vacancy costs
and excluding impairment of tenant debtors, accrued income,
tenant incentives and contracted rent increases) (B-D)/C 16.9% 14.3%
Overhead and operating expenses capitalised (including share
of joint ventures) 7 6
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 which are exceptional items in the
current year, to show the impact of these items on the ratios.
Table C: Gross rental income (Audited)
2022 2021
GBPm GBPm
Rent receivable1 479 493
Spreading of tenant incentives and contracted rent increases 8 11
Surrender premia 3 4
Gross rental income 490 508
1. Group gross rental income includes GBP7m (2020/21: GBP5m) 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 Year ended 31 March
2022 2021
Joint Joint
Group ventures Total Group ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Acquisitions 596 34 630 52 - 52
Development 175 33 208 104 25 129
Investment properties
Incremental lettable space 1 - 1 1 - 1
No incremental lettable space 12 25 37 31 28 59
Tenant incentives 21 3 24 2 5 7
Other material non-allocated types
of expenditure 2 3 5 5 1 6
Capitalised interest 6 1 7 6 2 8
Total property related capital expenditure 813 99 912 201 61 262
Conversion from accrual to cash basis 42 (7) 35 34 14 48
Total property related capital expenditure
on cash basis 855 92 947 235 75 310
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 GBP5m (2020/21: GBP6m).
Supplementary Tables
Data includes Group's share of Joint Ventures
FY22 rent collection1
Rent due between 25 March 2021 and 24 March 2022 Offices Retail2 Total
Received 100% 95% 97%
Rent forgiven - 1% 1%
Outstanding - 4% 2%
Total 100% 100% 100%
GBP196m GBP270m GBP466m
March quarter 2022 rent collection1
Rent due between 25 March 2022 and 10 May 2022 Offices Retail2 Total
Received 98% 92% 96%
Rent forgiven - - -
Customer paid monthly - 2% 1%
Outstanding 2% 6% 3%
Total 100% 100% 100%
GBP44m GBP31m GBP75m
1. As at 10 May 2022
2. Includes non-office customers located within our London
campuses
Purchases
Price Price Annualised
Since 1 April 2021 (100%) (BL Share) Net Rents
Purchases Sector GBPm GBPm GBPm1
Completed
Hercules Unit Trust units Retail 148 148 12
Thurrock Retail Park Retail 82 82 5
Reading Gate Retail Park Retail 68 34 2
Blackwater Shopping Park, Farnborough Retail 38 38 2
B&Q, Cambridge Retail 24 24 1
De Mandeville Retail Park Retail 24 24 -
Hannah Close, Wembley Logistics 157 157 4
Heritage House, Enfield Logistics 87 87 2
Verney Road Logistics 31 31 -
Finsbury Square car park, London Logistics 20 20 1
Peterhouse Technology Park, Cambridge Campuses 75 75 3
Waterside House, Guildford Campuses 15 15 1
The Priestley Centre, Guildford Campuses 12 12 -
Total 781 747 33
1. BL share of annualised rent topped up for rent frees
Sales
Price Price Annualised
Since 1 April 2021 (100%) (BL Share) Net Rents
Sales Sector GBPm GBPm GBPm1
Completed
Virgin Active, Chiswick Retail 54 54 2
Woodfields Retail Park, Bury (part-sale) Retail 36 36 2
Beaumont Leys (Fletcher Mall) Retail 9 9 1
Virgin Active, Brighton Retail 14 14 2
Debenhams, Plymouth Retail 4 4 -
Wardrobe Court Residential 70 70 -
St Anne's, Regents Place2 Residential 6 6 -
Clarges, Mayfair Residential 3 3 -
Canada Water (50% sale) Campuses 580 290 1
Exchanged
Paddington Central (75% sale)(3) Campuses 934 694 27
Total 1,710 1,180 35
1. BL share of annualised rent topped up for rent frees
2. Exchanged prior to 1 April 2021
3. Exchanged post year end
Portfolio Valuation by Sector
Change %1
Group Joint ventures Total
At 31 March 2022 GBPm GBPm GBPm H1 H2 FY
West End 3,479 128 3,607 2.8 1.6 4.5
City 438 2,415 2,853 2.6 2.1 4.7
Canada Water & other Campuses 147 283 430 6.9 6.4 12.9
Residential(2) 77 - 77 (0.8) 14.7 6.4
Campuses 4,141 2,826 6,967 3.0 2.4 5.4
Retail Parks 1,891 223 2,114 7.1 13.6 20.7
Shopping Centre 332 468 800 (4.2) (2.1) (6.1)
Urban Logistics 314 5 319 (0.9) 0.4 -
Other Retail 251 16 267 (0.4) 3.5 2.5
Retail & Fulfilment 2,788 712 3,500 2.7 7.5 9.9
Total 6,929 3,538 10,467 2.9 4.0 6.8
Standing Investments 6,224 3,099 9,323 2.2 3.5 5.5
Developments 705 439 1,144 6.3 7.8 11.7
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Valuation movement during the year (after taking account of
capital expenditure) of properties held at the balance sheet date,
including developments (classified by end use), purchases and
sales
2. Stand-alone residential
Gross Rental Income1
12 months to 31 March Annualised as at 31 March
2022 2022
Accounting Basis GBPm Group Joint ventures Total Group Joint ventures Total
West End 123 6 129 123 5 128
City 13 85 98 7 79 86
Canada Water & other Campuses 8 5 13 6 - 6
Residential(2) 1 - 1 1 - 1
Campuses 145 96 241 137 84 221
Retail Parks 131 15 146 129 16 145
Shopping Centre 47 33 80 42 32 74
Urban Logistics 3 - 3 7 - 7
Other Retail 19 1 20 18 1 19
Retail & Fulfilment 200 49 249 196 49 245
Total 345 145 490 333 133 466
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Gross rental income will differ from annualised valuation
rents due to accounting adjustments for fixed & minimum
contracted rental uplifts and lease incentives
2. Stand-alone residential
Portfolio Net Yields1,2
Overall
EPRA topped topped
EPRA net up net up net
initial initial initial Net equivalent Net equivalent Net reversionary
As at 31 March yield yield yield yield yield movement yield ERV Growth
2022 % %3 %4 % bps % %5
West End 3.4 4.1 4.1 4.3 (7) 4.7 0.4
City 2.9 3.8 3.8 4.3 (15) 4.7 (0.6)
Other Campuses 4.9 4.9 4.9 5.2 1 5.6 6.4
Residential 3.8 3.8 3.8 4.0 - 3.1 (11.7)
Campuses 3.2 4.0 4.0 4.3 (11) 4.7 0.0
Retail Parks 6.2 6.5 6.6 5.9 (151) 5.9 (2.0)
Shopping Centre 7.1 7.6 7.8 7.6 3 8.0 (5.2)
Urban Logistics 2.0 2.0 2.0 2.5 (75) 2.6 6.3
Other Retail 5.2 5.6 6.1 6.4 (16) 6.4 0.8
Retail & Fulfilment 6.0 6.3 6.4 6.0 (97) 6.1 (2.8)
Total 4.3 4.9 4.9 4.9 (42) 5.2 (1.2)
On a proportionally consolidated basis including the Group's
share of joint ventures
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 2022 Offices Retail Total
British British British
% Land MSCI Land MSCI Land MSCI
Capital Return 5.8 3.2 11.6 8.8 7.4 14.9
- ERV Growth 0.1 1.4 (2.9) (2.0) (1.2) 3.1
- Yield Movement1 (11) bps (23) bps (97) bps (82) bps (42) bps (67) bps
Income Return 2.6 3.7 7.6 5.6 4.0 4.2
Total Property Return 8.5 7.0 20.0 14.9 11.7 19.6
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Net equivalent yield movement
Top 20 Tenants by Sector
% of
Retail & % of
Fulfilment Campuses
As at 31 March 2022 rent As at 31 March 2022 rent
Retail & Fulfilment Campuses
Next 4.9 Meta (Facebook) 17.4
Walgreens (Boots) 4.8 Dentsu international 4.7
M&S 4.1 Visa 4.0
JD Sports 3.2 Herbert Smith Freehills 2.9
Currys Plc 3.1 Gazprom 2.6
J Sainsbury 2.8 Microsoft Corp 2.5
TJX (TK Maxx) 2.8 SMBC 2.2
Frasers Group 2.5 Vodafone 2.0
Asda Group 2.2 Deutsche Bank 1.9
Kingfisher 2.0 Henderson 1.7
Tesco plc 2.0 Reed Smith 1.6
DFS Furniture 1.8 TP ICAP 1.6
Hutchison Whampoa 1.8 The Interpublic Group (McCann) 1.6
TGI Friday's 1.8 Softbank Group 1.5
River Island 1.6 Mayer Brown 1.4
Homebase 1.5 Mimecast 1.3
Primark 1.5 Credit Agricole 1.2
H&M 1.4 Kingfisher 1.2
Wilkinson 1.3 Milbank LLP 1.1
Pets at Home 1.2 Monzo Bank 1.1
Total top 20 48.3 Total top 20 55.5
Major Holdings
Lease
BL Share Sq ft Rent (100%) Occupancy length
As at 31 March 2022 % '000 GBPm pa1,4 rate %2,4 yrs3,4
Broadgate 50 4,468 189 96.7 6.4
Regent's Place 100 1,740 85 95.2 8.7
Paddington Central(5) 100 958 47 99.6 5.2
Meadowhall, Sheffield 50 1,500 67 95.9 4.1
Glasgow Fort, Glasgow 100 510 17 94.7 5.2
Teesside, Stockton 100 569 15 95.0 2.6
Hannah Close, Wembley 100 246 3 100.0 3.4
Ealing Broadway, London 100 540 11 95.0 3.7
Drake's Circus, Plymouth 100 1,190 16 91.9 4.9
Giltbrook, Nottingham 100 198 7 100.0 4.7
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
5. Post year end, exchanged on the sale of 75% of the majority
of assets in Paddington Central
Lease Length & Occupancy
Average lease length Occupancy rate
yrs %
As at 31 March 2022 To expiry To break EPRA Occupancy Occupancy1,2,3
West End 7.8 7.2 95.7 96.8
City 7.4 6.5 90.2 96.2
Other Campuses 7.7 6.8 100.0 100.0
Residential 16.5 16.2 100.0 100.0
Campuses 7.7 7.0 93.5 96.7
Retail Parks 6.0 4.4 94.6 97.4
Shopping Centre 5.6 4.3 92.0 93.9
Urban Logistics 5.4 4.5 99.8 99.8
Other Retail 8.2 7.7 94.2 95.9
Retail & Fulfilment 6.0 4.6 94.0 96.3
Total 6.8 5.8 93.7 96.5
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 would rise from 96.7% to 97.2% 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 & Fulfilment would reduce from 96.3% to 94.5%, and total
occupancy would reduce from 96.5% to 95.6%
Portfolio Weighting
2021 2022 2022
As at 31 March % % GBPm
West End 35.9 34.5 3,607
City 27.5 27.3 2,853
Canada Water & other Campuses 6.1 4.1 430
Residential(1) 0.6 0.7 77
Campuses 70.1 66.6 6,967
Retail Parks 17.6 20.2 2,114
Shopping Centre 8.3 7.6 800
Urban Logistics 1.2 3.0 319
Other Retail 2.8 2.6 267
Retail & Fulfilment 29.9 33.4 3,500
Total 100 100 10,467
London Weighting 77% 73% 7,604
On a proportionally consolidated basis including the Group's
share of joint ventures
1. Stand-alone residential
Annualised Rent & Estimated Rental Value (ERV)
Annualised rent (valuation
basis) Average rent
GBPm1 ERV GBPm GBPpsf
As at 31 March 2022 Group Joint ventures Total Total Contracted2 ERV
West End(3) 114 5 119 161 63.9 69.4
City(3) 7 72 79 123 53.5 56.4
Canada Water & other Campuses 6 - 6 8 27.2 34.5
Residential(4) 1 - 1 1 41.7 30.9
Campuses 128 77 205 293 52.9 57.8
Retail Parks 133 17 150 136 22.3 19.2
Shopping Centre 39 39 78 76 23.9 22.4
Urban Logistics 7 - 7 9 11.9 15.6
Other Retail 17 1 18 19 11.0 11.2
Retail & Fulfilment 196 57 253 240 20.7 18.8
Total 324 134 458 533 29.5 29.9
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. GBPpsf metrics shown for office space only
4. Stand-alone residential
Rent Subject to Open Market Rent Review
For year to 31
March
As at 31 March 2023 2024 2025 2026 2027 2023-25 2023-27
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
West End 23 4 15 9 22 42 73
City 1 15 8 26 4 24 54
Canada Water &
other Campuses - - 1 - - 1 1
Residential - - - - 1 - 1
Campuses 24 19 24 35 27 67 129
Retail Parks 9 8 9 8 7 26 41
Shopping Centre 8 3 3 2 3 14 19
Urban Logistics - - 1 - - 1 1
Other Retail 1 2 1 - 1 4 5
Retail & Fulfilment 18 13 14 10 11 45 66
Total 42 32 38 45 38 112 195
On a proportionally consolidated basis including the Group's
share of joint ventures excluding committed, near term and assets
held for development
Rent Subject to Lease Break or Expiry
For year to 31
March
As at 31 March 2023 2024 2025 2026 2027 2023-25 2023-27
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
West End 19 15 11 13 8 45 66
City 7 16 4 17 3 27 47
Other Campuses 1 2 - - 1 3 4
Residential - - - - - - -
Campuses 27 33 15 30 12 75 117
Retail Parks 23 28 19 21 18 70 109
Shopping Centre 16 12 9 12 7 37 56
Urban Logistics - - 2 4 - 2 6
Other Retail 4 1 1 1 1 6 8
Retail & Fulfilment 43 41 31 38 26 115 179
Total 70 74 46 68 38 190 296
% of contracted
rent 13.7 14.0 8.9 13.2 7.2 36.6 57.0
On a proportionally consolidated basis including the Group's
share of joint ventures
Recently Completed and Committed Developments
Pre-let
100% sq Current Cost to & under
As at 31 March BL Share ft PC Calendar Value come ERV offer Forecast
2022 Sector % '000 Year GBPm GBPm1 GBPm2 GBPm(5) IRR %
1 Triton Square Office 100 369 Q2 2021 545 - 24.3 23.9 12
Total Recently
Completed 369 545 - 24.3 23.9
Norton Folgate Office 100 336 Q4 2023 235 157 23.1 7.5 11
Aldgate Place,
Phase 2 Residential 100 136 Q2 2024 48 86 6.0 - 10
1 Broadgate(5) Office 50 544 Q2 2025 147 210 20.2 13.7 12
The Priestley
Centre, Guildford Office 100 81 Q2 2023 13 19 2.8 - 22
Canada Water, Mixed
Plot A13 Use 50 273 Q3 2024 26 103 3.3 - 11
Canada Water, Mixed
Plot A23 use 50 250 Q3 2024 16 60 5.0 - Blended
Canada Water,
Plot K13 Residential 50 62 Q2 2023 2 13 - -
Total Committed 1,682 487 648 60.4 21.2
Other Capital
Expenditure4 23
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 2022. 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. Capex committed and underway within our investment portfolio
relating to leasing, infrastructure and asset management
5. Pre-let & under offer excludes 114,000 sq ft of office
space under option
Near Term Development Pipeline
Let &
100% sq Earliest Current Cost to Under
As at 31 March BL Share ft Start Value come ERV Offer Planning
2022 Sector % '000 on Site GBPm GBPm1 GBPm2 GBPm Status
2-3 Finsbury
Avenue Office 50 718 Q3 2022 71 433 31.0 - Consented
5 Kingdom Street Office 100 438 Q4 2022 122 397 33.9 - Consented
Meadowhall RDD Urban Logistics 50 604 Q3 2022 6 37 2.4 - Consented
Ealing - International
House Office 100 165 Q3 2022 20 96 9.3 - Consented
Total Near Term 1,925 219 963 76.6 -
Other Capital
Expenditure3 167
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 2022. 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. Forecast capital commitments within our investment portfolio
over the next 12 months relating to leasing and asset
enhancement
Medium Term Development Pipeline
100% Sq
BL Share ft
As at 31 March 2022 Sector % '000 Planning Status
Thurrock Urban Logistics 100 559 Pre-submission
Enfield, Heritage House Urban Logistics 100 431 Pre-submission
Hannah Close, Wembley Urban Logistics 100 668 Pre-submission
Verney Road Urban Logistics 100 166 Pre-submission
Teesside, Logistics Urban Logistics 100 299 Pre-submission
Euston Tower Office 100 578 Pre-submission
West One Development Office 25 73 Pre-submission
Finsbury Square Urban Logistics 100 47 Pre-submission
Ealing - 10-40, The Broadway Mixed Use 100 325 Pre-submission
Gateway Building Office 100 105 Consented
Canada Water - Future phases1 Mixed Use 50 4,495 Consented
Total Medium Term 7,746
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, intentions,
expectations, forecasts and beliefs of British Land concerning,
among other things, our markets, activities, projections, strategy,
plans, initiatives, objectives, performance, financial condition,
liquidity, growth and prospects, as well as assumptions about
future events and developments. Such 'forward-looking' statements
can sometimes, but not always, be identified by their reference to
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forward-looking statements involve inherent known and unknown
risks, assumptions and uncertainties because they relate to future
events and circumstances and depend on circumstances which may or
may not occur and may be beyond our ability to control, predict or
estimate. Forward-looking statements should be regarded with
caution as actual outcomes or results, may differ materially from
those expressed in or implied by such statements. Recipients should
not place reliance on, and are cautioned about relying on, any
forward-looking statements.
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 the property investment market and property price
volatility), (d) competition, (e) the behaviour of other market
participants, (f) government, law or regulation including in
relation to the environment, landlord and tenant law, health and
safety and taxation (in particular, in respect of British Land's
status as a Real Estate Investment Trust), (g) inflation and
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 of British Land speak only as of the date they
are made. Such forward-looking statements are expressly qualified
in their entirety by the factors referred to above and no
representation, assurance, guarantee or warranty is given in
relation to them (whether by British Land or any of its associates,
Directors, 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 document shall not, under any circumstances, create any
implication that there has been no change in the business or
affairs of British Land since the date of this document or that the
information contained herein is correct as at any time subsequent
to this date.
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END
FR BKOBNCBKDNPD
(END) Dow Jones Newswires
May 18, 2022 10:07 ET (14:07 GMT)
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