8493 1 Report 2012_Report 2012 01 to 96 31/05/2012 14:41 Page 2 The British Land Company DELIVERING PERFORMANCE PLC Annual Report and Accounts Annual Report and Accounts Annual Report and Accounts 2012 2012 8493 1 Report 2012_Report 2012 01 to 96 31/05/2012 14:41 Page 3 BRITISH LAND IS ONE OF EUROPE’S LARGEST REAL ESTATE INVESTMENT TRUSTS (REITs) AND OUR VISION IS TO BE THE BEST. We provide investors with access to a diverse range of quality property assets which we actively manage, finance and develop. We focus mainly on prime UK retail and London office properties and have a reputation for delivering industry-leading customer service. Our properties and our approach attracts high-quality occupiers committed to long leases, so we can provide shareholders with security of income as well as capital growth. Our size and substance demands a responsible approach to business. We believe achieving leading levels of efficiency and sustainability in our buildings helps drive our performance. This is also of increasing importance to occupiers and central to our aim to create environments in which businesses and local communities can thrive. Corporate responsibility information is integrated throughout our Annual Report and Accounts. This reflects how managing our environmental, economic and social impacts is central to the way we do business. It also provides readers with insights into the critical linkages in our thinking and activity, and greater clarity on the relationship between our financial and non-financial key performance indicators. Why go online? For more information Our corporate website contains detailed information You’ll find links throughout this Report, about the Company and is frequently updated as to guide you with further reading or relevant additional details become available. You can sign up information. for email alerts of our latest news and our current Our corporate website share price is displayed on the home page. www.britishland.com/annualreport2012 Our corporate website For further information www.britishland.com Page number Our iPad App British Land Investor Relations 8493 1 Report 2012_Report 2012 01 to 96 31/05/2012 14:41 Page 01 CONTENTS Directors’ report and business review Overview OVERVIEW 02 04 02 What we do 61% 04 Highlights of the year Retail 06 Chairman’s statement 08 What’s happened this year: Retail 10 Building our development pipeline: Retail 4% 12 What’s happened this year: Offices Other 14 Building our development pipeline: Offices 16 Chief Executive’s statement 35% Office 08 10 Understanding our strategy OUR STRATEGYUNDERSTANDING 20 Our markets 22 Our business strategy 24 Our Key Performance Indicators 28 About our business 38 Our principal risks and uncertainties 12 14 Our performance OUR PERFORMANCE 44 Portfolio review 49 Performance review: Retail 52 Performance review: Offices 55 Performance review: Joint ventures and funds 56 Our corporate responsibility review 58 Financial review 65 Financial policies and principles 20 22 Prime values compared WE HAVE FIVE STRATEGIC PRIORITIES WHICH ENSURE WE FOC to secondary values OUR EFFORTS ON THE MOST VALUE ENHANCING ACTIVITIES. 2 GOVERNANCE 1 These priorities guide the overall direction of the business and shape what British Land looks like Governance 0 today and how we are likely to look in the future. –1 68 Chairman’s Governance review –2 1 2 3 4 5 70 Board of Directors and Executive Committee –3 Creating Investing in Creating Controlling Exploiting 72 Corporate governance –4 sustainable assets which incremental our costs to our scale and growing protect and value through maximise and financial –5 77 Report of the Audit Committee property grow the developing, profit strength –6 rental income capital value repositioning generation 81 Report of the Nomination Committee –7 over the assets and 82 Remuneration report H1 H2 FY medium to exploiting British Land long term market 97 Additional disclosures IPD All Retail anomalies 98 Directors’ responsibility statement Financial statements Forward-looking statements Financial statements and other information INFORMATION OTHER AND STATEMENTS FINANCIAL This Report contains certain ‘forward-looking’ statements reflecting current views on, among other things, our markets, activities and prospects. Such ‘forward-looking’ statements can be identified by the use of ‘forward- 100 Consolidated income statement looking’ terminology, including terms such as ‘believes’, ‘estimates’, ‘anticipates’, ‘expects’, ‘forecasts’, ‘intends’, 101 Consolidated balance sheet ‘plans’, ‘projects’, ‘goal’, ‘target’, ‘aim’, ‘may’, ‘will’, ‘would’, ‘could’, ‘should’ or similar expressions or in each case 102 Consolidated statement of their negative or variations or comparable terminology. comprehensive income By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and 103 Consolidated statement of cash flows circumstances which may or may not occur and may be beyond our ability to control or predict. Forward-looking 104 Consolidated statement of changes in equity statements should be regarded with caution because of the inherent uncertainty in political, economic, market 105 Notes to the accounts and business factors. Actual outcomes and results may differ materially from any outcomes or results expressed 133 Report of the auditor or implied by such forward-looking statements and information contained in this Report relating to British Land or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance. 134 Supplementary disclosures 140 Company balance sheet Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made 146 Report of the auditor and no representation or warranty is given in relation to them, including as to their completeness or accuracy 147 Ten year record or the basis on which they were prepared. Other than in accordance with our legal and regulatory obligations (including under the Listing Rules and Disclosure and Transparency Rules), British Land does not undertake to update or revise forward-looking statements to reflect any changes in British Land’s expectations with Other information regard thereto or any changes in information, events, conditions or circumstances on which any such 148 Shareholder information statement is based. Financial calendar Analysis of shareholders 150 Glossary of terms 8493 1 Report 2012_Report 2012 01 to 96 31/05/2012 14:41 Page 02 OVERVIEW WHAT WE DO WE ARE ONE OF EUROPE’S LARGEST REITs What is a REIT? Real Estate Investment Trusts (REITs) provide AND OUR VISION IS TO BE THE BEST. an equal opportunity for shareholders of all sizes to invest in property. Companies which own and/or manage real estate can For us, being the best means delivering become a REIT and be exempt from paying corporation tax. In return at least 90% of superior total returns to our shareholders. taxable property income must be distributed to shareholders as dividends. Our portfolio 61% British Land manages a portfolio of commercial property worth £15.8 billion, Retail of which our share is £10.3 billion. Our portfolio is focused primarily on high-quality retail locations and central London offices. We believe these well-located properties are the ones best placed to benefit from customer 4% demand and rental growth. Other We invest in and develop high-quality buildings in prime locations and then manage them to the very highest standards – focused on customers’ needs at every stage. It’s an approach that’s proved successful: each year over 300 million people visit our properties which house over 1,000 organisations and retail brands. 98% of the portfolio is let and our occupiers sign long leases with us. This gives us the security of a strong 35% Office and sustainable rental income; only a very small portion of rent is subject to break or expiry before 2015. See Retail and Offices overview See Our full portfolio online P08–15 www.britishland.com/77-property-portfolio Our approach and values We take a responsible and collaborative approach to business so our brand is both trusted and valued by stakeholders. Our approach is embodied in our values which differentiate us and help deliver a brand with which people and organisations want to engage. Integrity Excellence One Team Commercial Acumen We do what is right We are the best we can be Working collaboratively We take the lead not what is easy. and have a growth mindset. with both internal and in our field. external stakeholders. Our strategic priorities 1 2 3 4 5 Creating Investing in Creating Controlling Exploiting sustainable assets which incremental our costs to our scale and growing protect and value through maximise and financial property grow the developing, profit strength rental income capital value repositioning generation over the assets and medium to exploiting long term market anomalies See Chief Executive’s statement See Our business strategy and Key Performance Indicators P16–19 P22–27 02 Directors’ report and business review The British Land Company PLC Annual Report and Accounts 2012 8493 1 Report 2012_Report 2012 01 to 96 31/05/2012 14:41 Page 03 Our executive team OVERVIEW See About our business See Board of Directors Our people are one of our major assets. P28–37 P70–71 To deliver our corporate strategy we need to attract and retain experts in Chris Grigg Lucinda Bell Stephen Smith Charles Maudsley Tim Roberts their fields, whose efforts, skill and Chief Executive Finance Director Chief Investment Head of Retail Head of Offices judgement are leveraged across our Officer extensive portfolio. UNDERSTANDING OUR STRATEGYUNDERSTANDING Retail 7% Retail: Our key properties We are the UK’s largest listed retail landlord. Department £m rent stores 46% Our portfolio of retail parks, superstores, Retail parks 01 Meadowhall Shopping Centre 82 shopping centres and department stores 02 Sainsbury’s Superstores 68 benefits from flexible planning consents 03 Tesco Superstores 62 making it adaptable to a wide range of 04 Teesside Shopping Park 14 OUR PERFORMANCE formats.