British Land has announced results for the year ended 31 March 2017. It says that its EPRA NAV fell very slightly, by 0.4% to 915p. Underlying profit rose by 7.4% to GBP390 million (2015/16: GBP363 million) and, on the back of this, diluted underlying earnings per share were up 10.9% to 37.8p. They are paying a final quarterly dividend of 7.3p (+3.0%); bringing the full year to 29.2p (+3.0%). For 2017/18 they are proposing a full year dividend of 30.08p (+3.0%; first quarter 7.52p).
British Land report a modest reduction in valuation; the second half of the year was better than the first half. The portfolio valuation fell by 1.4% as yields rose by 15 bps. Within this, office values fell by 0.7% (although ERVs were up 0.5%) and retail values fell by 1.8% (ERVs +1.6% with multi-let +2.4%).
British Land reports 1.7 million sq ft of lettings and renewals across the portfolio, 8.0% ahead of ERV, adding GBP22 million of rent. Occupancy at 31 March 2017 was 98%, with average lease length of 8.3 years. Splitting these figures between offices and retail again:
- 279,000 sq ft of Office lettings and renewals, 1.4% ahead of ERV, letting up standalone developments
- 1.3 million sq ft of Retail lettings and renewals, 10.8% ahead of ERV; letting more space on better terms, to a broader range of occupiers than a year ago
They have 700,000 sq ft under offer or in advanced negotiations, including 310,000 sq ft pre-let of proposed redevelopment of 1 Triton Square, Regent’s Place. A further 850,000 sq ft is in discussions.
Within the portfolio, they made disposals totalling GBP1.5 billion of disposals, 9% ahead of valuation. This figure includes the sale of a 50% interest in The Leadenhall Building for GBP575 million which is expected to complete post year end in May 2017. Retail disposals of GBP881 million (at an average yield of 4.3%) include Debenhams, Oxford Street for GBP400 million and GBP226 million of superstore sales; reducing weighting of superstores to 4% of the total portfolio.
By contrast, acquisitions totalled GBP195 million.
Development activity
Looking at existing and potential development activity, they have a GBP1.7 billion pipeline across a range of uses benefiting from 2.3 million sq ft of planning consents secured in the year. Development spend totalled GBP183 million in the year. They completed almost 200,000 sq ft of office space at 4 Kingdom Street, Paddington Central and 7 Clarges Street and 187 apartments at Aldgate Place (Phase 1) and The Hempel Collection. Capital expenditure enhancing existing assets was GBP109 million, including extensions and unit reconfigurations at multi-let retail assets with directly associated income uplifts. They invested GBP44 million improving retail environments, notably at Meadowhall which accounted for GBP23 million, as part of their GBP60 million (100%) refurbishment. This completes at the end of 2017, and is the most significant investment in the centre since it opened in 1990, ensuring that it continues to meet consumers’ evolving expectations. They say that they are already seeing a good response from occupiers with 37 long term lettings and renewals signed here in the year. They also invested GBP5 million enhancing the public realm at their London campuses, primarily Paddington Central, as part of a GBP12 million investment programme.
The value of Canada Water fell 10.8% in the year reflecting the valuer’s reassessment of development risk and returns, particularly on residential, as well as planning and feasibility costs not recovered. This 46-acre regeneration opportunity is valued at GBP6 million per acre. The next major value creation step is expected to be on securing planning.
LTV at the end of March was at 29.9% (March 2016: 32.1%) and their weighted average interest rate was 3.1% (March 2016: 3.3%).
BLND : British Land NAV down 0.4%