BRITISH LAND BRITISH 2019 ACCOUNTS AND REPORT ANNUAL Places People Prefer ANNUAL REPORTANDACCOUNTS2019 Contents Highlights STRATEGIC REPORT Underlying EPS Underlying Profit British Land at a glance Inside front cover Our investment case 1 34.9p £340m Letter from the Chairman 2 Our purpose 3 2018: 37.4p 2018: £380m Chief Executive’s review 4 In conversation with Chris Grigg 6 Reshaping our portfolio 7 Our portfolio 8 IFRS EPS IFRS profit/(loss) before tax Our operational expertise and customer insight 10 London campuses 12 (30.0)p £(319)m Canada Water 14 Retail 16 2018: 48.7p 2018: £501m Our business model and strategy 18 Our key performance indicators 21 Our development pipeline 22 Understanding our markets 24 Total accounting return Dividend per share Stakeholder engagement 26 Our 2020 sustainability strategy 28 Expert people 30 (3.3)% 31.00p Performance review 32 Financial review 46 2018: 8.9% 2018: 30.08p Financial policies and principles 51 Managing risk in delivering our strategy 54 Principal risks 58 Task Force on Climate-Related Financial 62 EPRA NAV per share IFRS net assets Disclosures (TCFD) Viability statement 65 CORPORATE GOVERNANCE REPORT 905p £8,689m 2018: 967p 2018: £9,506m Board of Directors 68 Chairman’s introduction 72 Corporate governance review 75 Report of the Audit Committee 80 Senior unsecured Carbon intensity Report of the Nomination Committee 86 credit rating reduction versus 2009 Directors’ Remuneration Report 88 Directors’ Report and additional disclosures 110 A 64% Directors’ responsibility statement 113 2018: A 2018: 54% FINANCIAL STATEMENTS Report of the auditors 116 Primary statements and notes 123 Customer Bright Lights skills and Company balance sheet 167 satisfaction employment programme Supplementary disclosures 179 OTHER INFORMATION 8.2/10 393 Other information (unaudited) 186 2018: 8.1/10 people supported with work Sustainability performance measures 195 2018: 288 Ten year record 198 Shareholder information 199 Presentation of financial information Integrated reporting The Group financial statements are on a line-by-line basis and excludes We integrate social and environmental prepared under IFRS where the Group’s non-controlling interests in the Group’s information throughout this Report in interests in joint ventures and funds are subsidiaries. The financial key performance line with the International Integrated shown as a single line item on the income indicators are also presented on this Reporting Framework. This reflects statement and balance sheet and all basis. Refer to the Financial review for how sustainability is integrated into our subsidiaries are consolidated at 100%. a discussion of the IFRS results. placemaking strategy, governance and business operations. Our industry-leading Management considers the business We supplement our IFRS figures with sustainability strategy is a powerful tool to principally on a proportionally consolidated non-GAAP measures, which management deliver lasting value for all our stakeholders. basis when setting the strategy, determining uses internally. IFRS measures are annual priorities, making investment labelled as such. See our supplementary and financing decisions and reviewing disclosures which start on page 179 for performance. This includes the Group’s reconciliations, and the glossary found share of joint ventures and funds at britishland.com/glossary. OUR INVESTMENT CASE Four compelling reasons to invest in British Land The scale and quality Our operational expertise 1 2 of our portfolio and customer insight Our 23m sq ft portfolio of high quality Our deep expertise of managing and leasing assets is underpinned by our resilient our assets, based on our understanding balance sheet and financial strength of the customer, drives incremental value – £16bn of assets under management (£12.3bn owned) for British Land and our stakeholders – Increasingly mixed use at our London campuses and – Investing in our places to deliver more attractive high quality retail nationwide and engaging environments – Loan to value (LTV) is appropriate at 28.1% and cost – Targeting the right mix of occupiers to make of finance is low at 2.9% our places successful – Understanding the needs of our customers as they evolve British Land owned assets Visitor surveys completed in the last year £12.3bn c.26,500 Learn more on pages 8 to 9 Learn more on pages 10 to 11 Our distinctive business A well-positioned 3 4 model and clear strategy development pipeline We are increasing our focus on mixed Our development pipeline is aligned use places and on a five-year view will be to our strategy and provides visibility on growing our London campuses and building future earnings a residential business while refining – 1.6m sq ft of high quality, design-led buildings our Retail business focused on our campuses – Enhancing our campuses through development – Developments delivering £63m of future rents – Masterplanning a 53 acre development opportunity adding 4.5p to EPS at Canada Water – De-risked by pre-letting space to lock in – Delivering a smaller, more focused Retail business future income through asset sales Residential homes envisaged in our Committed and recently completed Canada Water masterplan developments pre-let or under offer 3,000 76% Learn more on pages 18 and 19 Learn more on pages 22 to 23 British Land | Annual Report and Accounts 2019 1 BRITISH LAND AT A GLANCE Who we are We are a leading UK property company. We create and manage places that reflect the changing needs of the people who work, visit or live in and around them. Visit britishland.com to learn more about our business Our business Our portfolio is increasingly focused on mixed use places. Our campus-focused Offices portfolio and Canada Water are located in central London and our Retail assets are around the country. Campus-focused London Offices Canada Water Paddington 11 acre office-led campus close to Paddington Station We are delivering a wide and varied dining offer with new signings including Lords of Poké whose story we tell on page 12 Our three office-led At Canada Water our campuses are located masterplan includes office, in central London. They retail, residential, leisure are well-connected and and public spaces to create engaging places to work an exciting new urban centre and spend time, with the for London. right mix of world class offices, retail, leisure and dining, helping our occupiers attract the best talent for Regent’s Place their business. 13 acre office-led campus in the West End, close to Euston, Offices comprise Great Portland Street and Warren Street stations Its proximity to the Knowledge 51% 53 Quarter of academic institutions of the portfolio acres is increasing the profile of the area. Read more about our occupier, Dentsu Aegis Network, Learn more about our London Learn more about the Canada portfolio on pages 12 to 13 Water development on pages on page 13 and 37 to 38 14 to 15 and 43 Our five-year vision We have set out a clear strategic plan to build an increasingly mixed use business. It will comprise three core elements; our London campuses, a smaller Retail portfolio and a residential business. Learn more about our long term strategy on page 7 Broadgate Teesside Meadowhall 32 acre office-led campus adjacent to Leading regional retail centre in 1.5m sq ft superregional retail centre Liverpool Street station the North East with 280 units On site with three major developments Hotel Chocolat have opened their second Rock Up and Joe Browns were amongst the with pre-lettings to global advertising group store with British Land at Teesside, with a businesses that took space at Meadowhall McCann, technology company Mimecast and third planned at Fort Kinnaird, Edinburgh. following our £60m refurbishment. Read Italian marketplace Eataly. Read more about Read more about this on page 16 more about them on pages 16 and 17 this on page 12, 38 and 41 Retail Our retail places are around the country and reflect the changing way people shop. Increasingly we are focused on multi-let locations within or close to urban areas which best complement an omni-channel retail strategy. Canada Water 53 acre development opportunity in zone 2 Connecting with local education and families through the Paper Garden and supporting London’s 45% poets through the Poetry of the portfolio School whose story we tell on page 14 Portfolio breakdown includes: Learn more about our Canada Water 3% Retail portfolio on pages 39 Residential 1% to 40 LETTER FROM THE CHAIRMAN Another year of good progress In my final year as Chairman I leave the business well positioned for the future. Our business has continued to make good progress this year visited Broadgate with the Board in March, it is no exaggeration against an uncertain economic and political backdrop. We saw the to say that the neighbourhood has been transformed. We are effect of the particularly challenging retail environment in valuation delivering world class, modern office space alongside some of the declines but delivered a robust earnings performance with good best retail, leisure and restaurants in London, all integrated within progress on our strategy. central London’s largest pedestrianised environment. And there’s more to come; during the Our Office leasing performance has once again been excellent. year we were delighted to Across our London office business, we have leased over 1m sq ft receive planning permission of space, to world class businesses including McCann, Facebook for 1-2 Broadgate, and Milbank. The quality of the buildings we are delivering and which will represent the our campus approach are really paying off. A broader range of cornerstone of the next phase British Land is taking the businesses than ever before are taking space at our campuses, of Broadgate’s transformation. right steps to position its at attractive rental levels, and our recently completed and committed pipeline of new buildings is now 76% pre-let or under Storey, our flexible office portfolio for the long term offer, locking in significant future income for our business.