Half Year Results Presentation

Transcription

1 Half Year Results Presentation Six months ended 30 September 2018 #BLHY2019 $BLND

2 Progressing our Strategy Chris Grigg, Chief Executive 2

3 Further good operational and strategic progress Leasing well across the business 421,000 sq ft Offices leasing Office developments letting up ahead of schedule and on better terms than expected Retail demand firm with 457,000 sq ft leasing Good operational performance Occupancy high at 97.8% Outperforming on Retail footfall and sales Further roll out of Storey in Offices Progress at Canada Water: master development agreement signed and planning submitted Thoughtful allocation of capital 842m asset sales 5 Broadgate sold for 500m; 18% pa return Share buyback extended by 200m; 94m completed 100 Liverpool Street, PC Q

4 Finance Review Simon Carter, CFO 4

5 Focus on capital discipline since the referendum Selling Well 2.4bn income producing sales at 4.2% Investing In Our Properties At c.6% yield via developments and share buyback Building Balance Sheet Strength Leverage down 5.4% Cost of debt down 40bps 5

6 Headlines Period to H H Change % Underlying earnings per share (p) (10.4%) Underlying Profit ( m) (14.6%) Dividend per share (p) % As at H H Change % Valuation performance +0.9% (1.9%) EPRA net asset value per share (p) (2.9%) Loan to value (LTV) 28.4% 26.7% 6

7 Net rental income m (20) (10) (6) 7 (1) 297 Offices 5.8% Retail 0.2% Total 1 2.3% 267 HY 2018 Prior period surrender premia Net divestment Impact of CVAs and administrations Like-for-like rental growth exc. CVAs and administrations Developments HY Like for like rental growth is stated excluding the impact of surrender premia, CVAs and administrations 7

8 Financing costs m 4 6 (4) (2) (66) (62) HY 2018 Financing activity Net divestment Developments Share buyback HY

9 Underlying earnings per share Pence (1.9p) 19.2p (0.8p) (0.6p) 0.7p 0.6p 17.3p 17.2p HY 2018 Prior period surrender premia HY 2018 excl. surrender Net divestment and developments Impact of CVAs and admins LFL rental 1 growth Share buybacks HY 2019 Committed developments and buyback expected to add approx. 5p to future annualised EPS 1 Like for like rental growth is stated excluding the impact of surrender premia, CVAs and administrations 9

10 Income statement HY to 30 September H H Change % Net rental income ( m) (10.1%) Fees & other income ( m) 8 6 (25.0%) Administrative expenses ( m) (41) (42) (2.4%) Net finance costs ( m) (66) (62) 6.1% Underlying Profit ( m) (14.6%) Underlying earnings per share (p) (10.4%) Dividend per share (p) % 10

11 CVAs and Administrations Number of stores in portfolio Stores exposed to CVA/admins Contacted rent reduction m Number of Stores c.2, Administrations CVAs 76 % of CVAs Annualised contracted rent impact by Quarter ( m) CVAs - reduced rents CVAs - stores closing Admins - stores closing Unaffected % Reduced Rents % Closures % Total Rent Impact Rent on stores closing: 9.5m Rent reductions: 5.1m Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 All numbers as of 13 th November 2018, over the last 18 months 58% of 9.5m rent on stores closing is let or in negotiations 11

12 Valuation performance 6 months to September 2018 Valuation m Movement m Movement % Yield movement Bps ERV growth % NEY % Weighting % Offices 6, Retail 6,305 (307) (4.5) +14 (1.5) Residential 128 (4) (3.1) n/a n/a n/a 1 Canada Water n/a n/a n/a 2 Total 12,856 (260) (1.9) +7 (0.8) Of which Standing Investments 11,918 (323) (2.5) +7 (0.8) Of which Development n/a n/a n/a 7 As calculated by IPD, ERV Growth doesn t take into account asset management initiatives 12

13 Retail Valuation Movements Sept 18 Valuations ( m) 1,800 67% of rent lost through CVA/admin is at assets seeing more than 5% valuation decline 1,600 1,400 1,200 1, More than 0% 0% to -2.5% -2.5% to -5% -5% to -10% More than -10% Local Multi-let Regional Multi-let Superstores Leisure Solus Department Stores % Valuation Movement in H1 FY19 13

14 Retail Operational Performance Floor Area (Sq ft 000) New Lettings & Renewals Rent Reviews Occupancy Net Effective Rent ( m) Vs ERV Floor Area (Sq ft 000) Net Effective Rent ( m) Vs Previous Rent Total Retail % % 97.6% Regional multi-let % % 97.3% Local multi-let % % 97.0% British Land H1 FY19 (yoy) Outperformance vs Benchmark (bps) Footfall -1.2% +210 Retailer LFL Sales -2.5% +90 Retailer Total Sales -0.6%

15 EPRA net asset value (28p) 17p (15p) (3p) 2p (1p) 967p 939p Mar 18 Valuation performance Underlying Profit Dividends Financing activity Share buyback Other Sep 18 15

16 Pursuing developments on a risk managed basis Committed pipeline ERV of 63 million Delivering c.4p to EPS once fully occupied 69% pre-let or under offer Speculative exposure now 3.7% As at September, 65% costs to go covered by Clarges residential receipts 93% of costs are fixed Near term pipeline ERV of 27 million Planning consent achieved m ERV Pre-let or under offer 43m 63m ERV of committed developments 0 Committed Near Term Costs to go 353m Costs to go 364m 16

17 Strength of debt metrics Proportionally Consolidated 31 Mar Sept 2018 Loan to value (LTV) 28.4% 26.7% Weighted Average Interest Rate 2.8% 2.9% Interest Cover 4.0x 3.7x Available Undrawn Facilities 1.2bn 1.5bn Weighted Average Drawn Debt Maturity 8.6yrs 8.5yrs Senior unsecured credit rating (Fitch) A A 1.1bn of new finance since March 2018 Including impact of repayment of secured Broadgate bonds and associated swaps, committed prior to 30 September 2018 and completed on 5 October

18 Update on Strategy Chris Grigg, Chief Executive 18

19 Future British Land: progressing our mixed use strategy Mixed Use places to work, shop and live Offices Focused on London campuses Well connected, sustainable and smart Balance of type of space, lease length Further build out of Storey Retail Smaller more focused portfolio Multi-let with mixed use potential High quality, diverse retail integrated within our campuses Build to Rent Complementary to our current strategy Existing options within our portfolio (e.g. Canada Water) Bolt on acquisitions may play a role Significant pre-let progress at Campus developments Further roll out of Storey including the acquisition of a standalone building 634m assets sold or under offer in the last 12 mths Investing in assets which fit our strategy In exclusive discussions to acquire a BTR operator Opportunities identified across our portfolio, including Canada Water 19

20 Our unique London campuses Campuses account for 80% of Offices portfolio 421,000 sq ft Office leasing 6.5% ahead of ERV Developments 69% let or under offer 20

21 A range of developments attracting a broader mix of occupier McCann: 148,000 sq ft at 135 Bishopsgate Leading global advertising group Non-conventional city occupier relocating from the West End 21 st Century Warehouse the building s location at the intersection of Shoreditch, Spitalfields and The City will connect us to some of the most important creative, tech and historic hubs that London has to offer. Mark Lund, CEO McCann Worldgroup UK 135 Bishopsgate, PC Q

22 Mimecast the largest tech letting in the City this year Mimecast: 113,000 sq ft at 1FA 79,000 sq ft let in April 2018 Exercised option over 34,000 sq ft Now 42% let or under offer Further 73,000 sq ft allocated to Storey British Land s progressive approach will ensure our new London office at 1FA is great for collaboration, innovation and relaxing at the end of the day. Neil Murray, Co-founder, Mimecast 1FA, PC Q

23 TP ICAP maintaining our appeal to financial services TP ICAP: 123,000 sq ft at 135 Bishopsgate Existing occupier recommitting to Broadgate Vote of confidence in London and Broadgate 135 Bishopsgate now 94% pre-let Includes 42,000 sq ft let to Eataly opening a place in London where people can buy, eat and learn is a very important and exciting milestone for us. This is real London. Luca Baffigo, CEO Eataly 135 Bishopsgate, PC Q

24 Opening up Broadgate to the neighbourhood Eataly s frontage is 80m long and 12m high, leveraging the public realm along Bishopsgate benefitting from high footfall 135 Bishopsgate, previous 135 Bishopsgate, PC Q

25 Continued roll out of Storey Integral part of our campus offer Operational across all three campuses 130,000 sq ft; 87% let or under offer Premium of 42% to ERV on leased space 186,000 sq ft further space identified 120,000 sq ft on our campuses 65,600 sq ft in standalone buildings Potentially 10% of our Offices portfolio Storey at 338 Euston Road, Regent s Place 25

26 Retail maintaining our operational focus Market environment challenging Rapid structural change Cost pressures on retailers Continuing demand for our space 457,000 sq ft lettings and renewals 5.0% ahead of ERV Retail portfolio 98% full Operational outperformance Total sales down 0.6%; 150 bps ahead of benchmark driven by refurbishment and asset management initiatives Footfall down 1.2%; 210 bps ahead of benchmark Meadowhall 26

27 Delivering a smaller, more focused Retail portfolio 2.4bn assets sold since March m superstores 614m department stores 559m multi-let assets 196m leisure and solus assets 634m sold or under offer in the last 12 months 215m sold 419m exchanged or under offer Physical Retail plays a key role in our mixed use environments Long term holders of assets that meet our criteria Teesside, Stockton 273

28 Key criteria for long term Retail assets Criteria Size and location Environment Operators Services Key attributes Urban locations with excellent local market position and connectivity Strong demographics of catchment Right-sized to underpin supply-demand tension Strong visual identity; high quality environment Flexible space with capacity to respond to evolving demand Mixed use potential Good occupier mix; reflective of local area Winning and aspirational growth brands and categories Local operators and local lifestyle uses complementing major brands Advanced marketing, enlivenment and events plan Data sharing Technology enabled customer services 28

29 Build to Rent building a presence in this growth market Attractive market Clear structural growth dynamics Fragmented with small professional offering Highly complementary to our business Part of our mixed use vision Focused on achieving scale Exclusive discussions with an operator to add scale and enhance expertise Substantial opportunities within our portfolio Canada Water 293

30 Significant residential opportunities in our existing portfolio 4,000 5,000 units opportunities across our portfolio 30

31 Our vision for Canada Water A partnership between British Land and London Borough of Southwark creating a new urban centre 31

32 Further good progress at Canada Water Master development agreement signed New 500-year headlease, simplifying current structure Aligns our interest with Southwark Council; ownership split 80:20 Planning submitted Outline planning for the overall masterplan including 3,000 homes Detailed planning for the first three buildings including 265 homes Part of a major first phase, covering 1.9m sq ft Canada Water 323

33 First detailed plots K1 residential Plot A1 residential & workspace A2 workspace & leisure 333

34 Future British Land: London focused mixed use business March 2010 Current Indicative business split 5+ years 10% 33% 66% 48% 49% 30-35% 5% 50-55% London focused: over 70% of group Smaller, more focused Retail Meaningful Residential exposure Retail Campus-focused Offices Storey Residential Right balance of flexible and core workspace 34

35 Conclusion and outlook Uncertain environment Expect this to continue Our business is strong financially, with limited speculative exposure Clear and consistent strategy Good progress on Retail sales Continuing to benefit from the unconventional London cycle and our developments Promising opportunities in Build to Rent Confident in our business Quality portfolio; high occupancy Clear and consistent long term strategy Optionality and flexibility built into our business Winter Forest, Broadgate 353

36 Appendices 36

37 Our Strategy British Land is a leading UK commercial property company focused on high quality retail and London offices Customer Orientation Right Places We use our insight into customers needs and identify major long term trends to create environments in tune with changing lifestyles Places People Prefer We design engaging, sustainable places which bring people together through the right mix of occupiers, services and activities Capital Efficiency Expert People We allocate our capital, manage our finances and partner with like-minded organisations to deliver sustainable long-term value We employ expert people and work with specialist partners to create insight, develop skills and build capability By managing our business to be resilient, sustainable and responsive, we create enduring demand for our properties and value for our stakeholders 37

38 We apply our Placemaking Framework across the business We Connect We Design We Enhance We Enliven Communication Digital connectivity, branding and marketing Form Efficient and effective buildings and space Occupier mix Occupiers and campus community Customer service On-site hospitality & customer service Accessibility Convenience and access Authenticity How our users feel and interact with the space Segment mix Balance of different segments and uses Events Bringing people together and attracting visitors Community Supporting communities for local people and occupiers Function Facilities and safety Occupier service Supporting occupiers and British Land value add Memorable experience Creating lasting, positive impressions 38

39 81% of our Retail & Office assets are within our managed environments 58% London Weighting Offices 6.1bn 80% of Office assets are at our campuses Retail & Leisure 6.3bn 82% of Retail assets are multi-let Further 0.3bn at Canada Water and 0.1bn of standalone Residential assets Figures shown on a proportionally consolidated basis including the group's share of properties in Joint Ventures & Funds 39

40 Retail Multi-let Portfolio Our two core products each fulfil specific shopper missions Regional Attracting visitors from a wide catchment for a planned trip Local Fitting into the daily life of local communities Missions include Leisure-dominated Trips, Family Day Out and The Big Ticket Shop Retail offer covers multiple categories with depth of choice in each Significant leisure and F&B e.g. restaurants, cinema Missions include Local Neighbourhood Shopper, Convenient Leisure and Single Item Pick-Up Retail offer covers multiple categories & includes local services and amenities Convenient leisure and F&B e.g. gym and coffee shops Typically >30 occupiers Typically occupiers Footfall >10m, spend > 100m p.a. Footfall often <8m, spend < 100m p.a. Drive-time >20 mins Drive-time <15 mins Dwell >60 mins Dwell <60 mins 40

41 Multi-let Retail assets Regional Attracting visitors from a wide catchment for a planned trip Local Fitting into the daily life of local communities Southgate, Bath Broughton, Chester 1 Fort Kinnaird, Edinburgh 1 Glasgow Fort 1 St. Stephen s, Hull Eden Walk, Kingston Giltbrook, Nottingham Serpentine Green, Peterborough Drake Circus, Plymouth Meadowhall, Sheffield New Mersey, Speke 1 Teesside, Stockton Mayflower, Basildon Old Market, Hereford Studlands, Newmarket Weston Lock, Bath Inverness 1 Harlech, Newport Cornerhouse, Barrow Westside, Leeds Elk Mill, Oldham Hindpool, Barrow The Woolwich Estate Nugent, Orpington Forster Square, Bradford Beaumont, Leicester Botley Road, Oxford Woodfields, Bury Valentine, Lincoln 1 Deepdale, Preston 1 Forster Square, Bradford Mostyn Champneys, Llandudno 1 Queens, Stafford 1 Tollgate, Colchester St. Peter s, Mansfield Orbital, Swindon Prospect Place, Dartford 1 Kingston Centre, Milton Keynes Royal Victoria Place, Tunbridge Wells Crown Point, Denton Whiteley, Fareham Wheatley, Doncaster Ealing Broadway Lion, Woking Crown Wharf, Walsall 1 1 Assets held within Hercules Unit Trust or its subsidiaries and joint ventures 41

42 Our Retail portfolio is well positioned to meet both consumer and retailer demands BL local centres Potential to reach 60% of the population BL regional centres BL asset catchments Average rent to sales ratio 9% Annual footfall of 305m Source: CACI Retail Footprint 2017, BL Insight team Note that population reach includes Broadgate Occupancy cost ratio 14% 42

43 Online sales increasingly integrated with physical stores: 87% of UK retail sales touch the store Retail sales by channel (UK, all sectors, 2017) Click & Collect sales 6 bn Online sales browsed in store 7 bn Online sales not browsed in store 20 bn Online pureplay sales 19 bn Mail order & TV shopping 2bn Physical store sales 269 bn Boost +5% True Value of Stores 282 bn 87% of total retail sales in 2017 Total retail sales 323 bn Total online sales Online sales of store operators Online that touched the store Source: GlobalData/ British Land 43

44 Physical store openings significantly boost retailers online presence Postal area share of retailer website visits Indexed vs. start of store opening period % weeks Store Opening weeks Note: Based on a sample of 29 retailers opening at British Land centres between April 2014 and December For retailers with fewer than 30 UK stores, there is a 84% boost to online presence, based on a sample of 7 retailers Source: British Land/Connexity Hitwise 44

45 BL footfall performance vs benchmark Jan-10 = bps Outperformance for 6m to Sep BL Index Tyco (formerly Experian) Index Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 British Land UK Market (ShopperTrak UK National Index) 45

46 Major property holdings At 30 September 2018 BL Share % Sq ft 000 s Rent Occupancy m pa 1,4 Rate % 2,4 Lease Length yrs 3,4 1 Broadgate 50 4, Regent's Place 100 1, Paddington Central Meadowhall, Sheffield 50 1, Glasgow Fort Teesside, Stockton Drake Circus, Plymouth 100 1, Ealing Broadway Sainsbury's Superstores , Portman Square Annualised EPRA contracted rent including 100% of Joint Ventures & Funds 2 Including accommodation under offer or subject to asset management 3 Weighted average to first break 4 Excludes committed and near term developments 5 Comprises standalone stores 46

47 Broadgate Campus 2 FA & 3 FA 2FA & 3FA - Innovation cluster inc. 64k sq ft of Storey space 3FA UBS surrendered lease in Jan Light touch refurb completed, now 100% let/under offer Current size: 189k sq ft Potential size: 563k sq ft 1 FA Pre-let 113k sq ft to Mimecast, 11k sq ft to Everyman Cinemas 73k sq ft to be Storey space Size: 288k sq ft Completion: Q Bishopsgate 94% let or under offer Pre-let 123k sq ft to TP ICAP, 148k sq ft to McCann, 42k sq ft to Eataly Size: 334k sq ft Completion: Q Broadgate Current size: 331k sq ft Potential size: 533k sq ft 100 Liverpool Street Pre-let 160k sq ft to SMBCE Under offer on further 49k sq ft Current size: 380k sq ft Redevelopment: 521k sq ft Completion: Q % of Broadgate committed developments pre-let or under offer 47

48 Paddington Central Campus 48

49 Regent s Place Campus 49

50 Top 20 occupiers & occupier split by industry As at 30 September 2018 % of Contracted Rent Occupier Split by Industry (%) Tesco Sainsbury s 3.9 Debenhams 2 (incl. Head Office) 3.8 Government 2.9 Next plc 2.6 Kingfisher (incl. Head Office) 2.3 Facebook 2.0 Dentsu Aegis Marks & Spencer 1.8 Spirit Group 1.8 Visa Inc 1.7 Alliance Boots 1.7 Dixons Carphone 1.6 Arcadia Group 1.4 Herbert Smith 1.4 Homebase TK Maxx 1.2 Gazprom 1.1 Vodafone 1.1 JD Sports 1.0 Home & DIY 7% Grocery & Convenience 9% TMT 9% Professional & Corporate 11% Other 7% Banks & Financial services 11% Banks 5 3% Asset Management 5% Other Financial 3% 1 Includes 3.4m at Surrey Quays Shopping Centre 2 Of which 1.8% relates to rent received at the Head Office, 10 Brock Street 3 Represents current occupation of 10 Triton Street covering 118,000 sq ft of space. Taking into account their pre-let of 310,000 sq ft at 1 Triton Square, % of contracted rent would rise to 5.3%. As part of this new letting, Dentsu Aegis have an option to return their existing space at 10 Triton Street in If this option is exercised, there is an adjustment to the rent free period in respect of the letting at 1 Triton Square to compensate British Land. 4 Taking into account rent adjustments following CVA. Reduces to 1.1% taking account of asset sales under offer 5 Does not include letting to SMBC at 100 Liverpool Street Fashion & Beauty 18% General Retail 16% Food / Leisure 12% 50

51 Capital Activity Since 1 April 2018 Offices m Retail m Residential m Canada Water m Total m Purchases Sales 2 (500) (139) (203) - (842) Development Spend Capital Spend Net Investment (391) 8 (194) 8 (569) Gross Investment ,115 On a proportionally consolidated basis including the Group s share of joint ventures and funds 1 Includes 32m Orsman Road, Haggerston which exchanged in the period but has not yet completed 2 Includes 45m Richmond Homebase which exchanged prior to FY19 and completed in the period. Includes 203m of Clarges completions which exchanged prior to FY19 and completed in the period 51

52 Capital Activity 1.1bn Gross investment activity in H1 FY19 Net Spend 1 m 1,600 52m 648m ( 47m) 45m ( 502m) ( 572m) ( 569m) 1, (400) (800) (1,200) (1,600) (2,000) H Sales Capital Investment Purchases Net Spend 1 Previous periods have been restated to exclude residential sales transactions exchanged in the period that have now completed restated to exclude Richmond Homebase which completed after 31 March

53 Purchases Since 1 April 2018 Sector Price (100%) m Completed Price (BL Share) m Annual Passing Rent m 1 Royal Victoria Place, Tunbridge Wells Retail Hercules Unit Trust units Retail Exchanged Orsman Road, Haggerston Offices Total BL share of annualised rent topped up for rent frees 53

54 Sales Since 1 April 2018 Sector Price (100%) m Completed Price (BL Share) m Annual Passing Rent m 3 Richmond Homebase 1 Retail Cheltenham Gallagher Retail Park Retail Southampton David Lloyd Retail Broadgate Offices 1, B&Q Glasgow Retail Hamilton David Lloyd Retail Brentwood Virgin Active Retail Clarges, Mayfair 2 Residential Aldgate Phase 1 Residential Total 1, Exchanged during the year ended 31 March 2018, completed in the period 2 All of which exchanged prior to FY19 and completed in the period 3 BL share of annualised rent topped up for rent frees 54

55 Clarges Residential Unit Sales Number of units m Completed in FY Completed in FY Total Completed Exchanged (of which 1 exchanged and completed post period end) Total Sold Units remaining Total

56 H2 FY19 income statement guidance Gross Rents Annualised accounting gross rent of 555m as at 30 September 2018 This reflects the 14.2m reduction to contracted rents as a result of CVAs and administrations as at 30 th September 2018 Transactions exchanged post period end are expected to reduce annualised rents by 9.1m (H2 impact: 1.9m) No material expiries relating to properties in the development pipeline expected in H2 Rental income will be driven by like-for-like growth Operating costs Property outgoings and administrative costs expected to be broadly in line with H1 levels Financing Weighted average interest rate 2.9% on gross debt of 3.8bn Undrawn facilities of 1.5bn as at 30 September, with commitment fees of c.30bps p.a. Dividend As announced in May 2018, the dividend for the year ending 31 March 2019 is 31.0 pence per share (quarterly dividend of 7.75 pence per share) Other Capital activity has the potential to significantly impact profits. For example, selling/acquiring 100m of assets would reduce/increase profits by c. 4m and LTV by c.0.5%. As we expect to continue making retail sales, this is based on an average retail portfolio topped up NIY of 5.1% and marginal cost of debt of 1.4% Annualised impact of the 200m share buyback is c.0.8p, of which c.0.3p is expected in FY19, based on current share price levels 56

57 Illustrative future income profile breakdown (cash basis) For the year to 31 March Total Accounting Basis At 30 September 2018 m m m m m m Current Passing Rent 569 Contracted uplifts Letting of Committed Developments 1 let or under offer Contracted rent Sales exchanged post period end (9) (9) (9) Letting of completed developments Lease Expiries Development pipeline (4) (5) (1) - - (10) (10) Letting of Committed Developments 1 speculative Letting of Near Term Developments RPI Linked Leases Reversion Vacancies Letting of Medium Term Developments (excl. Canada Water & Eden Walk) On a proportionally consolidated basis including the Group s share of joint ventures and funds. Figures based on valuation rent and include assumptions on outstanding rent review settlements 1 Assumes lettings contracted are rent producing at practical completion 2 Assumed at 2.75% per annum 3 Includes reversion on expiries and open market rent reviews within 5 years 4 Includes 2m agreement for lease rents 57

58 Gross rental income 1 Accounting Basis m 6 months to 30 September 2018 Annualised as at 30 September Group JVs & Funds Total Group JVs & Funds Total West End City Offices Regional Local Multi-let Department Stores and Leisure Superstores Solus and Other Retail Residential Canada Water Total On a proportionally consolidated basis including the group's share of joint ventures and funds 1 Gross rental income differs from annualised rents due to accounting adjustments for fixed & minimum contracted rental uplifts and lease incentives 2 Standalone residential 3 Reflects standing investment only 4 After impact of reduction in rent from CVAs and administrations 58

59 Underlying Profit Bridge m (20) 198 (6) (5) (6) 7 4 (3) 169 HY 2018 Prior period surrender premia Net divestment (including share buyback) Developments Impact of CVAs and administrations Like-for-like rental growth exc. CVAs and administrations Financing activity Other HY

60 Administrative expenses HY to 30 September H m H m Personnel costs Share scheme costs 2 (1) Other administrative expenses Total Capitalised costs (3) (3) Total administrative expenses On a proportionally consolidated basis including the Group's share of Joint ventures and Funds and excluding non-controlling interests in the Group's subsidiaries. 60

61 Operating costs metric HY to 30 September H m H m Property operating expenses Administrative expenses Net fees and other income (8) (6) Ground rent costs and operating expenses de facto included in rents (1) (4) EPRA Costs (including direct vacancy costs) Gross rental income Ground rent costs and operating expenses de facto included in rents (1) (4) Gross Rental Income (EPRA basis) EPRA Cost Ratio (including direct vacancy costs) 16.2% 19.5% On a proportionally consolidated basis including the Group's share of Joint ventures and Funds and excluding non-controlling interests in the Group's subsidiaries. 61

62 Reconciliation of Underlying Profit HY to 30 September H m H m IFRS profit before tax 238 (42) Net valuation (profit)/loss (167) 265 Profit on disposal of investment and trading properties (20) (65) Capital financing costs Non-controlling interests (6) (6) Underlying Profit and EPRA Earnings On a proportionally consolidated basis including the Group's share of Joint ventures and Funds and excluding non-controlling interests in the Group's subsidiaries. 62

63 Number of shares As at 31 Mar 2018 (m) 30 Sept 2018 (m) IFRS Basic Weighted average 1 1, IFRS Diluted Weighted average 2 1, Underlying/EPRA diluted Weighted average 3 1, Year/Period end For use in IFRS basic earnings per share. 2 For use in IFRS diluted earnings per share. 3 For use in Underlying/EPRA diluted earnings per share. 4 For use in EPRA NAV per share and EPRA NNNAV per share. 63

64 EPRA balance sheet 31 March 18 Group JVs & Funds 30 September 18 Total properties ( m) 13,716 9,314 3,542 12,856 Adjusted net debt ( m) (3,973) (2,410) (1,118) (3,528) Other net liabilities ( m) (183) (83) (22) (105) EPRA Net Assets ( m) 9,560 6,821 2,402 9,223 Loan to value (LTV) % 26.7% Weighted average interest rate 2.8% 2.9% Interest cover 4.0x 3.7x Weighted average maturity of drawn debt (years) Group LTV based on Group Properties and net investment in Joint ventures & Funds, and Group net debt. 64

65 Reconciliation of EPRA NAV & NNNAV 31 March September 18 m Pence m pence IFRS Net Assets 9, , Deferred tax arising on revaluation movements 5 5 Mark to market on derivatives and related debt adjustments Adjust to fully diluted on exercise of share options Surplus on trading properties Non-controlling interests (254) (233) EPRA NAV 9, , Deferred tax arising on revaluation movements (31) (11) Mark to market of debt and derivatives (485) (407) EPRA NNNAV 9, ,

66 Gross and net debt reconciliation As at 30 September 2018 Group m JVs & Funds m Less noncontrolling interests m Gross Debt (principal) (2,597) (1,277) 111 (3,763) Total m IFRS adjustments: Issue costs and premia 14 1 (1) 14 Fair value hedge adjustments (151) - - (151) Other items IFRS gross debt (2,721) (1,273) 110 (3,884) Market value of derivatives (4) (24) 1 (27) Cash (9) 278 IFRS net debt (2,609) (1,126) 102 (3,633) Adjustments: Remove market value of derivatives 11 Remove fair value hedges 107 Other adjustments (13) Adjusted net debt (3,528) 66

67 Loan to value (LTV) As at 31 March 2018 m Valuation movement Acquisitions Capital spend Disposals Share buyback Other As at 30 September 2018 m Total properties 13,716 (246) (826) - (4) 12,856 Other investments LTV assets 13,888 (246) (826) - (3) 13,029 Adjusted net debt 3, (774) ,528 Other (30) (14) (44) LTV liabilities 3, (774) ,484 LTV 28.4% 0.5% 0.6% 0.5% (4.1%) 0.4% 0.4% 26.7% On a proportionally consolidated basis including the Group's share of Joint ventures and Funds and excluding non-controlling interests in the Group's subsidiaries. 67

68 Debt metrics Proportionally Consolidated 31 Mar Sept 2018 Loan to value (LTV) 28.4% 26.7% Weighted average interest rate 2.8% 2.9% Interest cover 4.0x 3.7x Weighted average maturity of drawn debt 8.6yrs 8.5yrs Group 31 Mar Sept 2018 Loan to value (LTV) 22.1% 20.1% Available undrawn facilities 1.2bn 1.5bn Weighted average interest rate 2.0% 2.2% Interest cover 5.3x 5.0x Senior unsecured credit rating (Fitch) A A Including impact of repayment of secured Broadgate bonds and associated swaps, committed prior to 30 September 2018 and completed on 5 October

69 Debt maturity ( m) m 1,200 1,000 JVs Securitisations (Secured) Sterling Bond (Unsecured) Funds Bank drawn (Secured) Convertible Bond (Unsecured) Debenture & loan notes (Secured) Bank RCF Drawn (Unsecured) US Private Placements (Unsecured) Bank RCF Undrawn (Unsecured) On a proportionally consolidated basis including the group's share of joint ventures and funds and excluding non-controlling interests in the Group's subsidiaries. Reflects the repayment of 223m ( 111m BL Share) Broadgate Bonds, completed October

70 Debt financing diverse profile 1.3bn of financing activity, including 1.1bn of new facilities Amended and extended our largest syndicated RCF at 735m Issued new 231m USPP Repaid 223m ( 111m BL%) of secured Broadgate bonds, removing properties from the securitisation and increasing our flexibility LTV reduced from 28.4% to 26.7% Weighted average interest rate of 2.9% Average drawn debt term 8.5 years 3.8bn Drawn Debt 1 (30 September 2018) Bank RCFs Drawn (Unsecured) 0.4bn 0.3bn US Private Placements (Unsecured) 0.6bn Convertible Bond (Unsecured) 1.2bn Sterling Bond (Unsecured) 0.4bn Debentures & loan notes (Secured) 0.3bn JVs Securitisations (Secured) 0.6bn JV & Funds Loans (Secured) Senior unsecured credit rating of A (Fitch) 1 Proportionally consolidated. HUT s debt shown at our share ( 0.4bn) within JV & Funds. Reflects the repayment of 223m ( 111m BL Share) Broadgate Bonds, completed October

71 Valuation growth drivers Offices 6 months to September 2018 Valuation m Movement m Movement % 1 Yield movement bps 2 ERV Growth % 2 H1 H1 H1 West End 4, City 2, Offices 6, Campuses represent 80% of the Offices portfolio 1 Valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales 2 Excluding committed developments, assets held for development and residential assets 71

72 Valuation growth drivers Retail 6 months to September 2018 Valuation m Movement m Movement % 1 Yield movement bps 2 ERV Growth % 2 H1 H1 H1 Regional 2,950 (122) (4.0) +9 (0.8) Local 2,217 (163) (6.8) +20 (2.5) Multi-let 5,167 (285) (5.2) +14 (1.6) Other 1,138 (22) (1.7) +13 (1.4) Retail 6,305 (307) (4.5) +14 (1.5) Multi-let assets represent 82% of the Retail portfolio 1 Valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales 2 Excluding committed developments, assets held for development and residential assets 72

73 Retail Portfolio Valuation previous classification At 30 September 2018 Group JVs & Funds Total H1 Change 1 m m m % m Shopping parks 1,827 1,105 2,932 (5.5) (175) Shopping centres 1,116 1,132 2,248 (3.7) (87) Superstores (0.7) (3) Department stores (24.9) (49) High Street (1.1) (2) Leisure Retail & Leisure 3,789 2,516 6,305 (4.5) (307) On a proportionally consolidated basis including the group's share of joint ventures and funds 1 Valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales 73

74 Portfolio valuation by sector At 30 September 2018 Group JVs & Funds Total H1 Change 1 m m m % m West End 4,097-4, City 118 1,915 2, Offices 4,215 1,915 6, Regional 1,087 1,863 2,950 (4.0) (122) Local 1, ,217 (6.8) (163) Multi-let 2,913 2,254 5,167 (5.2) (285) Department Stores and Leisure (3.1) (18) Superstores (0.7) (3) Solus and Other (0.2) (1) Retail 3,789 2,516 6,305 (4.5) (307) Residential (3.1) (4) Canada Water Total 8,405 4,451 12,856 (1.9) (260) Standing Investments 7,941 3,977 11,918 (2.5) (323) Developments On a proportionally consolidated basis including the group's share of joint ventures and funds 1 Valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales 2 Standalone residential 74

75 Portfolio weighting At 30 September % 2018 (current) % 2018 (current) m 2018 (pro-forma 1 ) % West End , City , Offices , Regional , Local , Multi-let , Department Stores and Leisure Superstores Solus and Other Retail , Residential Canada Water Total , Of which London 57% 58% 7,428 60% On a proportionally consolidated basis including the group's share of joint ventures and funds 1 Pro forma for developments under construction and committed developments at estimated end value (as determined by the Group s external valuers), excludes Clarges Residential 2 Standalone residential 75

76 Lease length and occupancy At 30 September 2018 Average Lease Length (yrs) Occupancy Rate (%) 1 To Expiry To Break EPRA Occupancy Occupancy 2,4 West End City Offices Regional Local Multi-let Department Stores and Leisure Superstores Solus and Other Retail Canada Water Total Space allocated to Storey is shown as occupied where there is a Storey tenant in place otherwise it is shown as vacant. Total occupancy would rise from 97.8% to 97.9% if Storey space were assumed to be fully let. 2 Including accommodation under offer or subject to asset management 3 Reflects standing investment only. Removing the impact of Tesco reduces the term to break to 3.2 years. 4 Where occupiers have entered administration or CVA but are still liable for rates, these are treated as occupied. Reflecting units currently occupied but expected to become vacant, then the occupancy rate for Retail would reduce from 97.6% to 96.1%, and total occupancy would reduce from 97.8% to 97.0% 76

77 Portfolio net yields 1,2 At 30 September 2018 EPRA net initial yield % EPRA topped up net initial yield % 3 Overall topped up net initial yield % 4 Net equivalent yield % Net equivalent yield movement bps Net reversionary yield % ERV Growth % 5 West End City Offices Regional (0.8) Local (2.5) Multi-let (1.6) Department Stores and Leisure (2.8) Superstores (1) 5.2 (0.2) Solus and Other (13) 4.4 (0.1) Retail (1.5) Canada Water (4) Total (0.8) On a proportionally consolidated basis including the group's share of joint ventures and funds 1 Including notional purchaser's costs 2 Excluding committed developments, assets held for development and residential assets 3 Including rent contracted from expiry of rent-free periods and fixed uplifts not in lieu of rental growth 4 Including fixed/minimum uplifts (excluded from EPRA definition) 5 As calculated by IPD 6 Reflects standing investment only 77

78 Retail Portfolio Net Yields 1,2 previous classification At 30 September 2018 EPRA net initial yield % EPRA topped up net initial yield % 3 Overall topped up net initial yield % 4 Net equivalent yield % Net equivalent yield movement bps Net reversionary yield % ERV Growth % 5 Shopping parks (2.1) Shopping centres (0.1) Superstores (1) 5.2 (0.2) Department stores (18.4) High Street (2) 5.2 (0.2) Leisure (0.0) Retail (1.5) On a proportionally consolidated basis including the group's share of joint ventures and funds 1 Including notional purchaser's costs 2 Excluding committed developments and residential assets 3 Including rent contracted from expiry of rent-free periods and fixed uplifts not in lieu of rental growth 4 Including fixed/minimum uplifts (excluded from EPRA definition) 5 As calculated by IPD 78

79 Annualised rent & estimated rental value (ERV) At 30 September 2018 Annualised Rents (Valuation Basis) m 1 ERV m Average Rent ( psf) Group JVs & Funds Total Total Contracted 2 ERV West End City Offices Regional Local Multi-let Department Stores and Leisure Superstores Solus and Other Retail Residential Canada Water Total On a proportionally consolidated basis including the group's share of joint ventures and funds, excluding committed, near term and assets held for development 1 Gross rents plus, where rent reviews are outstanding, any increases to ERV (as determined by the Group s external valuers), less any ground rents payable under head leases, excludes contracted rent subject to rent free and future uplift 2 Annualised rent, plus rent subject to rent free 3 psf metrics shown for office space only 4 Standalone residential 79 5 Reflects standing investment only

80 Rent subject to open market rent review For the year to 31 March At 30 September 2018 m m m m m m m West End City Offices Regional Local Multi-let Department Stores and Leisure Superstores Solus and Other Retail Residential Canada Water Total On a proportionally consolidated basis including the group's share of joint ventures and funds excluding committed, near term and assets held for development 1 Reflects standing investment only 80

81 Rent subject to lease break or expiry For the year to 31 March At 30 September 2018 m m m m m m m West End City Offices Regional Local Multi-let Department Stores and Leisure Superstores Solus and Other Retail Residential Canada Water Total % of contracted rent 4.9% 8.3% 8.1% 8.1% 10.4% 21.3% 39.8% On a proportionally consolidated basis including the group's share of joint ventures and funds excluding committed, near term and assets held for development 1 Reflects standing investment only 81

82 Contracted rental increases (cash flow basis) For the year to 31 March At 30 September 2018 m m m m m m m Expiry of rent free periods Fixed uplifts (EPRA basis) Fixed & minimum uplifts Total On a proportionally consolidated basis including the group's share of joint ventures and funds excluding committed, near term and assets held for development 82

83 Total Property Return (as calculated by IPD) 6 months to 30 September 2018 Offices Retail Total % British Land IPD British Land IPD British Land IPD Capital Return (4.6) (2.2) (1.9) 1.1 ERV Growth (1.5) (1.1) (0.8) 0.3 Yield Movement 1 1 bps (3) bps 14 bps 5 bps 7 bps (5) bps Income Return Total Property Return (2.1) Net equivalent yield movement 83

84 De-risked development pipeline focused on campuses 135 Bishopsgate 334,000 sq ft Completion Q Triton Square 366,000 sq ft Completion Q Blossom Street, Shoreditch 335,000 sq ft Eden Walk, Kingston 533,000 sq ft 2-3 Finsbury Avenue 563,000 sq ft 1-2 Broadgate 533,000 sq ft 5 Kingdom Street 371,000 sq ft 1 Finsbury Avenue 288,000 sq ft Completion Q Liverpool Street 521,000 sq ft Completion Q Gateway Building 105,000 sq ft Meadowhall Leisure 333,000 sq ft Committed Developments Near term pipeline Expected start 2019 ERV of 63m 69% pre-let or under offer ERV of 27m Both schemes consented Medium term pipeline 84

85 Committed developments At 30 September 2018 Sector BL Share Committed Pipeline Sq ft PC Calendar Year Current Value Cost to Come ERV Let & Under Offer % '000 m m 1 m 2 m 1 Finsbury Avenue Office Q Bishopsgate Office Q Plymouth (Leisure) Retail Q Liverpool Street Office Q Triton Square 4 Office Q Total Committed 1, Retail Capital Expenditure 3 58 On a proportionally consolidated basis including the group's share of joint ventures and funds (except area which is shown at 100%) 1 From 1 October Cost to come excludes notional interest as interest is capitalised individually on each development at our capitalisation rate 2 Estimated headline rental value net of rent payable under head leases (excluding tenant incentives) 3 Capex committed and underway within our investment portfolio relating to leasing and asset management 4 ERV let & under offer of 21.8m represents space taken by Dentsu Aegis. As part of this letting, Dentsu Aegis have an option to return their existing space at 10 Triton Street in If this option is exercised, there is an adjustment to the rent free period in respect of the letting at 1 Triton Square to compensate British Land 85

86 Near term development pipeline At 30 September 2018 Sector BL Share Near term Pipeline Sq ft Expected Start on Site % '000 Calendar Year Current Value Cost to Come ERV Let & Under Offer m m 1 m 2 m Planning Status Blossom Street, Shoreditch Office Q Consented Gateway Building Leisure Q Consented Total Near Term Retail Capital Expenditure On a proportionally consolidated basis including the group's share of joint ventures and funds (except area which is shown at 100%) 1 From 1 October Cost to complete excludes notional interest as interest is capitalised individually on each development at our capitalisation rate 2 Estimated headline rental value net of rent payable under head leases (excluding tenant incentives) 3 Forecast capital commitments within our investment portfolio over the next 12 months relating to leasing and asset enhancement 86

87 Medium term development pipeline At 30 September 2018 Sector BL Share Sq ft % '000 Planning status Medium term Pipeline 2-3 Finsbury Avenue Office Consented 1-2 Broadgate Office Submitted 5 Kingdom Street Office Consented 1 Meadowhall (Leisure) Retail Consented Ealing The Broadway Retail Pre-submission Aldgate Place Phase 2 Residential Consented Eden Walk Retail & Residential Mixed Use Consented Plymouth, George Street Retail Pre-submission Total Medium Term excl. Canada Water 2,821 Canada Water Phase 1 2,3,4 Mixed Use 100 1,917 Submitted outline 1 Planning consent for previous 240,000 sq ft scheme 2 Canada Water site covers 5m sq ft in total based on net area based on gross area of up to 7m sq ft 3 Phase 1 consists of Phase 1a, 1b, 1c. Detailed planning submitted for Phase 1a, outline planning submitted for total Phase 1 4 On drawdown of the Master Development Agreement, ownership reduces to 80% with LBS owning 20%. LBS ownership will adjust over time depending on level of investment by Southwark 87

88 Estimated future development spend and capitalised interest At 30 September 2018 PC Calendar Year Cost to Come m (excluding notional interest) 6 months breakdown Mar-19 Sep-19 Mar-20 Sept-20 Mar-21 Sept-21 Mar-22 Sept-22 1 Finsbury Avenue Q Bishopsgate Q Plymouth (Leisure) Q Liverpool Street Q Triton Square Q Total Committed Blossom Street, Shoreditch Gateway Building Total Near Term Indicative Interest Capitalised on above at attributable rates Contracted Residential receipts to come Assumes interest capitalised at 2% on qualifying expenditure for developments 2 Includes sale exchanged post period end. Does not include book value of units not yet sold of 123m 88

89 Canada Water Illustrative Scheme Masterplan First detailed plots Outline Submitted Detailed planning submitted in May 18 L2 K1 A1 H2 L1 Total NIA (sq ft) 5.0m 0.6m M1 A2 H1 H3 D1 D2 Commercial (sq ft) 2.1m 0.3m Retail & Leisure (sq ft) 0.7m 0.1m New Homes (units) 3, Note: The figures above are indicative and are likely to change as development plans evolve Buildings highlighted above reflect indicative First Major Scheme, totaling 1.9m sq ft 89

90 Canada Water: key milestones and timeline Acquisition of 50% of Surrey Quays shopping centre 23 acres Remaining 50% of Surrey Quays shopping centre acquired 23 acres MDA signed with Southwark Council Planning application submitted Conditional agreement to acquire Printworks 14.5 acres Surrey Quays leisure park acquired 8.5 acres Target grant of planning Earliest possible start on site 90

91 Central London development pipeline Q m sq ft Completed U/C Pre-let Pipeline Pre-let U/C Speculative Potential Speculative 10 year average new and under-construction take-up 10 year average development completions m 4.3m Source: CBRE Note: Forecast reflects CBRE s estimate of earliest completions. Central London comprises the City, Docklands, Midtown, Southbank and West End areas. 91

92 West End development pipeline Q m sq ft Completed U/C Pre-let Pipeline Pre-let U/C Speculative Potential Speculative 10 year average new and under-construction take-up 10 year average development completions m 1.0m Source: CBRE Note: Forecast reflects CBRE s estimate of earliest completions 92

93 City development pipeline Q m sq ft Completed U/C Pre-let Pipeline Pre-let U/C Speculative Potential Speculative 10 year average new and under-construction take-up 10 year average development completions m 2.1m Source: CBRE Note: Forecast reflects CBRE s estimate of earliest completions 93

94 Property Yields and interest rate yield gap % NIY % Retail and London Office Yields Source: IPD Property Yield vs 10 Year Gilt Yields 10 8 All Retail Central London Offices Yield Group UK 10 Year Gift Yield IPD All Property Net Initial Yield (2) Q Source: IPD/Bloomberg 94

95 London office market rental outlook Prime London Office Rents psf West End City Actual Forecast Source: CBRE (historic) and Average Agents' Consensus (including PMA) for forecasts 95

96 Vacancy Central London West End & City Vacancy Rates West End West End 10 year average City City 10 year average % 3.7% Q Source: CBRE (historic) 96

97 Sustainability Half Year highlights Customer Orientation Wellbeing Right Places Community Capital Efficiency Futureproofing Expert People Skills & opportunity We published a new report, A Design for Life, quantifying the benefits of integrating design that supports good mental and physical health. The report showed that designing the urban environment around wellbeing had the potential to boost the UK economy by 15.3bn over a development cycle, as well as help individuals to live happier, more connected and fulfilling lives Our investment in the public realm at Glasgow Fort has contributed to a 17% increase in visit frequency over the last year and a 6% increase in dwell time. British Land came 2nd in the 2018 UK GivX benchmark, which puts a value on corporate community investment Our Regent s Place Community Fund has attracted new partners and doubled its annual donations to 59,000. This will be invested in local projects supporting employability, social cohesion, health and wellbeing Our team won an award from the British Heart Foundation, recognising the 1m generated from donations collected by our centre teams over the last seven years. The re-use of materials in our redevelopment of 1 Triton Square, Regent s Place, has resulted in 35,000 tons of concrete and 1,877 tons of steel being reused. The emissions avoided are equivalent to powering the building for 26 years Following last year s refurbishment, Meadowhall achieved a BREEAM In- Use rating of Outstanding and is currently installing 3,148 panels of solar PV on-site. The Retail & Skills Centre at Fort Kinnaird celebrated its fifth anniversary by winning the Collaborators Award from Estates Gazette. Established in 2013 with three local councils, the Capital City Partnership, Department for Work & Pensions and Skills Development Scotland, the Centre has trained 2,663 people and helped 3,585 people into work. Our partnership with the National Literacy Trust has won a Charity Times Award. Over 34,000 young readers at primary schools across the UK have been supported in improving their literacy by employees of British Land and our customers over the last seven years and we are beginning to help the charity in their work with children of pre-school age. 97

98 Sustainability Indices 2018 performance Other benchmarks and awards MSCI ESG Ratings 2018: AAA rating FTSE4Good : 96 th percentile DJSI World & Europe : 92 nd percentile EPRA Sustainability Reporting Awards 2018: Gold for 7 th year Global Real Estate Sustainability Benchmark 2018: Green star for 9 th year Sustainalytics ESG Ratings : 98 th percentile MSCI disclaimer available 1 Sector specific percentile ranking 98