British Land posts robust results, with values stabilising

British Land has posted a robust set of annual results during one of the most turbulent periods, with EPRA net tangible assets (NTA) falling 4.4% to 562p in the year to 31 March 2024.

The value of its portfolio was down 2.6% to £8,684m, and down just 0.2% in the second half of the year, with underlying earnings up 1% to 28.5p and its dividend also up 1% to 22.8p.

Underlying profit of £268m was up 2% on last year. The company managed to bring its EPRA cost ratio  down to a very respectable 16.4% (from 19.5% in 2023).

The company’s pro forma loan to value (LTV) was 34.6% (37.3% at the year end versus 36.0% in 2023). Interest rate on its debt is fully hedged for 2025 and 86% hedged on average over the next five years. The company has £1.9bn in undrawn facilities and cash. Fitch affirmed its Senior Unsecured credit rating at ‘A’ with stable outlook in August 2023.

Portfolio valuation

• Portfolio value was down 2.6% over the year, with the portfolio net equivalent yield moving out 33 basis points to 6.2%. Its campuses portfolio was down 5.3%, while retail parks (up 2.7%) and London urban logistics (up 3.7%) were both marked up.
• ERV growth across the portfolio was 5.9%, with campuses up 5.4%, Retail Parks up 7.2%, London Urban Logistics up 10.0%.

Operational metrics

• Portfolio occupancy 97%: Campuses 96%, Retail Parks 99%, London Urban Logistics 100%
• Leased 3.3m sq ft in the year, 15.1% ahead of ERV
  • Campus leasing 679,000 sq ft, 8.7% ahead of ERV; a further 316,000 sq ft signed since 31 March 2024, 13.1% ahead of ERV. Campus under offers as of 17 May 2024, 544,000 sq ft, 9.3% ahead of ERV, with a further 806,000 sq ft in negotiations
  • Retail & London Urban Logistics leasing 2.6m sq ft, 17.8% ahead of ERV, and 493,000 sq ft under offer, 17.9% ahead of ERV

Capital activity

• Sold £410m of assets in 12 months to 31 March 2024, 11% above book value on average
• Post period end, sold its 50% stake in Meadowhall Shopping Centre to Norges for £360m, expected to complete in July 2024
• Acquired the Westwood Retail Park, Thanet for £55m at a net initial yield of 8.1%

Outlook

• 2025 ERV guidance of 3-5% growth in each markets
• Market expectation for underlying earning per share of 27.9p
• Expect committed and recently completed developments to deliver 4.5p of earnings, of which 2.6p will be in 2026

Simon Carter, chief executive, said:

 “Our strategy of focusing on campuses, retail parks and London urban logistics is delivering. ERV growth accelerated to 5.9%, exceeding our guidance in all sectors. We outperformed the MSCI benchmark by 300 basis points and values were stable in the second half. Our operational momentum continues with high occupancy, strong leasing and good cost discipline driving Underlying Profit growth of 2%.

“We have achieved much this year – the surrender and joint venture of 1 Triton Square, the commitment to 2 Finsbury Avenue following the record breaking pre-let to Citadel, and the sale of Meadowhall are all good examples of our active approach to capital recycling. As a result, 93% of our portfolio is now in our chosen markets.

“Although the geopolitical and economic landscape remains uncertain, with a portfolio net equivalent yield over 6%, 3-5% forecast rental growth and development upside, we expect to generate attractive future returns.”