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 a date or point in the future, the future tense, or the use of 'forward-looking' terminology, including terms such as 'believes', 'considers', 'estimates', 'anticipates', 'expects', 'forecasts', 'intends', 'continues', 'due', 'potential', 'possible', 'plans', 'seeks', 'projects', 'budget', 'goal', 'ambition', 'mission', 'objective', 'guidance', 'trends', 'future', 'outlook', 'schedule', 'target', 'aim', 'may', 'likely to', 'will', 'would', 'could', 'should' or similar expressions or in each case their negative or other variations or comparable terminology. By their nature, 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.

Nothing in this document shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation, invitation or inducement, or advice, in respect of any securities or other financial instruments or any other matter.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

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(END) Dow Jones Newswires

May 18, 2022 10:07 ET (14:07 GMT)

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