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British Land continues to recover from pandemic lows

British Land delivered a NAV total return for the year to March 2022 of 15.6% as the value of its portfolio continues to recover from the pandemic lows.

The company’s EPRA Net Tangible Assets (NTA) was up 12.2% to 727p, while it paid dividends during the year totalling 21.92p. Its portfolio valuation rebounded 6.8% on a like-for-like basis in the year and at the end of March 2022 was worth just under £10.5bn (March 2021: £9.1bn).

Underlying profit was up 24.9% to £251m, while its pro-forma loan to value (LTV) was 28.4% (adjusting for the recent Paddington Central transaction). The group has £1.3bn of undrawn facilities and cash.

Operational performance

Portfolio value was up 6.8% in the year, with its campus assets up 5.4% and retail & fulfilment up 9.9%, driven by retail parks up 20.7%. There was a 42 basis point yield contraction in its portfolio overall.

The company completed 1.7m sq ft of lettings on its campuses – the highest volume in 10 years – at an average 5.4% ahead of estimated rental value (ERV) and at an average lease length over 12 years. 2.2m sq ft of lettings were made across its retail & fulfilment portfolio – also the highest volume in 10 years – at 2.8% ahead of ERV.

Footfall and sales across its retail parks portfolio was 99.5% and 100.2% of the levels recorded in the year to March 2020, respectively. Rent collection was 97% for the year, nearing pre-pandemic levels.

Portfolio activity

A total of £2.2bn of transactions were conducted during the year, with the group recycling capital into areas of “growth and value”. It made £694m from the sale of a 75% stake in Paddington Central to GIC post-year end, and £290m from the sale of a 50% stake in the Canada Water Masterplan to AustralianSuper.

The group made £102m of acquisitions in Cambridge and Guildford, while £350m was invested into Retail Parks in the year. It has also assembled an urban logistics development pipeline with a gross development value of £1.3bn, focused on London where it says the supply-demand imbalance is most acute.

Simon Carter, chief executive, said:

“Over the past year we have delivered a strong performance across all parts of our business as we continue to execute against our strategy. Our total accounting return for the year was 14.8% driven by a 6.8% increase in the valuation of our portfolio and Underlying Profit is up 24.9%. Our balance sheet remains strong with pro forma loan to value of 28.4%. Operationally, our leasing volumes across Campuses and Retail & Fulfilment were the highest in ten years and were ahead of ERV. In London, demand continues to gravitate towards the best, most sustainable space where our Campuses are at a distinct advantage. Retail Parks are an attractive, cost-effective format for our retail customers reflected in our very low vacancy of 2.6%, so we are particularly pleased with our decision to allocate capital to this segment, where valuations have increased 20.7%. The fundamentals of Urban Logistics in London are compelling given the chronic shortage of space. We have made a good start to building our Urban Logistics business where we have assembled a c.£1.3bn development pipeline in 12 months.

“We are active recyclers of capital, releasing over £1bn since April 2021 to invest into higher value-creating opportunities in development and growth segments of the market. We have a wealth of development opportunities across our London Campuses, including Canada Water and in Urban Logistics which altogether we expect will generate around £2bn of future profit.

“We are mindful of current elevated economic and geo-political uncertainties, but our strategic advantage in sectors with pricing power means we can look ahead with confidence.”

BLND : British Land continues to recover from pandemic lows

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