ANNUAL REPORT AND ACCOUNTS 2018 ACCOUNTS AND REPORT ANNUAL BRITISH LAND BRITISH We create Places People Prefer Annual Report and Accounts 2018 There are four 1 The scale, balance compelling and quality of our reasons to invest portfolio underpinned by our resilient in British Land balance sheet and financial strength 2 3 4 Our ability to generate Our operational expertise A development pipeline robust and predictable and customer insight which positions us to income to support helping us understand capitalise on market sustainable shareholder evolving needs and opportunities and returns and fund driving enduring generate future income investment demand for our space At British Land we create Places People Prefer. By understanding the evolving needs of the businesses, people and communities who use our places, we help them to thrive. Sustainability and long term thinking are central to our purpose – to deliver outstanding places and positive outcomes for all of our stakeholders, through our placemaking expertise. £18.2bn 80% 10m sq ft assets owned or under of our assets, including our development pipeline, focused management (our share three London campuses and on London including 5m sq ft of which is £13.7bn) with our multi-let retail portfolio, at Canada Water exposure to a broad are in environments where mix of uses we can put our placemaking skills to work Highlights for the year Contents Financial Overview Investment case Inside front cover Underlying Profit n IFRS profit before tax Highlights for the year Opposite British Land at a glance 2 £380m £501m Chairman’s statement 4 2017: £390m 2017: £195m Strategic Report Chief Executive’s review 8 Underlying EPS n IFRS EPS Our business model 10 Market trends and how we are responding 12 37.4p 48.7p Our strategy 13 2017: 37.8p 2017: 18.8p Case study – Broadgate 18 Case study – Meadowhall 20 Dividend per share Total accounting return n Development pipeline 22 How sustainability creates value 24 Our key performance indicators 26 30.08p 8.9% Social and environmental reporting 30 2017: 29.2p 2017: 2.7% Performance review 32 Financial review 41 EPRA NAV per share n IFRS net assets Financial policies and principles 45 Managing risk in delivering our strategy 48 967p £9,506m Principal risks 52 2017: 915p 2017: £9,476m Governance and remuneration Board of Directors 58 Senior unsecured Chairman’s governance review 62 credit rating Report of the Audit Committee 69 Report of the Nomination Committee 74 Directors’ Remuneration Report 76 A Directors’ Report and additional upgraded by Fitch during the year disclosures 92 Directors’ responsibility statement 95 Financial statements Report of the auditors 98 Non-financial Primary statements and notes 104 Company balance sheet 148 Carbon intensity Customer Supplementary disclosures 159 reduction versus 2009 satisfaction Other information Other information (unaudited) 164 54% 8.1/10 Sustainability performance measures 175 2017: 44% 2017: 8.1/10 Ten year record 177 Shareholder information 178 Bright Lights skills and employment programme 228 people supported into work 2017: 275 Presentation of financial information joint ventures and funds on a line-by-line basis and Integrated reporting The Group financial statements are prepared under excludes non-controlling interests in the Group’s We integrate social and environmental information IFRS where the Group’s interests in joint ventures and subsidiaries. The financial key performance indicators throughout this Report in line with the International funds are shown as a single line item on the income are also presented on this basis. Refer to the Financial Integrated Reporting Framework. This reflects statement and balance sheet and all subsidiaries are review for a discussion of the IFRS results. how sustainability is integrated into our placemaking consolidated at 100%. strategy, governance and business operations. We supplement our IFRS figures with non-GAAP Our industry-leading sustainability strategy Management considers the business principally measures, which management uses internally. is a powerful tool to deliver lasting value for all on a proportionally consolidated basis when setting See our Supplementary Disclosures which start on our stakeholders. the strategy, determining annual priorities, making page 159 for reconciliations and the glossary found investment and financing decisions and reviewing at ww w.britishland.com/glossary. These measures performance. This includes the Group’s share of are highlighted by the following symbol: n British Land Annual Report and Accounts 2018 1 Overview BRITISH LAND AT A GLANCE We are focused on creating Places People Prefer, curating the environment inside and out Total portfolio in 2018 80% of our assets are within our campuses or ged environment multi-let environments, where we can curate Mana s 80% the buildings and the spaces between them. ged environgmede ennt vironment Mana Mana s 80% s 80% £18.2bn C assets under management 17% it al y 1 oc 8% L L o n % d 0 o % % C C n 17 17 it 4 it l l y l y ca ca 18i 18 c o o a % % a . m sq Lft L t m 24 8 e L L r o o p of floor space n n t d d u % % e s 0 0 l o o e - n n 4 4 i s l l t i i l c c a a a a 4 u t t m m 0 e e % M r r p p t t u u e e s s l l % e e - - i i 3 . % s £ s . bn t t 974 2 13 7 l l 4 4 l occupancy rateu u British Land owned 0 0 a % % M M n o i g % % e % 3 3 R 2 2 2 l l 3 a a d n n n o o i . years i E g 77 g t e e s weighted average unexpired lease term % % R R e 2 2 W 3 3 d d n n E E t t s s e Seo W W lu s re % tail 10 10 % ces offi lone S S Standa olu olu s r s r % % etail etail 10 10 10% 10% es es ffic ffic Si % ne o ne o ngle-use assets 20 Standalo Standalo Percentages exclude Canada Water and Residential. S S ingle-use ainsgsleet-su 2s0e% assets 20% We have proactively repositioned ourRetail: portfolio more multi-let assets Office: more West End exposure 2018 81% 19% £6.6bn 2018 63% 37% £6.7bn Retail: moreRetail: multi-let more multi-letassets assets Office: moreOffice: West more End West exposure End exposure 2010 60% 40% £5.6bn 2010 35% 63% 2% £2.7bn 2018 2018 81% 19%81% £6.6bn19% Multi-let2018£6.6bn 2018 63% 63%37% £6.7bn37% West£6.7bn End Other retail City 2010 2010 60% 60%40% 40% 2010 35%201063%35%2% 63% 2% £2.7bn £2.7bn £5.6bn £5.6bn Non London Multi-let Multi-let West End West End Other retailOther retail City City Non LondonNon London 2 British Land Annual Report and Accounts 2018 1,200 different customers occupy our space, generating £588m of rental income London Offices Retail Canada Water All of our offices are in London, of which Multi-let retail centres account for 81% A unique 53 acre mixed use opportunity 78% are located on our three central London of our Retail portfolio. Our space reflects in central London, one stop on the Jubilee campuses. These provide a diverse mix of consumers’ demands for experience line from Canary Wharf. Our masterplan space, with a broadening range of uses. This and convenience-led shopping as well envisages a genuine mix of uses including makes them attractive and engaging places as the changing way retailers use physical offices, retail, leisure, residential and to work and spend time, designed to help stores to engage with customers. community space. our customers attract the best talent. £9.0bn £8.7bn 53 acre assets under management assets under management regeneration opportunity 54,000 60% 3,500 people work across our Offices portfolio of the population falls within new homes, including affordable housing the catchment of our portfolio Regent’s Place Canada Water Our 310,000 sq ft pre-let In May 2018 we signed to Dentsu Aegis Network a Master Development at 1 Triton Square is the Agreement with largest West End pre-let Southwark Council and in over 20 years. submitted an outline planning application for our masterplan. Ealing A convenient, local retail destination benefitting from access to Crossrail in 2019. To read more information about our To read more information about our @CanadaWaterMasterplan Office portfolio, go to page 35. Retail portfolio, go to page 38. ww w.canadawatermasterplan.com British Land Annual Report and Accounts 2018 3 Overview CHAIRMAN’S STATEMENT Another year of progress for British Land This has been another year of progress for British Land, despite the ongoing political and economic volatility we have seen since the EU referendum. Business and consumer uncertainty was further compounded by the snap General Election in June 2017, which delivered a hung Parliament. Also of note was the decision by the Bank of England to increase interest rates for the first time in over a decade, with the prospect of more rises to come. Encouragingly, UK economic growth has remained relatively resilient, albeit at levels lower than other major economies, and one thing that remains unchanged is London’s status as a global city in which the world’s leading organisations want to do business. In this context British Land has performed well. The value of our portfolio was up 2.2% with EPRA NAV up 5.7% to 967 pence as occupier and investor demand continued through the year, particularly in the London office market.