Annual Report and Accounts 2015 We Create Outstanding Places Which Make a Positive Difference to People’S Everyday Lives
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Places People Prefer Annual Report and Accounts 2015 We create outstanding places which make a positive difference to people’s everyday lives Our portfolio of high Our purpose is to quality commercial deliver long term and property is focused sustainable total returns on retail locations to all our stakeholders. around the UK and We do this by focusing on London offices. Places People Prefer. Sustainability We believe that operating sustainably and behaving responsibly are fundamental to creating long term value. Information relating to social, environmental and ethical issues is integrated throughout this Report showing more directly how we create value not just for our investors but for our other key stakeholders and the society in which we operate. To read more go to www.britishland.com/ sustainability In this year’s Our portfolio Read more about our £13.6 billion property portfolio and how it has performed over Annual Report… the year. To read more please go to pages 2 to 3 Annual highlights Review our performance and key achievements of the year. To read more please go to pages 1, 6 to 9 and 24 to 25 Our business model Learn about what we do and what sets us apart. To read more please go to pages 14 to 21 How we create Places People Prefer Understand how our properties enhance the lives of those who work, shop and live in them. To read more please go to pages 14 to 23 and 27 to 35 Key market trends Identifying macro trends in our markets and how we are responding. To read more please go to pages 10 to 13 For more information You’ll find links throughout this Report to guide you to further reading or relevant information. Find more information on our website www.britishland.com Feedback We value your feedback. Please contact us at: Our corporate website www.britishland.com Follow us on Twitter @BritishLandPLC HIGHLIGHTS OF THE YEAR CONTENTS EPRA net asset value per share Dividend per share Strategic Report Mission, highlights and contents 1 At a glance 2 Chairman’s statement 4 829p 27.68p Chief Executive’s review 6 Market overview 10 Up 20.5% Up 2.5%, in line with previous announcements Our business model 14 Our strategy 22 Creating Places People Prefer 27 Performance review 36 Carbon reporting 48 Total accounting return Portfolio valuation Financial review 49 Financial policies and principles 53 Managing risk in delivering our strategy 56 24.5% £13.6bn Governance and remuneration Board of Directors 64 Reflecting the increase in our net asset UK property portfolio up 12.1% value per share and income yield from Board of Directors – biographies 66 the dividend Chairman’s governance review 68 Our governance structure 70 Governance review 72 Report of the Audit Committee 78 Underlying profit before tax Underlying EPS Report of the Nomination Committee 82 Remuneration report 86 Directors’ report and additional disclosures 113 £313m 30.6p Directors’ responsibility statement 115 Financial Statements Up 5.4% reflecting successful letting Up 4.1% of completed developments, like-for-like Report of the auditor 118 growth and liability management Primary statements and notes 124 Company balance sheet 167 Supplementary (unaudited) disclosures 173 Other information Other unaudited information 180 Carbon emissions Customer satisfaction Ten year record 190 Shareholder information 191 since Glossary 193 -39% 2009 7.8/10 We have reduced our Scope 1 and 2 carbon In our independent customer emissions across our like-for-like portfolio satisfaction survey our occupiers by 39% since 2009 scored us 7.8 out of 10 for satisfaction with landlord European Public Real Estate Association (EPRA) Performance measures As at 31 March (£m) 2015 2014 2013 – Valuation uplift reflecting strong markets and our actions. EPRA earnings 313 295 268 EPRA NAV 9,035 7,027 5,967 – Exceptional leasing activity; portfolio close to full occupancy. EPRA NNNAV 8,359 6,700 5,522 – Continued repositioning of the portfolio with £2.4 billion of gross As at 31 March (%) 2015 2014 2013 investment activity. EPRA net initial yield 4.3 4.8 5.5 EPRA ‘Topped-up’ – Progressing the development pipeline focusing on London and our net initial yield 4.8 5.3 5.7 strongest retail assets. EPRA vacancy rate 2.9 5.2 3.4 IFRS performance measures – Replenishing long term pipeline with a major regeneration As at 31 March (£m) 2015 2014 2013 opportunity at Canada Water. IFRS profit before tax 1,789 1,110 260 IFRS net assets 8,565 7,117 5,687 – Financing costs significantly reduced. British Land Annual Report and Accounts 2015 1 Strategic Report GROUP AT A GLANCE We create places where people want to work, shop and live. Places People Prefer. Group Retail & Leisure Office & Residential Across our portfolio, we create attractive We are the UK’s largest listed owner and Our Offices and Residential portfolio is environments in the right places focused manager of retail space. Our portfolio is focused on London reflecting its position around the people who work, shop and live closely aligned to the way people shop today. as a leading global city. We have an in them. We provide high quality retail alongside a attractive mix of high quality buildings growing leisure offer in attractive and in well-managed environments. accessible places. £18.9bn £611m £10.3bn 14 £8.6bn 3 Assets under management Contracted rent Assets under management Shopping centres Assets under management Office-led, mixed use campuses over 54 acres with 33 buildings £13.6bn 98.3% £7.5bn 60 £6.1bn 58 British Land owned Occupancy rate British Land owned Retail parks British Land owned Stand-alone office buildings 29.7m sq ft 9.5Yrs 22.0m sq ft 57 7.7m sq ft 8 Of floor space Weighted average Of floor space Food superstores Of floor space Office and residential lease length developments Highlights Highlights Highlights – Total accounting return of 24.5% for the – Over 1m sq ft of lettings and renewals, – Nearly 1m sq ft of lettings and renewals, year, bringing two-year return to 48%. maintaining occupancy at 98.5%. bringing occupancy to 98.1%. – £2.4bn of gross investment activity, with – £1.5bn capital recycling, including £733m – £210m acquisition of 1 Sheldon Square, acquisitions and development spend property exchange with Tesco. Paddington Central after the year end. broadly balancing disposals. – £100m invested in improving and extending – Started on site at 4 Kingdom Street, – £135m acquisition of Surrey Quays Leisure Retail assets. Paddington Central. Park, completing our 46 acre site in Zone 2. – Rental growth of 2.5%, the highest – Planning permission received for – Over £2 billion financing activity reducing in seven years. 517,000 sq ft at 100 Liverpool Street and average interest rate costs by 30bps. an application submitted for 347,000 sq ft – The Leadenhall Building completed and at Blossom Street, Shoreditch. 84% let/under offer. Retail and Leisure performance review Office and Residential performance review see pages 40 to 43 see pages 44 to 47 2 British Land Annual Report and Accounts 2015 Our portfolio is focused on retail locations around the UK and London offices. Broadgate Our properties are home to over 1,200 different organisations ranging from international brands to local start ups. 60,000 people work across our Office portfolio, and our Retail sites receive 350 million visits per year. 4.7 million sq ft Office and Retail space 100% Occupancy rate A 30 acre fully managed business campus, built around Liverpool Street Station, in London’s square mile. www.broadgate.co.uk United Kingdom London OM Drake Circus Clarges Mayfair 570,000 sq ft Retail and leisure space 96 % 192,000 sq ft Occupancy rate Of floor space Located in the centre of Plymouth, Drake Circus Shopping Centre has 56 % over 70 shops and restaurants and Residential pre-sold attracts 18 million visitors a year. Map key www.drakecircus.com Office & Residential A mixed use development in the Retail & Leisure heart of Mayfair, comprising 34 high-end residential apartments as well as over 60,000 sq ft of prime office and retail space. www.clargesmayfair.com British Land Annual Report and Accounts 2015 3 Strategic Report CHAIRMAN’S STATEMENT We’ve had another active and productive year We have continued to ensure our portfolio comprises attractive, well located assets focused around the way people work, shop and live. Our decision to increase our exposure to London and invest in the continued reshaping of our retail portfolio has enabled us to benefit from strong markets, and our business has continued to do well. Over the year, we undertook £2.4 billion of gross investment activity, increasing our weighting in London and the South East from 50% five years ago to 64% today. Activity included the recent acquisition of One Sheldon Square, a strategic piece of Paddington Central, which brings our total investment at the campus to 800,000 sq ft. We continued to reshape our retail portfolio, reducing our investment in superstores to under 7% of the portfolio and increasing our investment in assets we like, such as multi-let shopping parks in the South. We had an exceptional period for leasing with 2.4 million sq ft of lettings and renewals across the business taking our overall occupancy to 98%. Key highlights of the year We also progressed our development programme. At the Total accounting return Leadenhall Building, we completed one of London’s most iconic buildings. The letting up of the building was one of the highlights of the year. We decided early on to focus on the lower floors, holding 24.5% back the higher floors until the building was completed.