Performance review Governance Financial statements Other information Pages 71–105 Pages 107–131 Pages 133–180 Pages 181–184 WE’RE BRITISH LAND Annual Report and Accounts 2011 Annual Report and Accounts BUILDING THE BEST BEST THE BUILDING INVESTMENT REAL ESTATE TRUST IN EUROPE 8231 2 Report 2011 01 to 70 Amedned URLs_Report 2011 13/06/2011 11:45 Page FC1 The British Land Company PLC Annual Report and Accounts 2011 8231 2 Report 2011 01 to 70 Amedned URLs_Report 2011 13/06/2011 11:45 Page IFC1 OUR PERFORMANCE UNDERLYING PROFIT BEFORE TAX1 NET ASSET VALUE PER SHARE2 £256m 567p 2010: £249m 2010: 504p UNDERLYING EPS1 IFRS NET ASSETS 28.5p £4,930m 2010: 28.4p 2010: £4,208m IFRS PROFIT BEFORE TAX PORTFOLIO VALUATION3 £830m £9,572m 2010: £1,128m 2010: £8,539m DIVIDEND PER SHARE TOTAL (ACCOUNTING) RETURN1 26.0p 17.7% 2010: 26.0p 2010: 33.5% 1 For definition see glossary of terms. 2 EPRA (European Public Real Estate Association) basis. 3 Proportionally consolidated. Forward-looking statements This Report contains certain ‘forward-looking’ statements reflecting current views on, among other and information contained in this Report relating to British Land or its share price, or the yield on its things, our markets, activities and prospects. Such ‘forward-looking’ statements can be identified by shares, should not be relied upon as an indicator of future performance. the use of ‘forward-looking’ terminology, including terms such as ‘believes’, ‘estimates’, ‘anticipates’, Any forward-looking statements made by or on behalf of British Land speak only as of the date they are ‘expects’, ‘forecasts’, ‘intends’, ‘plans’, ‘projects’, ‘goal’, ‘target’, ‘aim’, ‘may’, ‘will’, ‘would’, ‘could’, made and no representation or warranty is given in relation to them, including as to their completeness ‘should’ or similar expressions or in each case their negative or variations or comparable terminology. or accuracy or the basis on which they were prepared. Other than in accordance with our legal and By their nature, forward-looking statements involve risk and uncertainty because they relate to regulatory obligations (including under the Listing Rules and Disclosure and Transparency Rules), future events and circumstances which may or may not occur and may be beyond our ability to control British Land does not undertake to update or revise forward-looking statements to reflect any changes or predict. Forward-looking statements should be regarded with caution because of the inherent in British Land’s expectations with regard thereto or any changes in information, events, conditions or uncertainty in political, economic, market and business factors. Actual outcomes and results may differ circumstances on which any such statement is based. materially from any outcomes or results expressed or implied by such forward-looking statements, 8231 2 Report 2011 01 to 70 Amedned URLs_Report 2011 13/06/2011 11:45 Page 01 Pages 01–09 Pages British Land Understanding OUR AIM IS TO BUILD THE BEST 11–23 Pages Strategy REAL ESTATE INVESTMENT TRUST (REIT) IN EUROPE British Land is one of Europe’s largest REITs and our 25–57Pages Our portfolio aim is to be Europe’s best. We provide investors with direct access to a diverse range of property assets which we manage, finance and develop, delivering security of income as well as capital growth. We focus on prime retail and office properties, 59–61 Pages Financing strategy mainly in the UK, which attract high-quality occupiers committed to long leases. Each year over 250 million people visit our properties which house over 1,000 different organisations. Through our property and finance expertise we attract experienced partners to Pages 63–70Pages responsibility Corporate create environments in which businesses and local communities can thrive. WHAT IS A REIT? Real Estate Investment Trusts (REITs) are companies which are exempt from corporate taxation on profits from rental income and capital gains on the sale of investment properties. The Government established REIT status in 2007 to remove the tax inequalities between different real estate investors. REITs Property Company are required to distribute 90% of their UK property rental profits of the Year 2011 in the form of property income dividends (PIDs). For more information on REITs p13–14 and p183 The British Land Company PLC Annual Report and Accounts 2011 01 8231 2 Report 2011 01 to 70 Amedned URLs_Report 2011 13/06/2011 11:45 Page 02 02 The British Land Company PLC Annual Report and Accounts 2011 8231 2 Report 2011 01 to 70 Amedned URLs_Report 2011 13/06/2011 11:45 Page 03 CHAIRMAN’S STATEMENT “We derive huge benefit from 01–09 Pages British Land Understanding the scale of our operations and pass this benefit on to our partners in terms of knowledge, experience and opportunity.” At British Land, we are facing the future with Recent research1 shows that we contributed almost £900 million 11–23 Pages Strategy confidence. Our London office portfolio comprises of Gross Value Added to the UK economy in 2009/10 through our direct operations and supplier expenditure. Our occupiers modern, flexible buildings that meet evolving contributed an additional £10.6 billion through their own business occupier needs and we own some of the best activities at our properties. We estimate consumers spent retail assets in the UK, where consumers want to around £4.7 billion in department stores and superstores on our shop and retailers trade efficiently and profitably. sites during 2010, and sales across our entire retail estate are clearly significantly greater. Total employment enabled by British Land is estimated to be around 142,000 jobs, including those While, as a nation, we have moved from ’Recession’ to the ‘Age of directly generated by our occupiers and indirectly through their Austerity’, consumers are still shopping and good businesses are supplier expenditure. looking to grow. British Land has been well served by the quality, Pages 25–57Pages Our portfolio location and sustainability of our portfolio. Our size and substance demands a responsible approach to business; a duty we take willingly and seriously. This year we Concentrated leasing activity across our portfolio, a decisive and reviewed our corporate responsibility strategy, consulting experts significant commitment to Central London office development, on a range of issues, evaluating best practice and benchmarking and a series of retail acquisitions, all contributed to a strong our performance. performance over an active year as we delivered improvements throughout our business. We continued to see a good recovery We believe leadership on issues such as sustainability help drive in the value of our assets and achieved rental growth with our performance and are core to our aim of building the best REIT continued demand for space from key retailers and office in Europe. It is difficult to measure their precise value but occupiers occupiers. These achievements were recognised at the annual are increasingly looking for efficiency and want premises that Property Week Awards in April 2011, when we were delighted express their own corporate commitments. Ropemaker Place, to be named Property Company of the Year. completed in May 2009, remains one of the City’s most sustainable 59–61 Pages Financing strategy buildings. Despite a challenging occupational market it is now fully We reported very pleasing results for the year to 31 March 2011. let; a testament to its quality and a good example of our approach. Underlying pre-tax profits at £256 million were 9.9% up excluding a credit provision release in 2009. The value of our property In March, we announced the promotion of Lucinda Bell to the portfolio increased by 6.9% to £9.6 billion with NAV per share Board to succeed Graham Roberts as Finance Director. We up by 12.5% to 567 pence. The Board is proposing a fourth quarter welcome Lucinda and thank Graham for his excellent contribution dividend of 6.5 pence, bringing the total dividend per share for to the Group over many years and for his strong stewardship the full year to 26 pence representing a 91% payout in respect and leadership of the finance function. We also appointed two of underlying earnings. For the coming year, it is our intention that Non-executive Directors in Simon Borrows, Chairman of Greenhill the dividend is maintained at 26 pence with quarterly dividends & Co International LLP, and William Jackson, Chief Executive of 6.5 pence. of Bridgepoint. Both have further strengthened our Board following the retirement of Clive Cowdery. Earlier in the year, 63–70Pages responsibility Corporate Our finances remain strong and over the last 18 months Robert Swannell retired from the Board after 11 years during we successfully refinanced over £1.1 billion debt and revolving which time he served as Audit Committee Chairman and Senior facilities. Finance is clearly available for well positioned UK Independent Director. We thank both Robert and Clive for their businesses and the strength and quality of our properties and strong contributions to the Board. their rental income, continue to underpin our ability to secure competitive funding successfully. I also thank everyone at British Land and our many business partners whose hard work has helped our business grow over During the year, we started a number of projects to create the past 12 months. The business had a strong 2010/11 and what is currently Central London’s largest committed office is performing well and we remain confident about the prospects development programme. We recognised, early on, the opportunity for the business. provided by a new major office cycle in Central London and will deliver 2.2 million sq ft of high-quality space, between 2012 and 2014, into a constrained market with rising rents and capital values. An investment of £1.6 billion, of which our share totals £1.1 billion, spans six separate sites including a 700,000 sq ft building for Chris Gibson-Smith UBS at Broadgate, the 610,000 sq ft Leadenhall Building in Chairman London’s insurance district and the 500,000 sq ft NEQ building, 22 May 2011 completing our Regent’s Place estate.