Annual Report and Accounts 2014 PeoPLe HAve A CHoiCe WHeRe THeY WoRk,
SHoP And Live. We Aim To CReATe ouTSTAnding
PLACeS WHiCH mAke A PoSiTive diFFeRenCe
To PeoPLe’S eveRYdAY LiveS.
Place: /pleis/ noun an area or location.
An office campus or building, shopping centre
or park, retail outlet, venue or residential building.
People: /’pi:p( )l/ noun persons in general
or considered collectively.
Customers (occupiers), users (office workers,
shoppers and visitors), residents, local community,
intermediaries (e.g. agents) and other related
stakeholders.
Prefer: /pri’f :/ verb like better than any other.
Tend to choose because it meets your needs.
fOr MOre infOrMatiOn
You’ll find links throughout this Report, to guide
you to further reading or relevant information.
feedback
We value your feedback.
Please contacts us at:
find more information on our website
www.britishland.com
Our corporate website
www.britishland.com
see page title
P00–00
Our iPad app
British Land investor relations
follow us on twitter
@BritishLandPLC
cOrPOrate resPOnsibility
We believe that operating sustainably and behaving
responsibly are fundamental to creating long-term
value. information relating to social, environmental
and ethical issues is therefore integrated throughout
this Report. This provides the reader with insight
into the critical linkages in our thinking and activity.
it also shows more directly how we create value
not just for our investors but for our other key
stakeholders and the society in which we operate.
HigHligHts of tHe year
contents
contents
Portfolio returns boosted by our actions and strengthening
markets.
increased letting activity driven by improving occupier demand.
significant development returns as 2010 West end programme
completes along with further pre-lets.
significant investment adding to core income and replenishing
development pipeline.
taking advantage of stronger debt markets to raise £1.5 billion
of new finance.
ePra net asset value Per sHare
carbOn eMissiOns
688p
Up 15.4%.
dividend Per sHare
27.0p
Up 2.3%, in line with previous
announcements.
tOtal accOunting return
20.0%
reflecting the increase in our net asset
Value per share and income yield from
the dividend.
POrtfOliO valuatiOn1
£12.0bn
Up 8.3% with asset management and
development contributing half the uplift.
–36% since 2009
We have reduced our scope 1 and 2
carbon emissions across our like-for-like
portfolio by 36% since 2009.
custOMer satisfactiOn
7.8/10
in our biennial independent customer
satisfaction survey our occupiers scored
us 7.8 out of 10 for ‘satisfaction with landlord’
outperforming the industry average of 5.1
out of 10.
eMPlOyee satisfactiOn
One Star
We achieved a one star rating in the sunday
times Best companies to Work for survey
2014 (2013: one star).
underlying PrOfit befOre tax
ePra PerfOrMance Measures
strategic rePOrt
What we do
our portfolio
Places People Prefer
chairman’s statement
chief executive’s review
our business model
the markets we operate in
Key market trends
right places, customer orientation
capital efficiency, expert people
Delivering our strategy and KPis
Managing risk
Principal risks
corporate responsibility
PerfOrMance review
Business review
Portfolio review
retail and leisure review
office and residential review
financial review
financial policies and principles
2
3
4
8
10
14
16
17
18
30
36
38
42
44
47
49
51
56
gOvernance and reMuneratiOn
chairman’s governance review
our governance structure
Board of Directors
governance review
report of the audit committee
report of the nomination committee
remuneration report
remuneration Policy
remuneration implementation report
additional disclosures
60
62
66
68
74
79
82
84
94
108
£297m
Up 8.4% reflecting the accretive
investment of our equity placing
proceeds, development lettings
and higher like-for-like growth.
underlying ePs
29.4p
Down 3% primarily as a result
of disposals made last year.
1 our share of UK portfolio excluding £89 million
of assets held in europe.
as at 31 March (£m)
2014
2013
2012
ePra earnings
ePra naV
ePra nnnaV
295
7,027
6,700
268
262
5,967 5,381
5,148
5,522
the sections from strategic report to governance
and remuneration make up the Directors’ report
for the purposes of the companies act 2006.
as at 31 March (%)
2014
2013
ePra net initial yield
ePra ‘topped-up’
net initial yield
ePra vacancy rate
4.8
5.3
5.2
5.5
5.7
3.4
2012
5.2
5.8
2.4
ifrs PerfOrMance Measures
as at 31 March (£m)
2014
2013
2012
ifrs profit before tax
ifrs net assets
1,110
7,117
260
5,687
479
5,104
financial stateMents
and OtHer infOrMatiOn
Directors’ responsibility statement
report of the auditor
financial statements
notes to the accounts
company balance sheet
supplementary disclosures
other information
ten year record
shareholder information
glossary of terms
110
111
114
119
153
159
165
175
176
178
1
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
WHat We Do
We are…
…one of europe’s largest publicly-listed real estate companies. We manage, develop
and finance a £17.8 billion portfolio of properties of which our share is £12.0 billion.
our portfolio is focused on high-quality retail locations around the UK and london offices.
Our portfolio
P18–21
reit legislation
P16
Our markets
P16–17
Our objective is…
Our strategy is…
…to deliver long-term and
sustainable total returns to our
shareholders. We do this by
creating places people prefer.
business model
P14–15
…to create and operate places that people
will prefer when making a decision where to
work, shop and live. We are customer-oriented,
enabling us to develop a deep understanding
of what is important to people who use our
places; we employ a lean team of expert
people who translate this understanding into the
creation of the right places to meet peoples’
needs; and our capital efficiency means we
can effectively finance our portfolio.
RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
P18–23
P24–25
P26–27
P28–29
Our scale…
Our team…
…gives us significant advantages. operationally, we
benefit from the breadth of our occupier relationships
and our ability to develop and leverage best practice
across our portfolio. financially, our scale gives us
a cost of capital advantage. We are able to access
a broad range of debt providing us with flexible and
competitively priced financing.
…is small and agile, best able to react quickly to
opportunities. although we manage a large
property portfolio, we are a team of 242 employees.
our employees focus on the most highly-skilled
and value-added activities. it keeps our operating
costs low and allows us to be more flexible.
customer orientation
P24–25
financing
P26–27
People
P28–29
Our partners…
Our values…
…are some of the best known property
investors and food retail businesses.
Partnerships are an important part of our
business, allowing us access to attractive
investment opportunities, the ability to
share risk, and work with people with
complementary skills.
strategic partnerships
P26
2
…underpin everything we do.
We believe behaving responsibly
and managing social and
environmental issues are
core to our ability to deliver
long-term value.
governance
P59–81
corporate responsibility
P42
integrity
We do what is right not what is easy.
One teaM
Working collaboratively both with
internal and external stakeholders.
excellence
We are the best we can be and
have a growth mindset.
cOMMercial acuMen
We take the lead in our field.
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014 oUr Portfolio
strategic rePort
our properties are home
to over 1,000 different
organisations and are places
where over 99,000 people
work or live. they are visited
around 300 million times
each year.
uk retail and leisure
As the uk’s largest listed owner and
manager of retail space, our portfolio
is well matched to the different ways
people shop today, from major regional
shopping centres to single occupier
locations. We are focused on being
the preferred destination for retailers
and their customers by being the
best provider of spaces and services.
lOndOn Office and residential
our offices and Residential portfolio
is focused on London reflecting its
position as a leading global city, a place
where people want to work, live and
visit. We have an attractive mix of
high-quality buildings in well-managed
environments and a pipeline of
development projects which will
add significantly to our portfolio.
increasingly, our offices are in mixed-
use environments which include
retail and residential elements.
£17.8bn
£10.4bn
£7.4bn
assets under ManageMent
assets under ManageMent
assets under ManageMent
£12.0bn
Of wHicH we Own
31.9m sq ft
Of flOOr sPace
£608m
cOntracted rent
96.1%
OccuPancy rate
10.3 years
£6.9bn
Of wHicH we Own
24.6m sq ft
Of flOOr sPace
15
sHOPPing centres
66
retail Parks
85
£5.1bn
Of wHicH we Own
7.3m sq ft
Of flOOr sPace
3
Office-led, Mixed-use caMPuses
Over 54 acres witH 33 buildings
(including develOPMents)
54
stand-alOne Office buildings
8
weigHted average lease lengtH
fOOd suPerstOres
Office and residential develOPMents
retail and leisure portfolio
P20
Offices and residential
P21
retail and leisure performance review
P47–48
Offices and residential performance review
P49–50
GEOGRAPHICAL PORTFOLIO BREAKDOWN1
London
South East
Other
39.0%
53.6%
7.4%
1 Pro forma for committed developments
at estimated end value.
Whiteley shopping, Hampshire
the leadenhall Building, london
3
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
strategic rePort
How do you keep retail relevant in an online world?
WHiteley sHoPPing, HaMPsHire
the way people are shopping is clearly changing
but physical space remains a core part of the buying
experience for consumers. our understanding of
consumers and what they want ensures we continue
to create the very best environments where people choose
to shop and spend their time and where retailers want to be.
getting the right food and leisure offer is playing an increasingly
important role in attracting shoppers and encouraging them
to stay longer, helping our occupiers to generate sales and
achieve their goals.
our recently opened Whiteley shopping is a great example
of how we can bring together insights and best practice from
across our business. it is why we were able to attract leading
high street brands such as fat face and Joules who chose
to open their first out-of-town stores at Whiteley shopping.
it is why the cinema and all restaurant units in our forthcoming
leisure extension are already pre-let or under offer, 12 months
before opening. Whiteley shopping has rapidly become a
preferred destination for retailers and shoppers. it was voted
‘Best Medium sized shopping centre Development in europe’
by the international council of shopping centres in 2014.
4.7m
annualised fOOtfall
65 minutes
average lengtH Of visit
1.25m
PeOPle in catcHMent area
87%
Of visitOrs are in tHe
‘affluent acHievers’
deMOgraPHic
1,355
free Parking sPaces
Excellent
breeaM sustainability
rating
4
the architecture has an extra level of
quality, which combined with the environmental
credentials rang true with our brand, and
therefore is what appeals to our customers.
tiM MOOdy
HeaD of ProPerty, fat face
whiteley shopping
www.whiteleyshopping.co.uk
www.britishland.com/shoppingcentres
The British Land Company PLC Annual Report and Accounts 2014
strategic rePort
5
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 How do you attract leading global companies to your offices?
regent’s Place, lonDon
companies from around the world are choosing london
as a place to do business. great working environments,
particularly those which have good transport links,
are increasingly important in attracting and retaining
the best people. as well as good buildings to work in, great
environments have places to shop and enjoy leisure time.
People are also choosing to live in the best of these environments.
regent’s Place is a great example of how we are able to create
outstanding work environments for london by understanding
our occupiers’ needs and working closely with the local
community. its high-quality offices, well served by major
transport links, are enhanced by restaurants, shops, a health
club, a theatre, art studios, a children’s nursery and landscaped
open space. as a result, this 13-acre campus has attracted
a broad range of businesses from around the world:
from banking to oil and gas, to media and technology,
including one of our newest occupiers, facebook. We have
also provided 150 high-end apartments for people to buy
along with 160 more affordable homes for people to rent.
15,000
wOrkers and residents
45
different cOMPanies
98%
OccuPancy rate
6.4%
annual increase
in value since 2009
Excellent
breeaM sustainability
rating
6
We are delighted to be moving
to regent’s Place and joining a vibrant
business community. our new office
space will transform the way we work
together as a company.
siMOn rees
ceo, Digital cineMa MeDia
regent’s Place
www.regentsplace.com
www.britishland.com/offices
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
strategic rePort
7
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 cHairMan’s stateMent
reflecting upon my first full
year as chairman, it is notable
how active British land has
been: two major acquisitions,
a new joint venture partner at
Broadgate, a substantial new
retail opening, and a significant
new landmark on the london
skyline, to name just a few
of the highlights of the past
12 months. this was achieved
while continuing to deliver
strong operational performance
and maintaining a robust
balance sheet.
20.0%
tOtal accOunting return
688p +15.4%
ePra net value Per sHare
27.0p +2.3%
dividend Per sHare
overall, this is testament to the management
team’s commitment to operational excellence
and delivery of total shareholder returns.
Underlying pre-tax profit of £297 million was
up 8.4% reflecting the successful investment
of our equity placing proceeds, rents from
recently completed developments and higher
like-for-like rental growth. the value of our
portfolio now stands at £12.0 billion and naV
is up to 688 pence per share. the Board
has recommended a fourth quarter dividend
of 6.75 pence per share making a total of
27.0 pence per share for the year, an increase
of 2.3% over the prior year. for 2014/15 we are
proposing a dividend increase of 2.5%. the
combination of naV growth and dividend gives
a total accounting return of 20.0%.
over the past four years, the management
team has been reshaping our business and
the strong results we reported this year are
evidence of this strategic direction. We have
greater weighting to london and the south
east, and importantly, within london, we are
well positioned with more assets in the West
end and ‘up-and-coming’ areas. as the retail
environment continues to evolve, we have been
investing in and future proofing our own retail
portfolio to better reflect the way people shop.
finally, we completed eight developments
in the last 12 months and have been active
in replenishing the pipeline with a combination
of new and existing assets that offer
significant potential.
strategically during the period we invested the
proceeds of our equity placing carefully, but
ahead of plan. We bolstered our development
portfolio which will provide the business with
opportunities out into the medium term.
our acquisition of Paddington central in
July, to me, encapsulates all the qualities of
British land. this was a complex transaction,
with multiple vendors and issues to resolve.
British land’s ability to rapidly understand and
address them, combined with our significant
financing resources, meant we were able
to acquire a very attractive asset at a highly
competitive price. it is the combination of skill
and scale that allows British land to extract
significant value from opportunities that
very few others could. With our strong asset
management experience, in particular that
developed at regent’s Place and Broadgate,
we are confident in our ability to add further
value by creating an attractive environment
in which people want to work, live and shop.
the achievements of the year are all the more
notable given they have been delivered by
a very small team in ftse 100 terms of just
over 240 employees. With a rigorous focus
on operational efficiencies, British land is
comprised of a small, but highly-effective team
of industry experts. as part of our commitment
to our employees, we have continued to invest
in training our staff to hone their skills and
develop their careers. i would like to take this
opportunity to thank the team for their hard
work during the year.
the importance of good corporate governance
cannot be understated. as a Board, we focus
continually on enhancing our effectiveness
as well as embracing the changes to the UK
corporate governance code and the changes
to it that have come into force during the year.
in september richard Pym stood down as
non-executive Director and chairman of the
audit committee. We appointed tim score
to the Board in March as a non-executive
Director and chairman of the audit committee.
His experience and insights, given his role
as cfo of a leading ftse 100 company,
will further strengthen the expertise and
composition of the Board. i would like to thank
aubrey adams for his role as chairman of
the company’s audit committee during the
interim period and the extremely valuable
contribution he made.
further developments in our governance
structure during the year included the
establishment of a new management
committee, the operations committee,
which has been formed to improve the
flow of information between the executive
committee and the wider company and
improve the quality of strategic and tactical
decisions that are made.
our business does not operate in isolation:
our performance is underpinned by strong
relationships with our occupiers, partners,
suppliers, employees and the communities
in which we operate. our occupiers are some
of the best businesses globally with whom we
work closely to understand their requirements
and create places they, their employees and
customers want to use. our partners are some
of the most respected investors and retailers.
Partnerships with the likes of norges Bank
and gic further enable us to make the most
of significant, large-scale opportunities.
full-year results 2014 video
www.britishland.com/investors
chief executive’s review
P10–13
chairman’s governance review
P60–61
8
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
Managing our social, environmental and
economic impacts is central to how we
do business, adding value to our assets
and delivering value to our shareholders.
all members of our executive committee
have a corporate responsibility target linked
to their variable remuneration. We continue
our efforts to improve understanding of how
social and environmental factors add value.
We are working with the Prince’s accounting
for sustainability Project to put sustainability
at the heart of business decision making,
strategy and reporting. our latest research
highlights the social benefits and commercial
results of our 30-year involvement at
regent’s Place, and our partnership with
the local community and camden council.
as we emerge from the shadow of global
recession, we remain confident for the
prospects for the business in our chosen
markets and locations. against an improving
economic backdrop, British land is well
positioned for the future with a highly attractive
portfolio of assets; extensive and resilient
financing capacity and a highly-motivated and
committed team of experts. i look towards
the coming year as we continue to build upon
our successes.
John gildersleeve
non-executive chairman
strategic rePort
9
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 cHief execUtiVe’s reVieW
oUr year
it has been a good year for British land and our
business is performing well. We have executed
well against the plan we set out last year.
the decisions and actions we have taken both
this year and in previous years continue to be
a key driver of our performance along with the
strengthening of our markets.
During our 2014 financial year, we successfully
invested the proceeds of our equity placing
ahead of schedule, acquiring attractive assets
at good prices. assets such as Paddington
central, where we can create attractive
environments; places people prefer to work,
shop and live in and which are integrated into
their local communities. We made major
strides replenishing our london development
potential giving us a significant pipeline of near
and medium-term opportunities. in retail,
we took advantage of stronger investment
markets to sell mature assets, redeploying
the capital into properties with more attractive
prospective returns, such as southgate, Bath.
We took advantage of improving debt markets
to raise new competitively priced finance,
providing us with additional flexible capital
to support the future growth of the business.
as economic confidence has improved in the
UK, and debt finance more broadly available,
the market environment has become
significantly more favourable, particularly
in the second half of our financial year.
Domestic and international investors were
more active, driving a higher volume of
transactions with a consequent tightening
of yields. capital returns outside london
strengthened, although london continued to
outperform all other markets, driven both by
stronger investment and occupational markets.
the UK retail market materially improved,
particularly from an investment perspective.
retailers are now undoubtedly more positive,
not only in the outlook for consumer spending,
but also the place that physical space plays
in their omni-channel strategies.
our underlying pre-tax profits were 8.4%
ahead at £297 million as we invested the
placing proceeds, benefited from development
lettings and like-for-like rental growth
improved. Underlying ePs at 29.4 pence
was 3.0% lower, primarily as the result of the
disposals we made last year. our dividend
is 2.3% up at 27.0 pence, in line with previous
announcements, reflecting our successful
investment of the placing proceeds and
success in letting up developments.
ePra net asset Value increased by 15.4% to
688 pence per share. taking into account the
impact of the dividend, and the increase in
net asset Value, we delivered an overall total
accounting return for the period of 20.0%.
reflecting our confidence in the coming year,
the Board is proposing a quarterly dividend
of 6.92 pence per share, or 27.68 pence per
share for the full-year, an increase of 2.5%.
We generated total property returns of 14.2%
and capital returns of 8.9%, once again
outperforming the iPD benchmark, by 60 bps
and 140 bps respectively. our UK portfolio
valuation uplift was 8.3% with our actions –
asset management and development – driving
around half the uplift and the balance coming
from market yield shift. the strengthening
performance was especially notable within our
london office and residential portfolio where
values were 14.5% higher. our retail valuations
were 4.4% ahead reflecting our active asset
management and improving market sentiment.
across our portfolio, rental values were 3.0%
ahead of 2013, compared with 1.7% for the
market as a whole.
Underpinning our business is the quality and
sustainability of our rental income. it is these
rental streams that enable us to support and
increase the dividend and grow our business.
our customer orientation, focus on landlord
services and asset management ensure we
continue to attract and retain high quality
occupiers. We signed over 2.3 million sq ft of
lettings and lease extensions during the year,
with investment lettings signed on average
6.3% ahead of erV. our like-for-like occupancy
was 130 bps ahead, reflecting the strength
of our letting activity. overall occupancy was
down at 96.1% as we completed West end
developments which were moved into the
standing portfolio.
Within our retail business, our operational
metrics strengthened reflecting the quality
of the portfolio and our strong asset
management. We signed 1.7 million sq ft of
lettings and renewals with investment lettings
and renewals 4.9% ahead of erV. With
occupancy up 110 bps to 98.5%, our portfolio
is now virtually fully let. footfall was flat for
the year as a whole and up 1.2% in the second
half, significantly outperforming the market.
the business is in good
shape and we’ve delivered a
strong set of results. We have
benefited from strengthening
occupational and investment
markets but the decisions
and actions we have taken
both this year and in previous
years have been a significant
contributor to our performance,
driving around half our
valuation uplift.
£1,970m
grOss investMent activity
14.2%
tOtal PrOPerty returns
OutPerfOrMing iPd by 60 bPs
2.3m sq ft
lettings/renewals
6.3% aHead Of erv
full-year results presentation
www.britishland.com/results
full-year results 2014 video
www.britishland.com/investors
Performance review
P43–55
10
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
strategic rePort
in offices, we made good progress with
increased letting activity broadly balanced
between standing investments and
developments. overall, investment deals were
signed at 8.4% ahead of erV. at regent’s Place
we completed our development of 10–30 Brock
street; 10 Brock street was fully let less than
three months after practical completion to
a diverse range of occupiers and the campus
itself is now virtually full. at Paddington
central, within our first months of ownership
we have increased occupancy and are already
making good progress on our plans to improve
the campus. Post our year-end, we have seen
an increase in occupier interest across our
portfolio with over 150,000 sq ft of space let
or under offer on attractive rental terms.
our 2010 development programme is
nearing completion and has been substantially
de-risked through lettings and residential
sales. it has now generated £608 million of
profit with a further £45 million estimated to
come. We have been actively replenishing our
pipeline, including through the acquisition
of development sites at Paddington central
and an option agreement to develop at Blossom
street, shoreditch. these take our recently
committed and near-term pipeline to almost
2 million sq ft. We also have significant
medium-term opportunities at existing sites
including at eden Walk, Harmsworth and
surrey Quays.
access to flexible and cost effective financing
is a key differentiator for British land. it allows
us to respond quickly to opportunities. our
financial flexibility not only allows us to have
ready access to financing to fund growth, but
also allows us to access the capital markets
at the optimal time so taking advantage of
improving financing terms. since 1 april 2013,
we have raised £1.5 billion of new unsecured
financing from a diverse range of lenders
on competitive terms. these included a
£200 million Us Private Placement with a
12-year term and a £785 million, five-year
revolving credit facility.
key HigHligHts Of tHe year
tiMely
investMent
PrOfitable
develOPMent
resHaPing retail
POrtfOliO
strengtHening
OccuPatiOnal Metrics
gross investment of £1.3 billion focused on london and the south east.
Placing proceeds invested ahead of plan accretive to ePs and naV.
completed five of our 2010 london developments on schedule –
total estimated profits of £636 million.
replenished development pipeline.
sale of £391 million mature UK retail assets ahead of valuation.
invested in high-quality preferred retail destinations.
2.3 million sq ft of lettings and renewals.
like-for-like occupancy up 130 bps.
11
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
cHief execUtiVe’s reVieW
looKing forWarD
POsitiOning Our business
fOr future grOwtH
over recent years, we have worked hard to
build more growth into our business. We have
actively invested more capital into improving
occupational and investment markets while
at the same time re-shaping our portfolio.
We have positioned our business around
several key themes, identified these trends
early and invested accordingly.
in total, we have undertaken £4.6 billion of
gross investment activity over the last four
years, made up of over £3 billion of acquisitions
and development spend along with £1.6 billion
of disposals. these trends have enduring
relevance which we believe leaves our
business well positioned as we look ahead.
1. attractive envirOnMents
occupiers are much more focused on
the environments in which they operate. this
is a theme right across our business. that is
why we talk about Places People Prefer. it is
why we are investing at our office campuses
at Paddington central, Broadgate and regent’s
Place and why we are investing to improve
the environments at our retail destinations
such as glasgow fort and Whiteley shopping.
2. lOndOn as a leading glObal city
london has become one of a small number
of what are called ‘global cities’ where people
are choosing to locate their business activities,
to live and visit. from a property perspective,
we believe london will remain strong both
operationally and from an investment
perspective over the longer-term and this
will also benefit its immediate hinterland in
the south east. around 75% of our investment
in the last four years has been in london and
the south east. as a result it has increased
from 50% of our business four years ago to
over 60% today on a pro forma basis.
3. iMPOrtance Of transPOrt
infrastructure
Public transport will become more and more
important in london. crossrail which opens
in 2018, is going to have a big impact. We now
own more than £3 billion of real estate within
a stone’s throw of crossrail stations. at our
Broadgate campus, the entrance to the station
will be on the doorstep of 100 liverpool street,
where we are planning a major refurbishment
of the building. Paddington central will be just
two minutes from Bond street on crossrail,
effectively edging it into the West end.
4. key rOle Of HigH-quality
PHysical retail
shops will remain critical to retailers even
in an increasingly digitally enabled world. But
success factors are changing. as retailers
continue to focus their stores on the best space,
it is our view that these locations will generate
better sustainable long-term returns than
other locations. that is why we have been so
active buying, selling and developing and with
£2.3 billion of activity in total over the last four
years, we believe our retail business is much
better placed as a result.
5. PrOfitable develOPMent
Developing prime property, remains a
fundamental driver of value in our business.
our 2010 programme has generated significant
returns for our shareholders and we have
made great progress replenishing our pipeline.
We have committed to a number of these
schemes, notably clarges Mayfair and expect
to commit to developing a new building,
4 Kingdom street at Paddington central later
this year. But we have also kept plenty of
optionality, recognising that things can change.
OutlOOk
looking to the next year, overall we remain
positive about our property markets. across
the UK as a whole, we are still in the early
stages of an economic recovery and real
wages are only just starting to increase.
from a property perspective, the differential
between property and bond yields is still wide
by historical standards. With interest rates
expected to remain at low levels for the
foreseeable future, property will remain an
attractive source of income return. However,
we have seen tightening of property yields
earlier than many people expected, particularly
in london, and so we see our key markets
as having rather different dynamics.
in london offices, yields have tightened
significantly and in the core markets are close
to their ten year lows. However, occupational
demand is strengthening at a time when
development completions are relatively limited.
so we continue to expect the market to perform
but for this performance to be driven primarily
by rental growth. With significant development
space to let, we are well positioned to capture
this growth.
We have positioned our
business behind several
key themes and invested
accordingly. these trends
have enduring relevance
which leave us well
positioned going forward
to take advantage of london’s
continuing success and
improving demand for
the best retail space.
12
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
strategic rePort
in prime residential, we have already sold
nearly all of the apartments developed as
part of our 2010 programme generating
significant profits. Price growth has slowed
but we are comfortable with our position
given the bulk of our exposure is now at
clarges Mayfair which we bought in 2012
and where we are already on site. located
on Piccadilly near the ritz, and with
spectacular views over green Park, this
is an exceptional scheme and we expect
to generate good returns for shareholders.
in retail, away from london, the cycle
is at an earlier stage. investor appetite
is strengthening with demand from both
domestic and international investors.
looking at our portfolio, we are still
significantly off trough yields, particularly
for some of our larger assets. from an
occupational point of view, retailers are both
more confident about the outlook for consumer
spending and are clearer about the central
role that physical space plays within their
omni-channel strategies. so while they are
looking to take more space, they are becoming
ever more discerning about the space they
are willing to take. overall therefore, we are
more positive about the potential for further
yield compression in retail and expect rents
for high quality space to benefit over time
as consumer spending continues to improve.
in terms of investment, we expect to be
more balanced in our acquisitions and
disposals in the coming year. We will continue
to take advantage of market strength to sell
more mature retail assets and we have a
number of assets under offer or in the market.
although the market remains competitive,
we believe we can continue to take advantage
of more complex situations to make attractive
acquisitions. We will also move forward
progressively with our new development
programme and expect to commit to
4 Kingdom street at Paddington in the
coming year.
there are, of course risks, to all this. Political
risks, both at home and abroad, are arguably
greater than they were a year ago. these
of course may have an impact, but we draw
considerable comfort from the strength
of our business and we look to the future
with confidence.
Our PriOrities fOr tHe year aHead
Drive like-for-like income through active asset management.
Progress our existing development programme:
– deliver leadenhall and 5 Broadgate; and
– lease up our remaining space in recently completed developments,
and selectively pre-let office space and pre-sell residential units
in our current developments.
Maintain strong occupier satisfaction, driven by our market-
leading service.
accelerating our development pipeline:
– commit to new sites, such as 4 Kingdom street at Paddington;
– progress our medium and long-term developments, such as Blossom
street in shoreditch, surrey Quays and Harmsworth Quays; and
– continue to build our pipeline by identifying new opportunities both
within and outside our portfolio.
employ our property and deal making skills to access
more complex property acquisitions as well as assets close
to our existing properties.
continue to reshape our retail portfolio:
– enhance our existing portfolio to meet the evolving needs of occupiers
and consumers;
– take advantage of market strength to sell more mature assets; and
– invest in retail schemes which are preferred destinations or have the
ability to be.
exit europe.
Maintain our financial gearing within our 40% to 50% ltV
range. ltV may fall below this level due to phasing of recycling.
invest in our capabilities for the medium-term:
– in particular, invest in people, processes, analytics, technology
and marketing.
Maintain our one star rating in the Best companies
to Work for survey.
chris grigg
chief executive
13
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
oUr BUsiness MoDel
we create
by fOcusing On
wHicH ensures
enduring deMand
frOM OccuPiers
and investOrs
in PrOPerty
High-quality occupiers.
attractive lease terms.
High occupancy.
strong cash flows.
alOng witH an
OPtiMal caPital
structure
appropriate leverage.
growing dividend.
RIGHT
PLACES
Well located.
great environments.
Modern buildings.
adaptable space.
efficient buildings.
sustainable.
integrated into the community.
right places
P18–23
CUSTOMER
ORIENTATION
strong occupier relationships.
Best customer service.
occupier and consumer insights.
engaged communities.
customer orientation
P24–25
CAPITAL
EFFICIENCY
scale.
low cost debt.
flexible financing.
capital efficiency
P26–27
EXPERT
PEOPLE
experts in their field.
lean, flexible operating structure.
Values led.
expert people
P28–29
People have a choice about
where they live, work and
shop. it is our aim to create
outstanding places which
make a positive difference
to everyday lives.
british land:
creating Places People Prefer.
14
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014 wHicH ensures
and delivers
creating value
strategic rePort
sustainable
tOtal returns
as Measured by:
grOwtH in net asset value (nav)
+15.4%
2014
2013
2012
688p
596p
595p
ePra net asset value per share was up
15.4% to 688 pence.
incOMe frOM dividend
+2.3%
2014
2013
2012
27.0p
26.4p
26.1p
Quarterly dividend of 6.75 pence brings total
dividend for the year to 27 pence, a 2.3% increase
year-on-year.
tOtal accOunting return
20.0%
2014
2013
2012
4.6%
9.5%
20.0%
As a result of the increased dividend and our nAv
we reported a total accounting return of 20.0%.
ecOnOMically
Our investOrs
suPPliers
our shares are widely owned, from large
institutions with global footprints, UK
local authority pension funds to small
individual investors. over the last three
years, we have generated total accounting
returns of 35.4% for our investors. of this,
the income return through our regular
quarterly dividend payment has been 14%.
Our OccuPiers
By creating the right spaces, we help
our occupiers thrive, with productive
workforces in our office properties and
popular brands at our retail destinations.
our five-year development programme is
contributing £1.2 billion to the UK economy
gross value added, boosting business for
thousands of firms around the UK.
lOcal cOMMunities
every £1 million we spend on construction
generates an estimated 31 jobs. our five-
year development programme is creating
32,300 jobs during construction.
sOcially
envirOnMentally
lOcal cOMMunities
Our investOrs
98 apprentices are learning while they
earn at our properties and developments,
supported or part-funded by us and our
suppliers. We have contributed over
£39.4 million to communities through the
planning process over the last three years,
creating affordable homes, improving
public spaces, enhancing pedestrian links
and delivering community facilities.
We create green buildings that stand the
test of time and we believe deliver better
returns for our investors.
Our OccuPiers
We have cut landlord-influenced energy
across our like-for-like portfolio by 34%
over the last five years, saving our
occupiers £6.9 million.
Our PeOPle
We again achieved a one star accreditation
in the sunday times Best companies to
Work for survey. We ranked in the top five
ftse 100 companies for reporting
wellness and engagement of employees
in the Business in the community
Workwell Benchmark 2013.
PeOPle wHO wOrk, sHOP
Or live in Our buildings
our green buildings are designed to
enhance the experience of those who
use them. all our office developments
are certified BreeaM excellent for
sustainability and 94% of our major
retail developments are excellent or
very good.
15
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 tHe MarKets We oPerate in
Overview
the UK has a large commercial property
market which attracts a broad range
of domestic and international investors.
it has strong, established property rights;
long-term leases with upwards only rent
reviews with occupiers generally responsible
for repairs, maintenance and insurance;
and a transparent valuation system.
today it is one of the top markets globally
for international investors in property.
y
t
r
e
p
o
r
p
i
l
a
c
r
e
m
m
o
C
tHe sHaPe Of tHe Market
Because of the diversity of ownership, there
is no definitive or regular measurement
of the total market.
the British Property federation estimated
that the commercial market was worth around
£569 billion in 2012 which split into three main
sectors: retail, office and industrial, along
with a number of smaller specialist sectors.
the commercial residential market is currently
a small part of the institutional investment
market but it is expected to grow significantly.
Measuring Market PerfOrMance
the investment Property Databank (iPD)
aggregates the valuation performance of
around £121 billion of commercial property,
providing monthly, quarterly and annual
performance information. these are the
benchmarks against which many property
companies, including British land, measure
themselves. at British land, our properties
are valued on a semi-annual basis by
external professionals.
cOMPetitive landscaPe
British land competes for capital and
properties with a diverse range of investors –
private, public and institutional. a number of
our equity shareholders also invest alongside
us in specific assets and compete with us for
investment opportunities. the most notable
examples are gic and norges Bank who
are both top 10 shareholders and are our
joint venture partners at Broadgate and
Meadowhall respectively.
A DEVELOPED, DEEP, LIQUID
AND WIDELY-HELD MARKET
£BN
2,000
1,500
1,000
500
0
e
g
n
a
h
c
x
E
n
o
s
e
i
t
i
u
q
E
k
c
o
t
S
n
o
d
n
o
L
s
d
n
o
b
t
n
m
e
n
r
e
v
o
g
K
U
End 2011
End 2012
Source: Property Data Report 2013
RETAIL AND OFFICES FORM THE LARGEST
COMPONENTS OF COMMERCIAL PROPERTY
£569BN
Retail
Offices
Industrial
Other
commercial
property
£65bn
£207bn
£140bn
£157bn
Source: Property Data Report 2013
DIRECT OWNERSHIP OF UK-INVESTED
COMMERCIAL PROPERTY 2012
£38bn
£78bn
£38bn
£50bn
£76bn
£68bn
Source: Property Data Report 2013
UK institutions
Overseas
investors
Investment
schemes
UK REITs
listed property
companies
UK unlisted
property
companies
Other
16
investing in PrOPerty
there are many different ways of investing
in the commercial property market:
in publicly-listed property companies such
as British land;
in a wide variety of listed and unlisted
funds; or
directly in the property itself.
Publicly-listed real estate companies account
for around 15% of the commercial market in
the UK – British land accounts for around 11%
of the UK-listed real estate market by market
capitalisation. More than 75% of listed property
companies in the UK are reits.
PrOPerty regulatiOn
Property management and development
is closely governed by local and national laws
and regulation which cover a whole range
of important activities including building,
planning, roads, parking, public transport and
fire. of these, planning has the most material
impact on the value development chain in so
far as planning regulates both the development
of the building itself and the purpose for which
it is used. changes in the planning environment
can have a significant impact on value and
this is one of the key ways that British land
creates value.
in recent years, the government has introduced
new legislation to simplify the complex local
and national planning processes and rules
in england, with the aim of boosting investment
and sustainable development.
reit legislatiOn
reits are globally recognised investment
structures which exist in 34 countries around
the world. reits are required to distribute a
significant proportion of the rental profits from
their reit operations to their shareholders.
the broad intention is to replicate the tax
treatment of a direct investment in property
effectively removing the double-layer of tax
payable by both the company and the
shareholder. instead tax is payable at the
shareholder level.
the UK reit regime was launched in 2007
and British land became a reit in that year.
changes to the reit rules were introduced in
2012 which, in effect, were designed to make
it easier for companies to become reits and
attract institutional investment.
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
Key MarKet trenDs
Our Markets
our focus areas – retail and offices account
for over 60% of the total commercial property
market in the UK. We have chosen to focus on
these areas because they are large and liquid
markets with, in our view, the best long-term
growth potential for rents and capital values.
We believe they are highly complementary.
We also have property in sectors which
complement our core business, principally
leisure and residential, and increasingly new
developments are mixed-use.
Historically, retail has produced more stable
returns than london offices; this reflects
office development cycles which, at times,
has created significant supply or demand
imbalances.
iPd tOtal uk all PrOPerty return
growth (%)
retail
offices
industrial
other
uk market
source: iPD
2012
2013
2014
10.1
18.5
16.6
10.3
2.1
4.6
3.0
6.2
3.2
13.6
5.0
7.9
6.4
9.2
6.3
UK RETAIL RENTAL GROWTH VERSUS GDP
(INDEXED FROM 2001)
145
135
125
115
105
95
85
’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13
Year
IPD Prime Retail
IPD Secondary Retail
GDP
Source: IPD
retail
the retail market continues to evolve with
the growth of e-commerce and mobile
technologies. the UK is the most developed
market in the world for online shopping which
accounts for around 11% of the total market.
the role that physical shopping environments
play is changing significantly as a result.
consumers are expecting much more from the
places they shop: more convenience, in more
attractive environments, with better facilities –
food, drink and increasingly some kind of
leisure offer whether it be a children’s play area
or a cinema and bowling alley. Many retailers
are increasingly viewing their physical stores
as an integral part of their overall marketing
effort and key to their internet offer through
click and collect.
Poor quality space which does not conform
to shoppers’ requirements in this new world
is becoming functionally or economically
obsolete, as retailers focus their physical
space on a smaller number of more highly-
performing locations and operators with
weak business models fail. the impact of this
can clearly be seen on retail rents. as shown
on the chart on the left, in the last three years
secondary rents have fallen by 3.2% per annum
compared to an increase of 1.4% per annum
for prime rents. We have already benefited
from focusing on those locations where we
can create destinations which are preferred
by retailers and their customers.
retail and leisure review for 2013/14
market overview P47–48
lOndOn
our increased focus on london in recent years
reflects its growing status as one of the most
important cities globally, a place where people
are choosing to locate their businesses, live,
visit and invest. looking forward, london is
expected to retain its status as a world-class
city, with population forecast to grow to just
over nine million people by 2023. international
investors have become an important part of the
market including in residential where they have
played a key role in the emergence of a super-
prime sector in the West end. large areas
of london are being improved or regenerated
by property and infrastructure investment,
the most significant of which is crossrail,
a £14.8 billion rail line due to open in 2018.
running from Heathrow through the West
end, to the city and canary Wharf it will
dramatically cut journey times.
Offices and residential review for 2013/14
market overview P49–50
strategic rePort
MOst iMPOrtant glObal cities
nOw and in 10 years
growth (%)
london
new york
Hong Kong
Paris
singapore
Miami
geneva
shanghai
Beijing
Berlin
são Paulo
Now
in 10 years
1 1
2 2
3 6
4 7
5 5
6
7 9
8 4
9 3
10
11 8
11
10
source: Knight frank Wealth report
as people increasingly want to work and
live in environments with a broad range of
amenities nearby, including high-quality public
spaces, cafés and restaurants and retail
and leisure facilities, the boundaries between
offices, retail, residential and leisure are
becoming blurred. to meet this growing
requirement, our business in london is
increasingly focused on creating and managing
great environments, often in campuses which
are mixed-use.
POPULATION GROWTH FOR LONDON
MILLION
10
9
8
7
6
‘03
‘05
‘07
‘09
‘11
‘13
Year
‘15
‘17
‘19
‘21
‘23
CAGR 2003–2013: 1.2%
CAGR 2013–2023: 0.9%
Source: Knight Frank Wealth Report
17
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
our business integrates
the entire value-creation chain
in property from investment
(buying and selling) to
development and property
management.
wHere we invest
our ability to create value requires us both
to identify long-term trends and to ensure
that we manage the risk and opportunities
created through economic and property cycles.
Property is a cyclical market with returns
sensitive to changes in supply and demand,
both from occupiers and investors.
We optimise and flex the allocation of our
capital across these sectors, including between
investment and development activities. We
regularly review our property portfolio and
recycle capital out of mature assets. our
investment strategy is considered alongside
the risk parameters agreed by the Board
(see page 40).
We believe our ability to source and structure
deals is a competitive advantage allowing
us to access high-quality investments and
development opportunities at attractive prices.
We are able to do this because our extensive
network of market contacts, property and
corporate finance expertise and financial
strength which enables us to take on large,
complex transactions.
Our POrtfOliO
our portfolio comprises assets with a range
of lease lengths and different ages including
those which are newly developed and those
which are scheduled for major refurbishment
or development. this allows us to drive
returns through asset management initiatives,
development and recycling of capital from
mature assets into those with better growth
potential.
we create HigH-quality,
adaPtable assets
Properties and locations with enduring
appeal both to occupiers and investors.
adaptable buildings that can evolve
to the needs of our customers.
sustainable and resilient buildings.
in attractive envirOnMents
environments with a broad amenity offer.
Well-connected locations.
witH best-in-class service
focus on continuous improvement of our
service offering and delivery.
services supported by latest technologies.
tHat Offer gOOd value fOr MOney
attractive and affordable locations.
We invest in places where we see good or
the potential for good, lasting demand from
occupiers and investors. attracting high-quality
occupiers on longer lease terms generates
sustainable and growing rental income which
drives increases in the capital value of our
properties over time. the right space tends
to perform better over the long-term than
average or poorer quality property reflecting
the benefits of enduring demand from
occupiers and investors.
Within the UK property market we focus on
investing, developing and managing high-
quality retail and london offices. this is
because these markets are large and liquid
and, in our view, have the best long-term
growth potential for rents and capital values
(see the markets we operate in on page 16).
although we report them separately, they are
highly complementary and we run them closely
together. today, an increasing amount of the
spaces we are creating are mixed-use. the
substantial retail cash flows enable us to flex
our investment in the more cyclical london
office market and invest in significant
development projects.
UK PORTFOLIO
1%
23%
2%
11%
23%
17%
16%
5%
3%
Retail parks
Superstores
Shopping centres
Department store
and High Street
Leisure
City offices
West End offices
Provincial
Residential
develOPMent – 2010 PrOgraMMe
2010 london programme 2.7 million sq ft
UK PORTFOLIO
develOPMent recently cOMMitted and near-terM PiPeline
completed 2012
completed 2013
completed 2013
completed 2013
completed 2014
to complete June 2014
to complete March 2015
199 bishopsgate
10–30 brock street
10 Portman square
Marble arch House
39 victoria street
the leadenhall building
5 broadgate
18
Retail parks
Superstores
Shopping centres
Department store
and High Street
Leisure
City offices
West End offices
Provincial
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014 strategic rePort
in construction costs. this can be mitigated
through pre-letting and fixed-cost contracts.
as part of our overall management of risks, we
maintain a maximum limit of total development
exposure (both pre-let and speculative) of not
more than 15% of our investment portfolio.
our current committed developments are over
70% pre-let and 77% of our costs are fixed.
in recent years, we have been one of only
a few companies with the financial resources
and expertise to exploit a scarcity of high-
quality london office space.
in 2010, we committed to a £1.5 billion
development programme, focused on london,
which has delivered over £600 million of
profit with a further £45 million estimated
to come. it is expected to be a key driver of our
rental income growth, adding an estimated
£85 million to our contracted rent. as this
programme is nearing completion and we
see development returns remaining attractive,
we have replenished our development pipeline.
We have recently committed to 1.3 million
sq ft of new development projects and have
a further 719,000 sq ft of projects in our near-
term pipeline. of these we expect to commit
to 4 Kingdom street later this year.
business review for development
P44–50
supplementary information for development
P172–173
driving PerfOrMance tHrOugH
asset ManageMent
We look to drive performance from the portfolio
through active management of the spaces
we own, both the buildings themselves and the
environments around them. Proactive asset
management adds significantly to the value of
an asset over time by increasing rental income.
asset management covers a broad range of
activities including:
new lettings, rent reviews and lease
renewals;
providing high levels of service to occupiers;
changing planning consents; and
changing configurations, refurbishment and
extensions to meet customer requirements.
We have 31 asset management specialists in
the business. they are responsible for making
strategic decisions on the occupier mix, leasing,
renewal or extension of leases. We utilise our
scale and customer relationships to drive value
through our active asset management.
our asset management specialists work with
our local property teams to deliver attractive
and vibrant environments – places that are
well integrated into the surrounding area,
with the right mix of amenities and pleasant
public spaces.
develOPMent
Development forms an important part of our
business: We have a strong and established
track record for delivering large-scale
development and refurbishment projects.
Development offers the opportunity to create
value by delivering the right product at the
right point in the supply and demand cycle.
the amount of development we undertake
varies depending on our view of the prospective
returns. Development returns are generally
considered higher risk than those available
from existing income-producing properties
and we target returns that are commensurately
higher as a result. the risk principally arises
from the length of time the development
takes from inception to completion: the risks
include letting the building and increases
glasgOw fOrt
as one of our largest shopping parks, we
have been investing to improve the experience
for the 12 million people who visit glasgow
fort each year. our investment in an eight-
screen Vue cinema and five restaurants,
to add to the existing line-up of over 60 retail
brands at the park, has delivered outstanding
results. footfall grew by 8%; dwell time
rose to 102 minutes. We have recently
obtained planning permission for a 112,000
sq ft extension, which includes a 80,000 sq ft
store pre-let to M&s.
glasgow fort
www.glasgowfort.com
www.britishland.com/retailparks
develOPMent – 2010 PrOgraMMe
develOPMent recently cOMMitted and near-terM PiPeline
recently committed 1.3 million sq ft
near-term 0.7 million sq ft
to complete 2015
to complete 2016
to complete 2016
to complete 2017
expected to commit
design stage
to start 2015
yalding House
the Hempel
aldgate Place
clarges Mayfair
4 kingdom street
Paddington central
5 kingdom street
Paddington central
blossom street
shoreditch
19
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
our portfolio is well balanced to the different
ways consumers shop. We own some of the
best retail locations in the country, whether
experiential shopping, where you may go for a
whole day out; convenient destination shopping,
where you regularly shop for a couple of hours;
or functional shopping, which meets everyday
or basic needs, such as a food shop.
creating the right space in an environment
where people want to shop and retailers
can thrive
We continually look to invest in our assets
whether through great shop fit-outs or major
refurbishments and extensions to provide
retailers with high-quality, flexible, modern
space at affordable prices.
retail develOPMent
We have a 372,000 sq ft retail development
programme which is primarily focused
on upgrading and extending our existing
assets and increasing our food and leisure
offer, to improve the overall environment,
which will deliver good near-term returns.
PerfOrMance Overview
our retail portfolio has consistently
outperformed iPD all retail over the last one,
three and five years with each major sub sector
outperforming its benchmark over the same
period. this underlines the quality and
resilience of our portfolio and our ability to
evolve our retail offer in a rapidly changing
marketplace.
britisH land retail tOtal
PrOPerty return versus iPd
1 year
3 years
5 years
British land retail
iPD
10.7%
10.1%
7.1%
5.7%
11.5%
9.6%
Performance
versus iPD
all retail
+60 bps +140 bps +190 bps
retail and leisure review for 2013/14
P47–48
More detail on our properties
www.britishland.com/our-properties
our scale and strong relationships gives us
competitive advantage, ensuring that we
have an unparalleled landlord’s view of our
occupiers’ and consumers’ behaviour. the
adaptability of our portfolio is key: the majority
of our assets benefit from flexible planning
consents and are easily adapted allowing us
to respond to changing requirements and
deliver the most attractive space to retailers
and consumers.
our asset management activities are focused
on: leveraging existing retailer relationships;
improving the retail mix and targeting a broader
range of retailers; increasing the food and
beverage offer; unit configuration and flexibility
including mezzanines; and improving the retail
environment including upgrading and extending
our assets.
retail strategy
our aim is to be the preferred destination
for retailers and consumers by owning and
creating retail assets that reflect how the
consumer shops and meets the needs
of retailers. in a fast-changing retail
environment we focus on:
detailed understanding of the consumer
We undertake extensive research including
over 50,000 exit surveys conducted over the
last 12 months, to provide us with detailed
knowledge on how people shop at each
of our key assets.
Providing the right services to attract both
the retailer and consumer
services cover a broad range including digital,
click and collect, marketing and community
engagement and are becoming an increasingly
important part of British land’s retail offer.
Our uk retail and
leisure POrtfOliO
uk’s largest listed landlOrd –
assets under ManageMent
£10.4bn
fOcused On HigH-quality PrOPerties
in well-lOcated retail lOcatiOns
24.6m sq ft
HigH-quality OccuPiers
generating HigH-quality casH
flOws – cOntracted rent
£397m
OccuPancy rate
98.5%
PORTFOLIO BALANCED TO THE WAY
PEOPLE SHOP
Experience
Convenience
Functional
40%
39%
21%
actively resHaPing Our POrtfOliO
tO best POsitiOn fOr grOwtH witH
£2.3bn
of gross investment activity
over the past four years.
key retail assets
Meadowhall shopping centre
tesco and sainsbury’s food superstores
teesside shopping Park
drake circus shopping centre, Plymouth
20
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
strategic rePort
best-in-class services
We focus on world-class property
management, covering everything from
day-to-day services to the development
of new buildings.
Office and residential develOPMent
in 2010 we took the decision to commit to a
significant london development programme
totalling 2.3 million sq ft of office and residential
space. one million sq ft of this has now
completed with the remainder to complete
over the next 12 months. We remain positive
on the outlook for development returns over the
coming year, we have successfully replenished
our pipeline and we have committed to a
number of new projects, totalling a further
485,000 sq ft, including clarges, the Hempel
and aldgate Place.
More information on our developments
www.britishland.com/development
PerfOrMance Overview
our london office portfolio has delivered
strong total returns of 14.9% per annum
over the last five years and consistently
outperformed iPD all offices, reflecting our
focus on london and the quality of our
buildings.
britisH land Office tOtal
PrOPerty return versus iPd
1 year
3 years
5 years
British land office
iPD
19.3%
18.5%
13.6%
10.2%
14.9%
11.5%
Performance
versus iPD
all offices
+80 bps +340 bps +340 bps
Office and residential review for 2013/14
P49–50
More detail on our properties
www.britishland.com/our-properties
Our lOndOn Office and
residential POrtfOliO
POrtfOliO fOcused On transPOrt
and infrastructure Hubs and
uP-and-cOMing areas
7.3m sq ft
we create attractive envirOnMents
and Places
3 campuses
HigH-quality standing investMents –
cOntracted rent
£211m
OccuPancy rate
92.1%
weigHted average lease
lengtH tO first break
8.4 years
Office POrtfOliO develOPed
in last five years
Around 40%
strOng PiPeline Of cOMMitted
develOPMent
£1.2bn
key lOndOn Office assets
our office and residential businesses focused
on london, reflect the capital’s position as a
leading global city, one of the world’s largest
centres for financial and business services,
and increasingly where people are choosing
to work, live and visit.
We own, manage and develop modern, high-
quality and well-located office accommodation,
supported by outstanding customer service,
which meets the needs of a broad range of
organisations. our portfolio comprises an
attractive mix of high-quality buildings in
well-managed environments and a significant
pipeline of development projects. increasingly,
our office properties and campuses include
retail and residential elements.
residential plays an important role in our office
developments in the West end and is also a
profitable business in its own right. We focus
on high-end properties in london and our
approach is to recycle capital quickly, as we
develop and look to sell the majority of the
units before schemes complete.
in offices, our asset management activities
are focusing on: leveraging our strong occupier
relationships; attracting new occupiers;
actively managing our lease expiries; and
improving the working environment.
Office strategy
our aim is to create offices in london which
have enduring appeal to occupiers, by virtue
of their location, design, overall costs to
occupy, environment and the way in which
we manage and maintain them. in order
to achieve this we focus on:
understanding our occupiers’ needs
our understanding of occupier needs
is the key to the quality and sustainability
of our buildings, ensuring that they are
both well-let and stand the test of time.
ensure our estates appeal to a broad
range of occupiers
We support our occupiers to attract and
retain talent by offering places with strong
transport links, excellent public spaces and
an attractive working environment enhanced
by restaurants, shops and leisure facilities.
broadgate, ec3
regent’s Place, nw1
Paddington central, w2
10 Portman square, w1
21
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
our requirements under the crc energy
efficiency scheme, and emission factors
from the UK government’s gHg conversion
factors for company reporting 2013.
for full details of the methodology used to
calculate these emissions and for Pwc’s
independent assurance, please see our
corporate responsibility full Data report
2014 www.britishland.com/crdata.
scope 3 emissions
P174
www.britishland.com/responsibility
envirOnMental excellence
efficient, modern buildings are more cost
effective to run and less at risk from emerging
issues, such as new climate change legislation,
rising energy costs, changing occupier demands
and potential reputational damage. sustainable
buildings are also better protected and future
proofed against physical risks caused by
increased flooding and rising temperatures.
there are growing indications to support our
view that sustainability, particularly energy
efficiency, help protect and grow capital value
over the medium to long-term.
occupiers and people who work, shop and
live in our buildings increasingly prefer
energy efficient, low-carbon buildings. our
stakeholders expect us to lead on energy
efficiency to reduce costs and future proof
our buildings.
reducing our carbon footprint is an important
part of our effort to manage buildings efficiently
and develop sustainable buildings. We actively
manage greenhouse gas emissions across
our business. We have participated in the
carbon Disclosure Project for eight years.
We are joint top of the ftse 350 carbon
Performance leadership index 2013 and
have been recognised in the Disclosure
leadership index for the third year running.
the UK government aims to reduce emissions
by 80% by 2050 and is introducing legislation
to drive reductions in the built environment
which is responsible for around half the UK’s
carbon emissions. We aim to reduce our
like-for-like emissions (scope 1 and 2) by
40% by 2015 compared to 2009. to date we
have achieved a 36% reduction. in support
of this reduction, we have a number of other
targets including improvements in waste
management and water efficiency.
We have reported on all emission sources
required under the companies act 2006
(strategic report and Directors’ reports)
regulations 2013. these sources fall within our
consolidated financial statement and relate to
head office activities and controlled emissions
from our managed portfolio. We do not have
responsibility for any emissions that are
not included in our consolidated statement.
We have used the gHg Protocol corporate
accounting and reporting standard
(revised edition), data gathered to fulfil
2014
2013
2009
5,406
5,722
5,015
1,677
1,076
653
36,264 37,295 42,339
2014
2013
2009
0.048
0.045
0.079
0.021
0.024
0.039
0.004
0.004
0.007
59.41
61.99
–
envirOnMental awards include
absOlute scOPe 1 and 2 eMissiOns (tonnes co2e)
year ended 31 March
combustion of fuel
Managed portfolio gas use and fuel use in British land owned vehicles
ciBse client energy Management award
and Building Performance award 2014.
Operation of facilities
Managed portfolio refrigerant loss from air conditioning
Purchase of electricity, heat, steam and cooling for our own use
Managed portfolio electricity use
scOPe 1 and 2 eMissiOns intensity (tonnes co2e)1
year ended 31 March
Per m2 – offices
Per m2 – shopping centres
Per m2 – retail parks
Per £m – gross rental and related income
1 Heating and cooling degree day adjusted to normalise for weather.
World green Business council – Business
leadership in sustainability award 2013.
nare it global recognition
– leader in the light award 2013.
Property Week sustainability
achievement award 2013.
22
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
strategic rePort
cOMMunity suPPOrt
as well as listening to the requirements of
our occupiers, we work with local communities
to understand their needs and help address
local issues, for instance by supporting local
employment, training and apprenticeships. We
know that local people prefer places created
with their collaboration – the right mix of retail,
restaurants and leisure, new jobs, much-
needed community facilities, better public
spaces, safer walking routes and amenities
such as accessible toilets and baby changing
facilities. Places which are integrated well into
the surrounding area become part of the local
community. it adds richness, life, a sense of
community and diversity to our places, which
makes them more attractive for occupiers.
We are making good progress on our
community charter which we launched in 2011.
this sets out ten commitments to the people
who live near our major properties and
developments. these commitments cover
our approach to community engagement,
and to local issues such as training,
employment and education.
our strong reputation for community support
makes us more likely to become the partner of
choice for local authorities and others. it means
our planning proposals are more likely to be in
tune with what local communities want, helping
us achieve better quality planning permissions,
more quickly.
www.britishland.com/responsibility
cOMMunity awards include
Business in the community awards 2014
reaccreditations 2013 in glasgow, Hull
and london.
Business in the community awards 2013
in glasgow, Hull, rotherham and london.
regent’s Place
aPPrenticesHiPs
Bruce ewen is one of 98 apprentices who
learnt while they earned at our assets last
year, supported or part-funded by us and our
suppliers as part of our focus on employment
and training. over 100 local jobseekers have
also gained sustainable employment with
our suppliers at Broadgate in the city,
through our skills into Work programme
with community partner the east london
Business alliance.
since 2007, we have invested over £50 million
of cash and in-kind contributions to local
infrastructure and initiatives through our
community programme. as a key member
in the West euston Partnership we were able
to better understand the issues the local
community faced and work to address them.
the statistics available for the period from
2004 to 2010 show that the area around
regent’s Place has benefited from a
substantial reduction in levels of deprivation –
in the top 1% of all london areas.
improvements in the local community have
gone hand-in-hand with commercial growth,
with property values increasing twice as
much as the rest of the West end office
market since 2009.
our experience at regent’s Place has
shaped our vision of what good community
engagement across our entire portfolio
can and will look like.
regent’s Place at 30
www.britishland.com/regentsplace30
regent’s Place
www.regentsplace.com
www.britishland.com/offices
23
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
close relationships with our occupiers, along with a deep
understanding of the people who use the spaces, forms the basis
of all our activities. this underpins our ability to generate high-
quality, secure cash flows.
attracting new retail
OccuPiers Out-Of-tOwn
our stronger understanding of the consumer
is allowing us to target a broader range of
retailer. it helped us attract nike to take space
at chester and rotherham and fat face and
Phase eight to take their first out-of-town
stores at Whiteley shopping.
in administration have fallen from 0.9% to
0.1% of our total rent reflecting the quality of
our portfolio. our occupancy, which is high
at 96.1%, also includes some vacant space at
recently completed london offices. We have
good levels of interest in this space and are
confident about letting prospects.
HigH-quality OccuPiers tOP 10
tesco
sainsbury’s
Debenhams
UBs
Home retail group
Kingfisher (B&Q)
HM government
next plc
Virgin active
arcadia group
% Rent
7.7
6.0
5.8
3.2
2.7
2.7
2.5
2.4
2.0
2.0
www.britishland.com/retail
retaining Office OccuPiers
On Our HigH-quality caMPuses
our occupiers choose to stay and grow
with us. across our office portfolio, existing
occupiers such as Herbert smith, f&c,
tullet Prebon, close asset Management
and Premier oil have signed close to
1.7 million sq ft of lease extensions with
us over the last three years.
DIVERSE OCCUPIER BASE
2.4%
7.2%
8.4%
0.8%
20.4%
12.7%
18.7%
13.9%
15.5%
General retail
Fashion/beauty
Supermarket
Banks/financial
services
Professional
and corporate
Food/leisure
DIY
Government
Other business
lOng leases and HigH OccuPancy
retail
offices
total
1 to first break.
broadgate
www.broadgate.co.uk
www.britishland.com/offices
Weighted average
lease length1
underlying
occupancy
Like-for-
like change2
11.3 years
98.5%
+100 bps
8.4 years
92.1%
+190 bps
10.3 years
96.1%
+130 bps
2 occupancy movement on the same group of properties over the past 12 months by excluding sales, purchases
and newly completed developments.
our approach is firmly grounded in strong
relationships and research. our scale in
retail and office markets gives us broad reach
across our markets. We undertake extensive
shopper research programmes across
around 80% of our multi-tenanted assets –
in the last 12 months we have interviewed
over 50,000 people.
We also work hard to ensure our relationships
with our occupiers are strong. in retail, we
have had over 500 meetings over the last 12
months. every two years, we commission
extensive independent customer satisfaction
surveys across our business to help us better
understand our occupiers’ needs and identify
opportunities for further improvements.
our fifth biennial customer survey in 2013
confirmed that we continue to significantly
outperform industry averages for occupier
satisfaction.
www.britishland.com/occupiers
We attract some of the highest-quality
occupiers to our properties. the quality of
our properties and our customer focus means
that our occupiers want to stay with us. they
commit to long leases and then extend them;
they also sign up for more space and grow
with us.
the quality and diversity of our occupiers,
high occupancy levels, strong rents and long
leases give us significant security of income
which enhance the value of our properties.
no single occupier accounts for more than
8% of our total revenues. our average
lease length at 10.3 years is longer than
the industry average of 10 years.
financially strOng OccuPiers
in addition to benefiting from a high-quality and
diversified portfolio of occupiers, we take a
rigorous approach to managing and monitoring
their financial positions. We review the financial
covenants of all new occupiers with rent over
a certain threshold before agreeing any lettings
and paying incentives. We also assess the
financial covenant strength of all our major
occupiers on a periodic basis and we monitor
those we consider may be experiencing
financial difficulty. over the last year, occupiers
24
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
strategic rePort
PrOviding tHe rigHt services in retail
Provision of click and collect services is
increasingly important. consumers’ ability
to get in and out of a retail destination really
matters and the free car parking in a large
proportion of our schemes is a real benefit.
at Meadowhall shopping centre in sheffield,
click and collect and pioneering technologies
such as virtual gift cards are attracting
shoppers.
Meadowhall
www.meadowhall.co.uk
www.britishland.com/shoppingcentres
Meeting Our Office OccuPiers’ needs
if i was asked who was the best landlord
that we deal with, every time it would be
British land.
nick benbOw Of regus
occUPier at tHe BroaDgate toWer
anD 338 eUston roaD, regent’s Place
PrOPerty ManageMent
in offices, day-to-day facilities management
is undertaken by Broadgate estates, a wholly-
owned subsidiary, whose team also provides
facilities management and other services
to third-party clients. the fact that Broadgate
estates also acts for other occupiers and
investors helps them to deliver best-in-class
occupier services to the British land
office portfolio.
in retail, we outsource the day-to-day
operational management of most of our
retail properties, including maintenance and
cleaning, to external agents. outsourcing day-
to-day management to expert agents, who
manage on a large scale, helps us to minimise
operational costs for us and our occupiers,
gives us significant operational flexibility and
further broadens our insights into occupier
and consumer trends. We work closely with
our managing agents and proactively monitor
their performance against our customer-
focused standards.
safe and HealtHy envirOnMents
British land is committed to providing safe
and healthy environments for all users of the
buildings and places we manage. We aim to
be a leader in our industry and to apply best
practice in meeting applicable health and
safety requirements. We perform regular
risk assessments across the portfolio and
set ourselves ambitious targets for resolving
identified risks to achieve continuous
improvement. Performance against these targets
and accident reporting are monitored by our
Health and safety committee which, in turn,
reports performance to the risk committee.
PrOPerty awards include
Whiteley shopping in Hampshire won the icsc new
Development award 2014 (Medium sized category).
st stephen’s shopping centre in Hull won the
retail Week retail Destination of the year 2013.
www.britishland.com/offices
25
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
debt finance
We focus on having sufficient competitively
priced and flexible borrowings available to
deliver our property strategy.
the scale of our business, combined with
the quality, security and stability of our rental
income, means that we are attractive to
a broad range of debt providers and able to
arrange finance on attractive terms. good
access to the capital and debt markets is a
competitive advantage, both reducing our cost
of funding and allowing us to take opportunities
when they arise.
Debt financing involves risk from adverse
changes in the property and financing markets.
in arranging and monitoring our financing we
include important risk disciplines, ensuring
that relevant risks are fully evaluated and
managed. We choose the appropriate gearing
level and follow five guiding principles which
govern the way we structure and manage
our debt. these principles are outlined on
the opposite page and explained on page 57.
gearing
in deciding our gearing level we weigh up
the potential increased returns obtainable
from greater leverage (through borrowing to
buy property) against the risks of having more
debt. We use a loan to value ratio (debt as a
percentage of the value of our assets, ltV)
to measure our gearing and settle on an
ltV range which reflects the strength of our
operational business and reliability of cash
flows, where we are comfortable that overall
returns will be enhanced without exposing
the group to undue risk.
strengtH Of balance sHeet Metrics
Proportionately consolidated
loan to value (ltV)
31 March
2014
31 march
2013
40%
40%
average interest rate
4.1%
4.6%
interest cover
2.5x
2.3x
group
loan to value (ltV)
29%
24%
average interest rate
3.5%
4.4%
interest cover
3.2x
2.8x
tHe leadenHall building
at 736 ft high, and with over 610,000 sq ft
of lettable floor space over 46 floors, the
leadenhall Building is the tallest office tower
in the city of london. its development is an
excellent example of British land’s ability
to form strategic partnerships with leading
institutional investors. Working closely
with oxford Properties, the real estate arm
of oMers (ontario Municipal employees
retirement system), we have respective scale
to undertake this significant development
opportunity while sharing the associated
risks. the strength of the design and
desirable location has meant that the building
is already 53% pre-let at terms overall
accretive to value.
the leadenhall building
www.theleadenhallbuilding.com
www.britishland.com/offices
capital efficiency means
achieving the right risk/return
balance of equity and
borrowings to support the asset
side of our balance sheet and
enhance shareholder returns.
strategic PartnersHiPs
the equity to finance the £18 billion property
portfolio we manage comes from our
shareholders and our co-investors in joint
ventures and funds. the strategic alliances
we develop with our partners enable us to
leverage our equity, achieve benefits of scale
and spread risk.
Our Main Partners
Partner
gic
Property
Broadgate
norges bank
Meadowhall shopping centre
tesco
34 superstores
3 shopping centres
3 retail parks
sainsbury’s
33 superstores
Oxford Properties the leadenhall Building
uss
aviva
Whiteley shopping
eden Walk shopping centre
southgate shopping centre
the use of partnerships is an integral part of
our business and a key way in which we extend
our capital base. they also enable us to access
attractive investment opportunities alongside
like-minded partners with complementary
skills. around half of our owned assets by value
are in joint ventures or funds including our two
largest single assets, the city office campus
at Broadgate and Meadowhall shopping
centre. our recent city development projects,
i.e. those in our 2010 development programme,
have been developed within joint ventures.
our partnerships are based on developing
deep and long-term relationships. in the
majority of cases, we provide asset
management, development, corporate and
financial services and we earn performance
and management fees. this enhances our
overall returns, strengthens our relationships
with key customers and suppliers and keeps
us close to our markets.
financial policies and principles
P56–58
26
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
our unsecured revolving credit facilities
provide flexibility to support the operations
of our business, with the ability to draw
and repay at short notice without additional
cost. Undrawn committed facilities are
maintained for immediate available liquidity.
Maturities of different facilities are well
spread, from debentures with terms up
to 2035, Us Private Placements at circa
12 years and a range of bank facilities with
terms usually of five years. this spread
reduces our refinancing risk in respect
of timing and market conditions.
We aim to have no requirement to
refinance in British land with a two year
horizon and continue to review the
debt markets to arrange new finance
as opportunities arise.
the same two financial covenants (set
out on page 56) apply to all British land
unsecured borrowings. our consistent
approach has helped us build the long-term
relationships with debt providers which
we encourage and value.
our preferred ltV range is between 40% and
50% on a proportionally consolidated basis, i.e.
including our share of joint ventures and funds.
at 31 March 2014, this ratio was 40%. from
time to time we may fall below this as a result
of phasing of recycling activity or valuation
increases; we would not increase gearing
as a result of market improvements in
investment yields.
We leverage our scale through joint ventures
and funds which are financed with debt, in
securitisations and loans, which are non-
recourse to British land. in doing so, the ltV
at 40% on a proportionally consolidated basis
is higher than the group measure for our
unsecured lenders, which is around 30%.
accordingly we can operate with a higher level
of gearing on a proportionally consolidated
basis without putting pressure on the British
land credit profile.
Our aPPrOacH
We monitor the markets and seek to access
different types of finance when the relevant
market conditions are favourable to meet
the needs of our business, including our joint
ventures and funds. We aim to avoid reliance
on any particular source of funds and borrow
both on unsecured and secured bases from
a large number of lenders from different
market sectors and geographical areas.
BRITISH LAND DEBT MATURITY PROFILE (AS AT 31 MARCH)1
£M
1,000
800
600
400
200
0
’15
’16
’17
’18 ’19 ’20
’21 ’22
’23
’24
’25
’26 ’27 ’28
Financial year
Undrawn facilities
Drawn facilities
Convertible bonds
US Private
Placements
Debentures
’29 ’30 ’31 ’32 ’33 ’34 ’35
’36
’37
’38
1 British Land facilities proforma for the new £785 million revolving credit facility.
strategic rePort
Our five financing PrinciPles
DIVERSIFY OUR SOURCES OF FINANCE
£0.9bn
£0.6bn
£1.0bn
£1.6bn
£0.7bn
£0.4bn
Unsecured
bank debt
Debentures
US Private
Placements
Convertible
bonds
Securitisations
Joint ventures
and funds1
Maintain liquidity
£2.0bn
Undrawn committed facilities2.
extend and stretcH Maturity
Of debt POrtfOliO
8.7 years
average debt maturity.
Maintain flexibility
£2.6bn
of revolving credit facilities to draw
and repay at no additional cost2.
Maintain strOng
balance sHeet Metrics
40%
ltV (proportionally consolidated).
2.5x
interest cover (proportionally consolidated).
4.1%
Weighted average interest rate.
A–
rating from fitch.
1 HUt’s debt shown at our share (£0.3 billion)
within joint ventures and funds.
2 British land facilities pro forma for the new
£785 million revolving credit facility.
27
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
our team of 242 people is small for a ftse 100 company.
We believe that this is the best of both worlds. our approach
is to recruit small teams of experts in their fields who
buy in additional, external resources as they need them.
our lean team makes our business
entrepreneurial, fast and flexible. for our
people, this also means that each individual
has the chance to get involved, to work
alongside industry leaders, and to have
a real impact in our business and beyond.
our skills, give us considerable competitive
advantage in a fast paced, changing
environment. our outsourced model and
scale also mean that we have the lowest
operating costs of the major UK reits.
We are a values-based organisation. our
people are good to deal with: they are talented
and professional, have integrity and work well
with others. our people and values are part
of what make us different and drive a high
performance culture. they make us a good
organisation to do business with, so we are
often a partner of choice for customers,
suppliers, joint ventures and regeneration
projects. they are also at the heart of our
employer brand ‘the smallest big company
you’ll ever work for’, which helps us attract
and grow the best talent.
our Board consists of expert individuals with
experience from a number of relevant sectors,
as detailed in their biographies on pages 66
and 67. the Board draws on its diverse range
of skills and breadth of knowledge when
developing British land’s strategy and
provides strong leadership as that strategy
is implemented.
over the last year our Hr strategy has focused
on two key areas:
nurturing talent – so we get more out of our
people and so they grow and develop; and
optimising our organisation – so we are
as dynamic as possible and have the
capabilities we need for the future.
We believe that staff engagement is a
competitive advantage. We have a full formal
and informal staff programme to increase
engagement. one of the benefits of the
relatively small size of our head office team
is that we are able to get all our employees
together in one room. We make the most of this
opportunity, holding all-staff conferences each
year and all-staff meetings every month, where
people from different areas of our business
are able to update our whole team on relevant
developments and respond to questions.
We also offer a wide range of volunteering
opportunities, many of which are designed
to encourage team-building and develop staff
competencies and skills that will be useful
in the workplace, at the same time as helping
to address community issues. We also have
a broad range of social activities which many
staff participate in.
in 2013, we participated in our third annual
staff satisfaction survey through the sunday
times Best companies to Work for survey.
We achieved a one star rating, for the third
year running.
wellbeing
We are committed to the wellbeing of our staff,
recognising our obligations as an employer
and the benefits this brings to our business.
We provide a safe working environment,
access to healthcare services and an employee
assistance scheme which includes a
counselling service. We promote and support
active lifestyles through subsidised gym
membership, provision of cycling facilities,
membership of the government’s cycle to
Work scheme and regular sporting activities
arranged through our social programme.
as part of British land’s first community Week,
180 volunteers worked together on community
projects close to some of our key assets. one team
of volunteers hosted a day of entertainment at age
UK’s centre in camden.
92% of our staff said volunteering activities
were effective for team building. Here, two of
our volunteers are working on the garden area at
richard House children’s Hospice in newham.
Our values
integrity
We do what is right, not what is easy.
One teaM
We work collaboratively with both
internal and external stakeholders.
excellence
We are the best we can be and
we have a growth mindset.
cOMMercial acuMen
We take the lead in our field.
28
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014 strategic rePort
report of the nomination committee
P79–81 Diversity Policy
P81 Developing people at British land
governance review
P66–67 Board of Directors
P73 employees
We currently have two female Directors on
the Board, Dido Harding, a non-executive
Director and lucinda Bell, finance Director.
this currently represents 18% female Board
membership. as at 31 March 2014, of the 34
senior management at British land and our
subsidiaries, 21% were female. of the 526
employees at British land and our subsidiaries,
48% were female. We report diversity in line
with the UK’s new narrative reporting
regulations. senior management therefore
includes employees of British land and our
subsidiaries who have responsibility for
planning, directing or controlling the activities
of the company or a strategically significant
part of the company.
GENDER DIVERSITY AT BRITISH LAND AND ITS SUBSIDIARIES
Board of Directors
Senior Management
All employees
100
80
60
40
20
0
%
2
8
%
8
1
Male
Female
100
80
60
40
20
0
%
9
7
%
1
2
100
80
60
40
20
0
%
2
5
%
8
4
HuMan rigHts and fairness
in tHe wOrkPlace
We treat our staff and suppliers with fairness,
dignity and respect. We support the protection
of internationally recognised human rights
and have been a signatory to the United nations
global compact, which promotes absolute
respect for human rights, since 2009. British
land supports the United nations guiding
Principles on Business and Human rights,
also known as the ruggie framework.
We are developing a supply chain charter
to ensure that these principles are
implemented throughout our supply chain.
British land treats all job applicants and
employees equally and conducts business
in an honest way. Measures to deliver
on these commitments include our equal
opportunities Policy, anti-Bribery and
corruption Policy, competition Policy
and fraud awareness Policy.
We have been a signatory to the UK
government’s Prompt Payment code since
it launched in 2010. We paid 97% of invoices
by value within 30 days this year, excluding
disputed invoices.
diversity
our recruitment practices have long included
a commitment to diversity and gender equality.
the Board’s Diversity Policy is detailed in the
report of the nomination committee on pages
79 to 81. the policy throughout British land
is to employ the best candidates available
in every position, regardless of sex, race
(ethnic origin, nationality, colour), age, religion
or philosophical belief, sexual orientation,
marriage or civil partnership, and pregnancy,
maternity, gender reassignment or disability.
awards include
We won a national Payroll giving excellence
award 2013, with 23% of staff signed up
to our new scheme, an impressive rise
from 2% in 2011.
PaddingtOn central
the strengths of our people in deal making delivered results in our £470 million acquisition of
Paddington central in July 2013, an off-market transaction with a complex ownership structure.
on a net initial yield once fully let of 6.2% on the existing properties and development sites at
a price of £175 per sq ft, we believe this is a very attractive entry price into a well-located, major
West end office.
We rank in the top five ftse 100 companies
for reporting wellness and engagement
of employees, in the Business in the
community Workwell Benchmark 2014.
Paddington central
www.paddingtoncentral.com
www.britishland.com/offices
29
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
DeliVering oUr strategy
HoW We PerforMeD in tHe year
creating places people prefer drives enduring
demand for our properties from occupiers and
investors. this generates the long-term growth
in our rental income and capital which, together
with an optimal capital structure, delivers value
for our shareholders.
creating
DriVing
DeManD
for our properties from
occupiers and investors.
generating
long-terM
groWtH
in our rental income
and capital.
DeliVering
ValUe
for our shareholders.
Our priorities ensure that we focus our efforts on the most value creating activities.
Our key PriOrities in 2013/14
continue to increase our weighting
to london and the south east:
– focus on up-and-coming areas with strong
infrastructure links; and
– replenish our london development pipeline.
fully deploy the proceeds of our equity placing:
– the net impact of placing and investment to be
accretive to earnings by the end of the financial year
on an annualised basis.
Deliver and de-risk our 2010 development
programme:
– complete all our developments in the West end; and
– de-risk through pre-letting office space
and pre-selling residential units.
exiting europe.
reshape our retail portfolio:
– reshape our existing portfolio to meet the evolving
needs of occupiers and consumers;
– take advantage of market strength to sell
more mature assets;
– invest in retail schemes which are preferred
destinations or have the ability to be; and
– build the retail team to extend our consumer-facing
skills and activities.
Maintain our financial gearing within
our 40% to 50% ltV range:
– access debt markets to meet the evolving
needs of the business.
Maintain our one star rating in the sunday
times Best companies to Work for survey.
continue to drive corporate efficiencies.
Deliver our corporate responsibility goals.
HOw we assess Our PerfOrMance
We measure how we are delivering against our strategy at the group level through our key performance indicators.
We monitor our exposure to each of our principal risks through our key risk indicators. By remaining within agreed
parameters, we ensure that our actions are consistent with the risk appetite of the business. our incentives are
closely aligned with the delivery of our strategy and with the intention of matching the interests of management with
our shareholders. the incentives are based on a range of financial and non-financial measures.
30
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014 DeliVering oUr strategy
DeliVering sUstainaBle
total sHareHolDer retUrns
our objective is to deliver long-term sustainable total returns
for our shareholders through the increase in the value of our
shares and the income we distribute by way of the dividend.
strategic rePort
tOtal accOunting return
as a business we are focused on maximising
total shareholder returns. over time, we expect
our total accounting returns to be a good proxy
for total shareholder returns and this is the key
performance indicator we use to track our
overall progress.
our total accounting return is the overall return
we generate including the impact of debt,
commonly called the ‘levered property return’.
it is calculated based upon a combination of the
net income distributed to shareholders in the
form of the dividend, plus the percentage
growth in net asset Value per share (naV).
During the year we generated a total accounting
return of 20.0%. our dividend was increased
by 2.3% to 27.0 pence per share and our naV
increased by 15.4% to 688 pence per share.
key risk indicatOrs
the biggest driver of our returns are the
economic environment and the appeal
of investment in property within that.
the primary key risk indicators that we
monitor in this area are:
forecast gDP growth; and
the margin between property yields and
borrowing costs.
key incentive Measures
the management team’s compensation
and incentivisation is linked to:
total accounting returns.
Managing risk
P36–41
remuneration Policy
P84–93
key PerfOrMance indicatOrs
tOtal accOunting return
20.0%
2014
2013
2012
4.6%
9.5%
20.0%
As a result of the increased dividend and our nAv
we reported a total accounting return of 20.0%.
grOwtH in net asset value (nav)
+15.4%
2014
2013
2012
688p
596p
595p
ePra net asset value per share was up
15.4% to 688 pence.
incOMe frOM dividend
+2.3%
2014
2013
2012
27.0p
26.4p
26.1p
Quarterly dividend of 6.75 pence brings total
dividend for the year to 27 pence, a 2.3% increase
year-on-year.
31
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
key risk indicatOrs
the primary key risk indicators which
we monitor to guide our strategic decisions
to invest in the right places are:
property capital and erV growth forecasts;
total and speculative development
exposure; and
progress of developments against plan.
key incentive Measures
the management team’s compensation
and incentivisation is linked to:
property returns;
successes on purchase and sales; and
successful progress on development.
Managing risk
P36–41
remuneration Policy
P84–93
key PerfOrMance indicatOrs
PrOPerty returns
14.2%
2014
2013
2012
6.3%
8.3%
vs IPD
14.2% +60 bps
+320 bps
+200 bps
How we allocate our capital, manage existing
assets and develop properties is core to our ability
to generate returns. We compare our total property
returns with the investment Property Databank’s
(iPD) UK benchmark.
develOPMent cOMMitMent
£1.4bn
2014
2013
2012
£1.4bn
£1.4bn
£1.4bn
Development is an important contributor to our
income and value growth but it also adds risk. We
aim to keep our committed development exposure
at less than 15% of our investment portfolio.
Our acHieveMents in tHe year
We have had an active year with total gross
investments of £2.0 billion, made up of:
− £1,033 million of acquisitions;
− £710 million of disposals; and
− £227 million of development spend.
as a result, we successfully deployed the
proceeds of our March 2013 equity placing,
ahead of the schedule we set out. the
placing was accretive to ePs by 0.5 pence
and naV by 6 pence.
We invested £787 million in london focusing
on the West end and up-and-coming areas
with strong transport links. these sites
included Paddington central and Blossom
street, shoreditch.
these investments have significantly
replenished our development pipeline.
We now have £1.1 billion of recently
committed or near-term developments
primarily focused on london.
as a result, london and the south east
now accounts for over 60% of our total
portfolio, up from 50% four years ago.
We made significant progress with our
2010 development programme with eight
of the projects now completed. in offices
we completed all the West end developments
including our 500,000 sq ft office and
residential development at regent’s Place.
the office programme is now 73% pre-let
securing £54 million of rent. over 96%
of the residential units are pre-sold or
under offer.
in retail, we opened Whiteley shopping
in May 2013. for details see page 4.
We continued to reshape our retail
properties. since 1 april 2013, we have sold
£391 million of more mature retail assets
ahead of book value; we invested over
£500 million in strong, locally-preferred
locations such as southgate, Bath; increased
our stake in HUt, one of the highest-quality
shopping park portfolios in the UK; and
bought a 26% equity stake in a portfolio
of sainsbury’s superstores.
Performance review
P44–55
32
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014 RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
strategic rePort
key PerfOrMance indicatOrs
custOMer satisfactiOn
7.8 out of 10
(industry average 5.1 out of 10)
2013
7.8
2011
2009
7.6
7.5
our customer orientation helps us to attract and
retain occupiers who are willing to commit to
long leases for the right building and best-in-class
landlord services. our biennial survey helps us
track our performance and identify opportunities
for further improvements. our next biennial
independent customer survey will be in 2015.
dOw JOnes sustainability scOre (dJsi)
70%
2013
2012
2011
70%
70%
76%
Managing our social, environmental and economic
impacts is central to how we do business and
deliver long-term value to our shareholders.
the DJsi is a key sustainability reference point
for our occupiers as well as investors. our DJsi
score influences the annual incentive remuneration
of those on our executive committee. 2014 results
will be available in september 2014.
Our acHieveMents in tHe year
We had a good year in retail agreeing
1.7 million sq ft of lettings and renewals,
4.9% ahead of estimated rental value,
with strong demand from a broad range
of occupiers.
key risk indicatOrs
the primary key risk indicators which we
monitor to ensure that our business is
aligned with the needs of our customers
and resilient to variations in occupier
demand are:
in london, we successfully tapped
consumer confidence;
employment forecasts for relevant sectors;
market letting risk (vacancies, expiries,
administrations); and
weighted average lease length.
key incentive Measures
the management team’s compensation
and incentivisation is linked to:
gross income growth.
Managing risk
P36–41
remuneration Policy
P84–93
increasing demand for high-quality office
space, letting 632,000 sq ft of office space
including 323,000 sq ft to the growing
tMt and insurance sectors (51%).
Performance review
P44–55
We also formed a new joint venture
partnership at Broadgate with gic who is
also one of our largest shareholders.
over the past year we completed or started
significant leisure-focused extensions on five
of our key assets: glasgow fort; Broughton
Park, chester; fort Kinnaird, edinburgh;
Whiteley shopping, Hampshire; and Kingston
centre, Milton Keynes.
this will increase our leisure offer in
multi-tenanted assets to over 7.0%. Within
our experiential assets this figure is 9.0%.
as part of our focus on our customers, we
significantly expanded our consumer insights
by extending our shopper survey to over
50,000 users on our major shopping centres
and retail parks within the last 12 months.
We strengthened our digital platform with
free wi-fi in 11 of our shopping centres, and
free wi-fi hot spots at six of our major retail
parks, with further roll out planned over
the next six months.
We delivered £2 million energy cost
savings for occupiers in the year, bringing
total savings over the last five years to
£6.9 million.
33
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
key risk indicatOrs
the primary key risk indicators which we
monitor to manage the risks relating to our
capital structure are:
ltV;
likelihood of covenant breach; and
period until refinancing is required.
key incentive Measures
the management team’s compensation
and incentivisation is linked to:
operating costs as a percentage of rent
and assets;
successful execution of financings; and
progress of strengthening the dividend.
Managing risk
P36–41
remuneration Policy
P84–93
key PerfOrMance indicatOrs
lOan tO value (ltv)
40%
2014
2013
2012
40%
40%
45%
Debt plays an important role in enabling us to take
advantage of market opportunities. our 40% to 50%
ltV range balances the rewards of owning more
property with the risk inherent in debt financing.
weigHted average interest rate
(wair)
4.1%
2014
2013
2012
4.1%
4.6%
4.6%
our low cost of debt finance is a key contributor
to our overall performance and a competitive
advantage. at 4.1%, we have one of the lowest
Wair of the UK reits combined with one of the
longest average debt maturities at 8.7 years.
cOst ratiO
16.2%
2014
2013
2012
16.2%
15.3%
14.9%
controlling our costs so we maximise the
amount of rent which flows through as profits
and dividends is a key focus of the business.
our small head office and outsourced business
model helps to keep costs low.
Our acHieveMents in tHe year
We maintained our loan to value (ltV)
within our 40% to 50% range.
We have continued to demonstrate our ability
to take opportunities to access capital and
debt markets to meet the requirements
of our business.
During the last 12 months we have been
successful in raising £1.5 billion of unsecured
debt finance for British land on competitive
terms from a broad range of sources,
including:
− £310 million five-year revolving credit
facility, signed in May 2013 with a syndicate
of eight banks, at an initial margin of
135 bps per annum;
− £200 million Us Private Placements with
12-year maturity, signed with new york
life and Pricoa capital group in august
2013. the two sterling fixed rate notes
were swapped to an effective floating rate
of 103 bps per annum above liBor. this
funding closed, as scheduled, in March
2014; the deferred drawdown date enabled
us to continue to utilise our lower cost
bank facilities (arranged in earlier years)
between signing and closing;
− £785 million revolving credit facility
provided by a syndicate of 14 banks signed
in april 2014, with an initial margin of 115
bps per annum. the initial committed term
of the facility is five years which may be
extended to a maximum maturity of seven
years at our request and on each bank’s
approval for its commitment.
all these facilities include our standard
unsecured financial covenants.
these transactions have taken advantage
of market conditions and added further
flexibility and term to our already strong and
diversified debt portfolio, such that we are
well ahead of our preferred two-year
refinancing date horizon.
British land’s senior unsecured credit rating
has been maintained at a– (fitch).
financial policies and principles
P56–58
We have been investing in growing our
capabilities and this is one of the reasons
our operating costs are higher in the year.
However, our costs remain one of the
lowest among our reit peers.
34
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014 RIGHT
PLACES
CUSTOMER
ORIENTATION
CAPITAL
EFFICIENCY
EXPERT
PEOPLE
strategic rePort
key risk indicatOrs
the primary key risk indicator which we
monitor in managing our people risks is:
unplanned executive departures.
key incentive Measures
the management team’s compensation
and incentivisation is linked to:
quality of people and management
renewal; and
company reputation.
Managing risk
P36–41
remuneration Policy
P84–93
key PerfOrMance indicatOrs
tHe sunday tiMes best cOMPanies
tO wOrk fOr survey
One Star
2014
2013
2012
One Star
one star
one star
our people are a key asset and we believe that
staff engagement is a competitive advantage
that distinguishes us from our peers. the sunday
times annual survey is one of the most extensive
benchmarks of employee engagement with
nearly 900 organisations participating.
British land characterises itself as ‘the
smallest big company you’ll ever work for’.
We have fewer than 250 direct employees
in our core business and they manage over
£17 billion in assets. our goal is to leverage
our financial strength while enjoying the
entrepreneurial benefits of a compact
organisation. this translates to a rewarding
employee experience.
Our acHieveMents in tHe year
95% of employees participated in this year’s
sunday times Best companies survey
scoring us 76% for ‘i love working for this
organisation’. We maintained our one star
rating for the third year in a row.
During the year we launched a new peer-
led recognition programme called ‘Hats off’
which focuses on our company values.
the majority of the organisation nominated
colleagues for their achievements. the five
top prize winners participated in a two week
sustainable leadership programme in
antarctica, reinforcing the group’s values.
community engagement remained an
important part of our culture with 77%
of our staff volunteering time to local
initiatives. We also won an award for
our payroll giving scheme which allows
many of our employees to contribute
directly to charities of their choice.
our focus on training and development
increased this year with specialist
appointments in our Hr function and
a suite of new competency-based
programmes rolled-out at all levels
of the business.
Detailed compensation studies were used
to ensure that our rewards remain highly
competitive, including comprehensive
healthcare, pension and other benefits.
employee satisfaction with reward is also
measured through the Best companies
survey and we continue to score highly.
We leveraged our property and financial
skills to secure highly attractive assets.
nearly all the acquisitions we made
during the year were complex off-market
transactions involving significant
commercial judgements.
35
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 Managing risK in
DeliVering oUr strategy
the strengthening economic
environment has improved the
outlook for our performance
however our risk appetite
remains broadly unchanged.
the most significant judgements affecting our
risk exposure include our property sector
selection, our level of development risk and our
gearing. We maintain our focus on sectors
where we see outperformance over the
medium term, that is high-quality UK retail and
london offices, and we want to increase further
our exposure to london and the south east.
as our 2010 development programme lets up,
we continue to replenish our pipeline of
opportunities to maintain an appropriate level
of risk exposure – commensurate with our
return aspirations. our approach to gearing is
unchanged but we see our ltV being towards
the lower end of and possibly below our target
range as valuations increase.
Our aPPrOacH tO risk ManageMent
at British land, we take the view that our
assessment of risk is a cornerstone of our
strategy and our embedded risk management
is fundamental to its delivery. our integrated
approach combines a top-down strategic
view with a complementary bottom-up
operational process.
the top-down approach involves a review of the
external environment in which we operate, to
guide an assessment of the risks which we are
comfortable exposing the business to in pursuit
of our performance objectives – this is our risk
appetite. this evaluation frames the
determination of the actions we take in
executing our strategy. key risk indicators
(Kris) have been identified for each of our
principal risks and are used to monitor our risk
exposure. the Kris are reviewed quarterly by
the risk committee to ensure that the activities
of the business remain within agreed risk
appetite tolerances.
the bottom-up approach involves identification,
management and monitoring of risks in each
area of our business meaning that risk
management is embedded in our everyday
operations. control of this process is provided
through maintenance of risk registers in each
area. these risk registers are aggregated and
reviewed by the risk committee, with
significant and emerging risks escalated for
Board consideration as appropriate.
this process complements the top-down view
by informing the identification of our principal
risks, ensuring that operational risks are fully
considered in determining the risk appetite and
the corresponding strategy of the business.
our principal risks are detailed in the table
that follows. this year, we recognise the
increasing risks associated with upcoming
political events, such as the UK general
election, by expanding the risk of economic
outlook to be economic and Political outlook.
Our aPPrOacH tO risk in Practice
development exposure
Development has been a key source of returns
and outperformance for British land in recent
years. We continue to believe that development
can deliver good risk adjusted returns in the
years to come and so we maintain our appetite
for risk in this area. our letting progress on our
2010 development programme has provided
us with the confidence to commit to several
new developments and we continue to replenish
our pipeline through acquisition activity and
progression of opportunities within the portfolio.
We monitor the development exposure of the
business as a proportion of the portfolio,
both currently and on a prospective basis, with
reference to a target range, and this guides
the pace and quantum of replenishment
of the pipeline, noting also the risks to timing
and delivery of these opportunities, including
planning and construction cost inflation.
36
We determine our risk
appetite based on our
assessment of the economic
environment that we are
operating in and our
performance aspirations.
We use key risk indicators
to monitor the external
environment as well as the
risks across the business.
these provide clear
thresholds covering areas
such as gearing, sector
selection, target development
exposure and the sustainability
of our income. remaining
within these thresholds
ensures that our actions
are consistent with our
agreed risk appetite.
lucinda bell
cHair of tHe risK coMMittee
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014 strategic rePort
risk gOvernance
the Board takes overall responsibility for risk
management with a particular focus on
determining the nature and extent of significant
risks it is willing to take in achieving its strategic
objectives. the audit committee assesses the
principal risks facing the company, including
those that would threaten its solvency or
liquidity. their evaluation of these solvency
risks is described further in the going concern
section on page 72 and a description of how
these risks are managed and mitigated is
included in the financial strategy execution
risk in the table of principal risks which follows.
the audit committee takes responsibility
for overseeing the effectiveness of sound risk
management and internal control systems
and more information on the system of
internal controls can be found on page 76.
the executive Directors are responsible
for delivering the company’s strategy and
managing operational risk and a risk
committee has been established to provide
a forum to fulfil these responsibilities.
the Directors in turn place reliance on their
teams to monitor and manage operational
risks on an ongoing basis, as well as identifying
emerging risks. the risk registers provide a
framework for all staff to feed into this process
recognising their shared responsibility for
effective management of risk in delivering our
strategy.
Our governance structure
the risk committee P65
report of the audit committee
P74–78
risk ManageMent at a glance
the diagram below summarises the complementary top-down and bottom-up aspects
of our integrated approach to risk management.
TOP-DOWN
Strategic risk management
BOTTOM-UP
Operational risk management
BOARD AND
AUDIT COMMITTEE
Assess effectiveness of risk
management systems
—
Report principal risks
Review external
environment
—
Set risk appetite
and parameters
—
Determine strategic
action points
Direct delivery of
strategic actions
—
Monitor key risk indicators
Execute strategic actions
—
Report on key risk indicators
RISK COMMITTEE
(EXECUTIVE
DIRECTORS)
BUSINESS UNITS
Consider completeness
of identified risks and
adequacy of mitigating actions
—
Consider aggregation of risk
exposures across the business
Report priority and
emerging risks
—
Identify, evaluate, prioritise,
mitigate and monitor
operational risks recorded
in risk register
37
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
PrinciPal risKs
Managing our social and environmental impacts is central to how we do business and deliver
value to our shareholders. to reflect this, rather than reporting social and environmental
factors separately, we have integrated them within the principal risks disclosure which follows,
as indicated by these social and environmental icons
.
our principal key risk indicators are highlighted within ‘How we manage the risk’.
risks and iMPacts
HOw we Manage tHe risk
MOveMent in tHe PeriOd
external risks
ecOnOMic
and POlitical
OutlOOk
the economic recovery and the
prospect of increasing interest
rates present risks and opportunities
in property and financing markets
and the businesses of our occupiers.
significant upcoming political events
bring risks in two areas:
− reluctance of investors and
businesses to make investment
decisions while the outcome
remains uncertain, and
− on determination of the outcome,
the impact on the case for
investment in the UK, and of
specific policies and regulation
introduced – particularly those
which directly impact real estate.
the risk committee reviews the economic
environment on a quarterly basis to assess
whether any changes to the economic outlook
present risks or opportunities which should
be reflected in the execution of our strategy.
indicators such as forecast gdP growth,
unemployment, business and consumer
confidence, interest rates and inflation are
considered, as well as central bank guidance
and government policy updates.
We are not able to influence the outcome of
significant political events, but take the uncertainty
related to such events and the range of possible
outcomes into account when making strategic
investment and financing decisions.
We engage public affairs consultants to ensure
that we are properly briefed on the potential
policy and regulatory implications of political
events. Where appropriate, we act with other
industry participants to influence the debate
on these policies.
cOMMercial
PrOPerty
investOr deMand
reduction in investor demand for
UK real estate may result in falls
in asset valuations and could arise
from variations in the:
health of the UK economy;
attractiveness of investment
in the UK;
availability of finance; and
relative attractiveness of other
asset classes.
an external event such as a civil
emergency, including a large-scale
terrorist attack, extreme weather
occurrence or environmental disaster
could severely disrupt global markets
(including property and finance)
and cause significant damage and
disruption to British land’s portfolio
and operations.
catastrOPHic
business event
the risk committee reviews the property
market on a quarterly basis to assess whether
any changes to the market outlook present risks
or opportunities which should be reflected in
the execution of our strategy. the committee
considers indicators such as the margin between
property yields and borrowing costs and property
capital growth forecasts which are considered
alongside the committee members’ knowledge
and experience of market activity and trends.
We maintain a focus on those sectors which we
believe will deliver outperformance over the
medium term benefitting from continuing occupier
demand and, consequently, investor appetite.
asset risk assessments (e.g. security,
flood, environmental, health and safety).
regular security threat information service.
Physical security measures at properties
and development sites.
asset emergency procedures reviewed
and scenario tested.
Head office business continuity plan in
place and regularly tested.
comprehensive insurance.
38
the UK recorded strong gDP
growth and falling unemployment
in 2013, with these trends forecast
to continue in 2014. this is anticipated
to result in increased consumer
demand and to be beneficial for the
businesses of our occupiers. risks
to this recovery remain, including
the prospect of rising interest
rates, geo-political conflicts and a
slowdown of economic growth in
emerging markets.
Political: european Parliament
elections, the referendum on
scottish independence and the UK
general election are all scheduled
within the next 12 months. Beyond
that, there is the possibility of a UK
referendum on membership of the
eU. each of these events has the
potential to impact the appeal and
performance of investment in the
UK in general and real estate
in particular, both through the
related uncertainty and resultant
implementation of policies and
regulation.
the weight of money seeking
investment opportunities in UK
commercial property, both from
international and traditional
institutional sources, continues
to grow. investor appetite has been
further enhanced by the improving
economic outlook and increasing
availability of finance at low rates
with interest now extending beyond
prime properties and locations.
the evaluation of the likely
impact of this risk on the
performance of the group has
not changed since the prior year.
the Home office threat level from
international terrorism remains
‘substantial’. the portfolio has
remained resilient to the storms
and flooding experienced in the
year with minimal damage and
disruption experienced.
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
strategic rePort
key
CHAnge FRom LAST YeAR
risk exposure has increased
no significant change in risk exposure
risk exposure has reduced
risks and iMPacts
HOw we Manage tHe risk
MOveMent in tHe PeriOd
external risks
OccuPier deMand
and tenant
default
Underlying income, rental growth
and capital performance could be
adversely affected by weakening
occupier demand resulting from
variations in the health of the UK
economy and corresponding
weakening of consumer confidence
and business activity and
investment.
occupier failures may adversely
impact underlying income and
capital performance.
changing consumer and business
practices (including the growth
of internet retailing, flexible
working practices and demand
for energy efficient buildings),
new technologies, new legislation
and alternative locations may
result in earlier than anticipated
obsolescence of our buildings if
evolving occupier and regulatory
requirements are not met.
availability and
cOst Of finance
reduced availability of property
financing may adversely impact
British land’s ability to refinance
facilities and result in weaker
investor demand for real estate.
increasing finance costs would
reduce British land’s underlying
income.
We are seeing improving
demand for office space in
london underpinned by increasing
take up from tMt occupiers.
in retail, occupiers are becoming
more confident in the role of
physical space in an omni-channel
world. With a reduced number of
administrations as the economy
recovers, we are seeing signs
of increasing demand for flexible
space in the best locations.
We have seen a continuing increase
in the availability of finance to
commercial property across a range
of sources. financing costs remain
near historic lows but are expected
to increase.
the risk committee regularly reviews indicators
of occupier demand including consumer
confidence surveys, employment forecasts
for relevant occupier sectors and erv growth
forecasts. these are considered alongside the
committee members’ knowledge and experience
of occupier plans, trading and leasing activity
in guiding execution of our strategy.
We have a Key occupier account programme
through which we work together with our
occupiers to find ways to best meet their evolving
requirements – including understanding how
our stores fit with their omni-channel offer.
We perform rigorous occupier covenant checks
and review these on an ongoing basis so that
we can be proactive in managing exposure
to weaker occupiers.
We are constantly assessing how best to
‘future proof’ our buildings and maintain
sustainability briefs across the investment
portfolio as well as on acquisitions and
developments.
British land prides itself on taking
a leadership position on defining and
responding to environmental legislation
impacting the built environment. all our office
developments are BreeaM excellent and
94% of our major retail developments are
BreeaM Very good or excellent. We have
achieved significant landlord-influenced
energy reductions, benefitting our occupiers
(see page 22 for further details).
Benchmark borrowing rates and measures
of real estate credit availability are monitored
by the risk committee on a quarterly basis and
considered alongside committee members’
awareness of financing activity in the industry
to guide our financing actions in executing
our strategy.
We maintain strong relationships with our key
financing partners and advisors to maintain
an awareness of financing market activity.
We maintain a diverse range of sources
of finance to provide flexibility to access funding
as required.
We closely monitor relevant emerging banking
regulation, working with industry bodies and
other relevant organisations to participate
in the debate where our interests are affected.
in the current year, we contributed to the
Vision for real estate finance in the UK
recommendations which were drafted by
a cross-industry real estate finance group.
39
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
PrinciPal risKs
continUeD…
our principal key risk indicators are highlighted within ‘How we manage the risk’.
internal risks
risks and iMPacts
HOw we Manage tHe risk
MOveMent in tHe PeriOd
investMent
strategy
in order to meet our strategic objectives
we must invest in and exit from the
right properties at the right time.
our investment strategy is determined to be
consistent with our target risk appetite based
on the evaluation of the external environment.
Progress against the strategy and continuing
alignment with our risk appetite is monitored
at each risk committee by reviewing relevant
indicators including a comparison of forecast
portfolio returns against the iPD benchmark.
individual investment decisions are subject
to robust risk evaluation overseen by our
investment committee including consideration
of returns relative to risk-adjusted hurdle rates.
We foster collaborative relationships with our co-
investors and enter into ownership agreements
which balance the interests of the parties.
significant underperformance could
result from inappropriate determination
and execution of our property
investment strategy, including:
sector selection and weighting;
timing of investment and divestment
decisions;
exposure to developments;
sector, asset, tenant, region
concentration; and
co-investment arrangements.
responsible executive: chris grigg
strategic focus:
RIGHT
PLACES
development provides an opportunity
for outperformance but this brings
with it elevated risk. The care with
which we make our decisions around
which schemes to develop when, as
well as our execution of these projects,
must reflect this.
We maintain our levels of total and speculative
development exposure as a proportion of the
investment portfolio value within a target range
taking into account associated risks and the
impact on key financial metrics. this is monitored
quarterly by the risk committee, along with
progress of developments against plan.
Development risks could adversely
impact underlying income and capital
performance including:
development letting exposure;
construction timing and costs; and
for each project we make a judgement about
apportionment of construction risk. Where we
retain this risk we fix costs early in the process,
subject to other market factors, with key
contractors subject to financial covenant review.
Pre-let targets are used to reduce development
adverse planning judgements.
letting risk where considered appropriate.
responsible executives:
charles Maudsley, tim roberts
strategic focus:
RIGHT
PLACES
We actively engage with the communities
in which we operate, as detailed in our
community charter, to ensure that our
development activities consider the interests
of all stakeholders.
We manage social and environmental risks
across our development supply chain by
engaging with our suppliers, including through our
sustainability Brief for Developments and Health
and safety Policy.
British Land runs a heavily outsourced
model which means that critical
business processes and decisions
lie in the hands of a few people.
failure to recruit, develop and retain
staff and Directors with the right skills
and experience may result in significant
underperformance.
our Hr strategy is designed to minimise
risk through:
informed and skilled recruitment processes;
highly competitive compensation and benefits;
people development and training;
employee engagement surveys and other
initiatives; and
responsible executive:
chris grigg
strategic focus:
EXPERT
PEOPLE
monitoring of unplanned executive departures
and conducting exit interviews.
our supply chain strategy is designed
to manage key social and environmental
risks with our outsourced suppliers, including
health and safety, fraud and bribery.
develOPMent
PeOPle
40
chris grigg commented,
“We have been active in
delivering our investment strategy
in the year. We have increased our
exposure to london and the south
east, taking advantage of strengthening
investor interest in retail across the
UK to rebalance our portfolio. as
our 2010 development programme
concludes we have been replenishing
our development pipeline. We remain
confident that our chosen sector
focus will deliver outperformance
over the medium term, although our
outperformance against benchmarks
may narrow in the short-term as
a result of strengthening investor
demand in secondary property and
other sectors. as investor appetite
intensifies we will remain disciplined
in our investment approach.”
our strategy for investing in the right
places is outlined on pages 18 to 23.
tim roberts commented,
“We are now well advanced
on our 2010 development programme
and have achieved considerable letting
success. reducing the risk exposure
on this programme has provided
us with the confidence to commit
to further developments, including
the residential-led clarges estate
on Piccadilly, and we are continuing
to progress opportunities to further
replenish our pipeline. We are
conscious of the prospect of rising
construction costs in evaluating
these opportunities. the balance
of these risks is managed within
overall development exposure
metrics which are monitored
across the organisation.”
for more on our development
programme, see page 19.
chris grigg commented,
“our expert people are a key
asset and their decisions and actions
drive our performance. We remain
confident in our appeal as an employer
but are conscious that competition
for the best people is escalating in
our industry, mirroring the increased
level of investor activity. We were
pleased to appoint an Hr Director
and launch a new Hr strategy in the
year to continue to improve our
attractiveness as an employer and
our capacity to develop our staff.
our high level of staff engagement
was recognised by the award of a
one star rating in the sunday times
Best companies to Work for survey.”
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
strategic rePort
key
CHAnge FRom LAST YeAR
risk exposure has increased
no significant change in risk exposure
risk exposure has reduced
risks and iMPacts
HOw we Manage tHe risk
MOveMent in tHe PeriOd
internal risks
incOMe
sustainability
We must be mindful of maintaining
sustainable income streams in order
to continue to generate returns for
our shareholders and provide the
platform from which to grow the
business through development and
capital appreciation.
We consider sustainability of our
income streams in:
execution of investment strategy
and capital recycling, notably timing
of reinvestment of sale proceeds;
We monitor our market letting exposure including
vacancies, upcoming expiries and breaks and
tenants in administration as well as our weighted
average lease length.
We undertake comprehensive profit and cash
flow forecasting incorporating scenario analysis
to model the impact of proposed transactions.
We perform rigorous occupier covenant checks
and review these on an ongoing basis so that
we can be proactive in managing exposure
to weaker occupiers.
We are proactive in addressing key lease breaks
nature and structure of leasing
and expiries to minimise periods of vacancy.
activity; and
nature and timing of asset
management and development
activity.
responsible executives:
charles Maudsley, tim roberts
strategic focus:
CUSTOMER
ORIENTATION
We have a diversified occupier base and monitor
concentration of exposure to individual occupiers
or sectors.
We actively engage with the communities
in which we operate, as detailed in our
community charter, to ensure that we provide
buildings that meet the needs of all relevant
stakeholders.
caPital
structure –
executiOn
We must maintain a capital structure
which recognises the balance
between performance, risk and
flexibility.
We set the ltV range to reflect the strength
of our portfolio and the longevity of our cash
flows, management of our debt book and our
refinancing risk.
gearing magnifies returns both
We monitor our ltv on an ongoing basis and
positive and negative.
manage gearing levels over the cycle.
an increase in the gearing level
increases the risk of a breach of
covenants on borrowing facilities
and may increase finance costs.
We manage our investment activity, which
can be lumpy, as well as our development
commitments, to ensure that we will remain
within an appropriate range of ltV.
finance
strategy
executiOn
responsible executive:
lucinda Bell
strategic focus:
CAPITAL
EFFICIENCY
We must be judicious in the
management of our financing as our
strategy here addresses risks both
to our continuing solvency and the
stability of our profits.
failure to manage the refinancing
requirement may result in a shortage
of funds to sustain the operations
of the business or repay facilities
as they fall due.
this and a breach of financing
covenant limits are considered to
be the most significant risks to the
continuing operation of British land
as a going concern. see page 72
for further consideration of going
concern.
responsible executive:
lucinda Bell
strategic focus:
CAPITAL
EFFICIENCY
We have five key principles guiding the financing
of the group which together are employed to
manage the risks in this area: diversify our sources
of finance, maintain liquidity, extend and stretch
maturity of debt portfolio, maintain flexibility,
maintain strong balance sheet metrics.
see page 57 for further details.
We closely monitor the period until refinancing
is required, which is a key determinant of financing
activity, and use scenario modelling tools to
evaluate the likelihood of covenant breach.
We are committed to maintaining and enhancing
relationships with our key financing partners.
We closely monitor relevant emerging regulation
which has the potential to impact the way that
we finance the group and to introduce operating
constraints.
as with other regulatory and public affairs
matters which impact us, we engage with
government and other industry participants
to influence the debate.
charles Maudsley commented,
“in a challenging market, we have
demonstrated the enduring appeal of
our retail properties with lettings above
erV, footfall above benchmarks and
improving occupancy throughout the
year. We are investing further in our
properties, including with the provision
of wi-fi and increased food and
beverage options, to ensure that they
continue to meet the evolving needs
of our occupiers and their customers.”
tim roberts commented, “occupier
demand across our office portfolio is
robust, supported by the increasingly
diverse range of occupiers which our
buildings appeal to. nowhere is this
better demonstrated than at regent’s
Place where 10 Brock street was fully
let within three months of completion
to a broad range of occupiers including
Debenhams, facebook, Manchester
city football club and Whitefoord llP.”
for more on how we manage our
portfolio, see pages 24 to 25.
lucinda Bell commented,
“During the year, our ltV has
been in the lower half of our range as
we successfully invested the proceeds
from our March 2013 placing, sold
retail assets and benefited from
valuation increases. as values
increase, we will continue our rigorous
assessment of the appropriate ltV,
which may fall below 40%, and will
not gear up on market yield shift.”
for more on our financial policies,
see pages 56 to 58.
lucinda Bell commented,
“We were again successful
in raising finance from a range
of sources in the year including
unsecured corporate facilities and
a Us Private Placement. the attractive
terms of these arrangements mean
that we continue to operate an efficient
debt book which provides both
flexibility to effect our property
investment activity and, in conjunction
with our hedging policy, stability
of financing costs.”
for more on our financial policies,
see pages 56 to 58.
41
The British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
corPorate resPonsiBility
at BritisH lanD
our customers and their stakeholders prefer
efficient, modern places, which are integrated
well into the surrounding area and are
often developed in collaboration with local
communities. this enhances people’s daily
lives at work, at home or out shopping. these
places also benefit from the actions we take
to future proof against physical risks caused
by increased flooding and rising temperatures.
at British land, we have worked very hard
to ensure that corporate responsibility is
integrated into our business, with social,
environmental and ethical factors considered
and managed at every level. that is why,
this year, we have integrated corporate
responsibility information throughout this
report, reflecting how we not only create
value for our investors but make a broader
contribution for our other key stakeholders
and the society in which we operate.
our size and substance demand a responsible
approach to business. across all our activities,
we take great care to try to ensure that our
impacts are positive, for our occupiers, local
communities, investors, suppliers and the
wider environment.
our properties attract over 300 million visits
each year and are places where almost 100,000
people work or live. through our five-year
development programme, we are supporting
a further 32,300 jobs, fuelling growth and
engaging with local communities. We work
with our supply chain to create apprenticeships,
giving people the chance to learn while they
earn at our assets, at the same time as
developing the workforce of tomorrow for our
sector. our community programme also stands
out for the high level of staff involvement, with
over three quarters of our people volunteering
this year.
in addition, we work closely with our supply
chain to manage carbon emissions and other
environmental impacts at our properties and
developments. i continue to be pleased with the
substantial reductions we have achieved in
landlord-influenced energy costs for occupiers.
this reflects the way we run our business, with
our customer orientation and environmental
emphasis.
We identify the social, environmental and
ethical issues that matter most by working
with people across the business, engaging
with external stakeholders, consulting experts,
reviewing best practice, benchmarking our
performance, monitoring the external context
and carrying out risk assessments. this year,
750 stakeholders completed an online survey
exploring social and environmental issues
related to our business, over 100 experts
appraised our approach to carbon and energy
management, and many participated in
independently facilitated workshops on
key social and environmental issues.
Different stakeholders have markedly different
priorities and we need to strike a balance. so,
alongside our other stakeholder engagement
activities, our corporate responsibility Panel,
chaired by chris grigg, includes external
experts who provide market insights on
changing trends in their fields and challenge our
approach. through our corporate responsibility
committee, we then develop and implement
our strategy and monitor performance.
our long-term social and environmental
targets will conclude in March 2015. We have
made good progress on these during the year,
as detailed in our full Data report 2014.
During the coming year, we will continue to
focus on delivering these targets and will also
implement our supply chain plan to address
key social and environmental issues, notably
increasing our focus on human rights. We are
working with the Prince’s accounting for
sustainability Project to put sustainability at the
heart of business decision making, strategy and
reporting. areas that have proved challenging
this year that we will continue to focus on, both
directly and through our supply chain, include
local procurement and employment, renewable
energy in existing buildings and embodied
carbon on developments.
i look forward to working with our team
and expert partners to develop our strategy
further and set new long-term targets
in the coming year.
lucinda bell, finance director
chair of the corporate
responsibility committee
strategic rePOrt aPPrOval
the strategic report, outlined on pages
2 to 42, incorporates what we do, our portfolio,
places people prefer, chairman’s review,
chief executive’s review, business model,
markets, strategy, KPis, managing risks
and corporate responsibility.
By order of the Board
tony braine
company secretary
13 May 2014
dear sHareHOlder,
i am delighted to have taken the
lead for corporate responsibility
at British land, an area that
i have always been interested in.
it is in keeping with our mindset
that the person responsible
for finance is also responsible
for social, environmental and
ethical issues. our commitment
to these issues helps us to
create places people prefer, and
so to deliver long-term value.
corporate responsibility information
is integrated throughout this report.
Our strategy and carbon data
P22–23
risks
P38–41
the corporate responsibility committee
P65
ePra sustainability reporting
P174
for more detail on our strategy
www.britishland.com/responsibility
for more detail on our performance
www.britishland.com/crdata
42
Strategic reportThe British Land Company PLC Annual Report and Accounts 2014
PerforMance reVieW
Business review
Portfolio review
retail and leisure review
office and residential review
financial review
financial policies and principles
44
47
49
51
56
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
2
–
4
2
P
e
r
f
o
r
m
a
n
c
e
r
e
v
i
e
w
4
3
–
5
8
g
o
v
e
r
n
a
n
c
e
a
n
d
r
e
m
u
n
e
r
a
t
i
o
n
5
9
–
1
0
8
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
1
0
9
–
1
8
0
43
The British Land Company PLC Annual Report and Accounts 2014
BUsiness reVieW
Portfolio oVerVieW
uk POrtfOliO valuatiOn
£11,951m
tOtal PrOPerty return
14.2%
erv grOwtH
3.0%
caPital return
8.9%
lettings/renewals versus erv
6.3%
OccuPancy rate
96.1%
lease lengtH tO first break
10.3 years
grOss investMent activity
£1,970m
cOMMitted develOPMents caPex
£227m
acquisitiOns
£1,033m
disPOsals
£710m
Overview
Until this year, the UK property market has been
sharply polarised between the london market,
which emerged from the recession sooner and
saw significant inflows of international capital,
and the rest of the country. over the past year,
increasing confidence in the outlook of the UK
economy and increased availability of debt
has benefited the broader UK property market.
nevertheless, london continued to generate
the strongest total returns reflecting improving
occupational demand and continued strong
investment flows.
our portfolio performed strongly during the
year as we benefited both from actions we
have taken this year and in previous years and
from rising markets. our investment activity
during the year was materially accretive to our
property performance, notably the investment
of our March 2013 equity placing along with
our retail recycling where we have been taking
advantage of market strength to sell more
mature properties. We also continued to
benefit from our decision in 2010 to commit
to a £1.5 billion development programme,
focused on london. along with more recently
committed projects, our developments
contributed a third of our valuation uplift.
today, london and the south east accounts
for 61% of our portfolio on a pro forma basis
(including the estimated completed value of
committed and near-term developments), up
from 50% four years ago. on the same basis,
within london, the West end now accounts for
60% of our offices business, up from 35% four
years ago. We continue to have a substantial
uk POrtfOliO PerfOrMance
pipeline of developments, both near and
medium-term, focused on london. our UK
retail portfolio, comprising 53% of the total
portfolio, focuses on the best environments
where people choose to spend their time and
retailers want to be.
overall our UK portfolio generated a total
property return of 14.2%, made up of an income
return of 4.9% and a capital return of 8.9%.
We continued to outperform the iPD
benchmarks, by 60 bps on total returns and
140 bps on capital returns.
the value of our UK portfolio increased by
8.3% to £12.0 billion with a 6.6% uplift in our
investment portfolio and a 20.9% uplift from
developments. our investment portfolio
was a more important contributor to portfolio
performance than in recent years, driven
by a combination of tightening market yields
and our asset management activity. the
performance of our office and residential
portfolio was particularly strong up 14.5%
over the year reflecting the strength of the
london markets along with our development
programme. our UK retail performance
continued to improve with a valuation uplift
of 4.4% with an acceleration in performance
in the second half of the year.
there was a marked improvement in rental
values across our UK portfolio which were 3.0%
ahead (2013: 1.0%). this compares with growth
of 1.7% for the property market as a whole. at
31 March 2014, our portfolio net equivalent yield
was 5.5% compared to 6.4% for the market.
year ended 31 March 2014
retail and leisure
offices and residential
total
valuation uplift
valuation
£m
6,852
5,099
11,951
investment
portfolio
%
developments
%
Total
portfolio
%
4.4
11.4
6.6
2.2
22.3
20.9
4.4
14.5
8.3
44
performance reviewThe British Land Company PLC Annual Report and Accounts 2014
investMent activity
the gross value of our investment activity since
1 april 2013, as measured by our share of
acquisitions, disposals and capital investment
in developments was £2.0 billion.
again we were able to successfully access
transactions to grow our portfolio by taking
advantage of our financial flexibility and our
ability to source deals, move quickly and deal
with complexity. the majority of the acquisitions
we made during the year, including Paddington
central and southgate, Bath, were secured
off market. our acquisitions were focused on
both core income producing assets with good
growth prospects from asset management
and developments. overall, we completed or
exchanged £1,033 million of acquisitions, with
income generating properties adding annual
rental income of £46 million, with an average
net initial yield of 5.4%. this includes over
£100 million of potential development sites.
in UK retail, we continued to sell mature
assets where we believe the future returns
will be below our internal hurdle rates of
return. in offices and residential, the majority
of our disposals were residential units sold
after practical completion of our West end
developments. We also sold two of our
largest assets in continental europe in line
with our aim of exiting from that market, and
successfully outsourced the management
of the remaining assets. europe now accounts
for less than 1% of our total portfolio. overall,
disposals completed or exchanged raised
£710 million and were sold on an average
niy of 6.2% and at 4.2% ahead of book value.
acquisitiOns and disPOsals
from 1 april 2013
acqusitions
retail
offices
residential
total acquisitions
disposals
retail
offices
residential
europe
total disposals
Price
(gross)
£m
British Land
share
£m
Annual
passing rent
£m
604
499
51
502
499
32
1,154
1,033
507
30
142
281
960
391
30
142
147
710
24
22
–
46
26
1
–
9
36
45
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
BUsiness reVieW
Portfolio reVieW
continUeD…
develOPMent
in 2010, we committed to a major development
programme, to deliver 2.7 million sq ft of space,
principally in london. Well-timed to deliver high
quality offices along with high-end residential
units into a supply constrained london market
along with a number of retail projects, the
programme in total has generated £608 million
of profit to date with a further £45 million
estimated to come (based on valuers’
estimates). this is more than double the
estimate at the time we started the
programme, reflecting strong market growth,
leasing and pre-sales ahead of plan and
release of contingencies. the total estimated
annual rental value has increased from
£79.0 million to £85.0 million over the same
period. 76% of the space is already let or
under offer and 96% of the residential units
have been sold or are under offer.
We remain positive about the prospects for
development returns in london, so, as the
2010 programme has been completing, we
have been replenishing our development
potential both for the near-term and also for
our longer-term pipeline. We have already
committed to a number of new projects.
We will continue to manage our development
exposure within our self-imposed limit of
committed development being not more than
15% of our investment portfolio and for our
exposure to the london residential market
to remain below £500 million (total cost net
of pre-sales).
During the year, the purchase of development
sites, mainly at Paddington central and our
agreement with the city of london corporation
to become their development partner on
Blossom street, shoreditch added 1.1 million
sq ft to our pipeline. this brings total
development opportunities acquired over the
last two years to 1.6 million sq ft. We obtained
planning permission on 1.0 million sq ft of
office, residential and retail development
during the year.
as a result of our activity, despite completing
over 1.2 million sq ft of developments this
year, we have 2.5 million sq ft of committed
development under construction. We have
contracted 77% of the costs of our committed
developments. excluding projects which are
due to complete over the next year, principally
5 Broadgate and the leadenhall Building,
we have 43% of our costs contracted.
We have a further 719,000 sq ft in our near-
term pipeline which are projects we could
commit to over the next year to eighteen
cOMMitted and near-terM develOPMent PiPeline
months. as we complete further projects,
and the outlook for the market remains
positive, we anticipate committing to more
development in the coming year, including
4 Kingdom street, Paddington. if we were
to commit to all these projects over that time
frame, our total capital commitment, including
land, would be £1.2 billion with an anticipated
profit to come of around £300 million. in terms
of capital commitment, the majority of our
recently committed projects are london
residential, the most significant of which
is the residential element at clarges Mayfair.
further out, we have a number of potential
development projects primarily in up and
coming areas of london and including mixed-
use schemes.
More details on the portfolio, property
performance, individual developments and
assets acquired during the year can be found
in the retail and leisure and offices and
residential reviews on pages 47 to 50 and
in the detailed other information on pages
166 to 173.
Sq ft
’000
1,354
1,315
2,669
21
1,232
1,253
2,547
719
Current
value
£m
897
516
1,413
5
417
422
933
79
Cost to
complete
£m
19
92
111
–
335
335
427
351
British Land share
eRv
£m
46.9
38.1
85.0
0.3
17.2
17.5
55.3
Pre-let
eRv
£m
Residential
end value
£m
Pre-sold
residential
£m
29.1
28.2
57.3
0.3
6.7
7.0
34.9
165
–
165
–
664
664
664
143
–
143
–
5
5
5
at 31 March 2014
completed
Under construction
total 2010 programme
completed
Under construction
total recently committed
total committed
total near-term pipeline
46
performance reviewThe British Land Company PLC Annual Report and Accounts 2014
BUsiness reVieW
retail anD leisUre reVieW
Market Overview
the tentative signs we saw of an improving
UK retail market at the beginning of 2013
have strengthened over the last 12 months,
underpinned by better than expected economic
growth and growing consumer confidence.
retailers have become noticeably more
confident not only in the outlook for the market
but also the role that physical space will play
in their omni-channel strategies. While appetite
for high quality space in the best locations has
improved, retailers continue to reduce their
exposure to more secondary locations which
in many cases are becoming functionally and
economically obsolete. rental values in more
secondary locations continued to decline
while prime rental values rose modestly.
there was a marked improvement in the retail
investment market, particularly in the second
half of the year, reflecting increased interest
and demand from a broad range of domestic
and international investors including sovereign
Wealth funds. the volume of transactions
during the year was significantly higher than
the prior year with yields across the retail
market tightening, particularly on secondary
assets where the greater volume of
transactions took place. Market evidence
for prime remained limited given the scarcity
of available product, with owners reluctant
to sell, and yields were more stable as a result.
We continued to actively reposition and
upgrade our portfolio focusing on preferred
destinations for both retailers and shoppers
through investment in our existing properties
and through recycling. this brings the total
investment in the business over the last four
years to £1.5 billion (acquisitions and capital
spend) with £0.8 billion of disposals, being
mainly smaller properties.
POrtfOliO PerfOrMance
our retail and leisure portfolio grew in value
to £6.9 billion, a 4.4% uplift over the year.
Performance was driven by yield compression
(26 bps), reflecting the significant improvement
in the retail investment market, complemented
by our asset management actions. the portfolio
continued to outperform the market, by 40 bps
on a capital returns basis, although not at the
same level as previous years, reflecting the
improvement in secondary asset valuations,
particularly in the second half. there was
a particularly strong performance from our
department stores and leisure portfolio,
with yield compression driven by appetite for
fixed uplift backed income. our retail parks,
shopping centres and superstores also
benefited from positive rental growth but with
lesser yield compression due to a relative lack
of transactional evidence. this was particularly
the case for superstores with open-market
rent reviews.
our occupational metrics improved further
during the year reflecting the strength of our
offer. With good demand our portfolio is now
virtually fully let with occupancy ahead of
March 2013 by 110 bps to 98.5%. there was
a notable reduction in units in administration
down from 0.9% to 0.1% of total rent as we
successfully let up units previously in
administration. footfall improved over the
second half of the year, up 1.2% and was
broadly flat over the year. We significantly
outperformed the market where footfall was
down 2.6% in the year. our retail erVs were
1.5% up compared with the market which was
flat. since the trough in June 2010, our rental
values have now grown by over 3.3% compared
with a fall of 1.0% for the market, reflecting
the ongoing polarisation between the
performance of the best space where retailers
want to trade and less attractive, more
secondary space. our like-for-like rental
income grew by 3.0%, in part benefiting from
the successful letting of units previously in
administration along with surrender premiums.
asset ManageMent
We had a stronger period for leasing with
higher levels of letting volumes and an
improvement in the breadth and quality of
occupiers and on enhanced terms, particularly
from fashion, home wares and leisure
operators. We continued to benefit from
retailers looking to take space in the best
quality locations. overall, we signed 1.7 million
sq ft of lettings and renewals across the
portfolio during the year, on average 4.9%
ahead of erV within the standing investment
portfolio. rent reviews were signed on average
5.0% above previous passing rent with
particularly good uplifts being achieved at
superstores, on average 11% ahead of previous
passing rent. although our portfolio is nearly
fully let and we see an improving outlook for
rental growth although given our high levels
of occupancy and no major developments
coming on stream, our overall leasing volumes
are likely to reduce through the coming year.
We currently have 273,000 sq ft of space
under offer at terms overall ahead of erV.
our asset management activities remained
focused on evolving and improving our
overall retail offer, attracting new and existing
occupiers to our properties, as well as
upgrading the physical environment and
expanding the range of services we offer.
our increased investment in consumer
surveys continued to provide valuable insights
and feedback.
47
charles Maudsley
Head of retail and leisure
POrtfOliO valuatiOn
(britisH land sHare)
£6,852m
tOtal PrOPerty return
10.7%
erv grOwtH
1.5%
caPital return
4.6%
lettings/renewals versus erv
4.9%
OccuPancy rate
98.5%
lease lengtH tO first break
11.3 years
retail and leisure
P20
More detail on british land properties
www.britishland.com/retail
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 BUsiness reVieW
retail anD leisUre reVieW
continUeD…
We leveraged our existing strong retail
relationships, signing five long-term deals each
with next and arcadia totalling 140,000 sq ft,
which for arcadia included two out of town
outfit stores. We also worked successfully with
retailers to expand new and existing formats,
for example opening first out of town stores for
Patisserie Valerie at fort Kinnaird retail Park;
and Joules and fat face at Whiteley.
Quality physical environments are becoming
increasingly important in creating the right
places. We undertook and committed to almost
200 capital projects during the year to improve
shop fascias and fit-outs and to refurbish and
extend our existing schemes. Major projects
completed during the year included the refit
of Debenhams flagship store in oxford street
and the creation of a new out of town store for
next Home & garden at camberley. We also
continued to expand our food and leisure offer
with 148,000 sq ft of deals signed with catering
and leisure operators. on our larger more
experiential assets we now have 9% of rent
from food and beverage, up from 8%.
our digital strategy is to enhance the occupier
and consumer experience at our retail
assets and is an integral part of the physical
experience, increasing convenience and
widening our reach. at the beginning of the
year, we signed a long-term deal with Bt to
provide free wi-fi on our shopping centres
and retail parks. We now have free wi-fi in
11 of our shopping centres and free wi-fi
hotspots at six of our major retail parks with
further rollout planned over the next six
months. along with our customer exit surveys,
this means we can monitor and improve the
experience of consumers, increasing dwell
time which will support our occupiers’ sales.
investMent activity
We continued to reshape our portfolio with
£953 million of gross investment activity across
our retail and leisure portfolio, including
investment in developments, since the 1 april
2013. We have taken advantage of the strength
of the investment markets to sell £391 million of
more mature assets and have invested both in
our existing portfolio and in acquisitions where
we believe we can generate higher returns.
our largest disposals during the year
included eastgate shopping centre, Basildon;
Bon accord shopping centre in aberdeen;
and st James’ retail Park, northampton.
We also sold seven smaller retail parks and
six small food stores. on average these sales
were 2.4% ahead of book value. Post the year-
end, we sold cwmbran retail Park for a net
initial yield of 6.4%.
48
We made £502 million of acquisitions over
the period. this included a 50% interest in
southgate, the main shopping destination
in the centre of Bath, for £101 million, reflecting
a fully let yield of 5.7%. the acquisition price
was significantly below the original sum
invested in constructing the newly built
430,000 sq ft, prime open air retail scheme.
With a large and affluent catchment and an
impressive occupier line up, the scheme has
a high annual footfall of around 18 million
visitors. it is anchored by Debenhams, H&M,
topshop and Boots and has attracted several
new, high profile retailers to the city including
Hollister, apple, Urban outfitters, all saints
and superdry.
We increased our ownership of Hercules
Unit trust (HUt) from 41.2% to 59.8% through
the purchase of £154 million of units since
the beginning of the year. on an average 4.2%
below naV, this represents an effective net
initial yield of 6.0% (based on actual acquisition
costs). this investment increased our share
of gross assets by £262 million, reflecting the
discount to naV and the leverage within the
HUt structure. HUt is the UK’s largest
specialist retail park property unit trust with
a portfolio totalling £1.5 billion. We believe
that HUt’s portfolio is well positioned from a
development perspective and to take advantage
of the projected growth in click and collect
which is increasingly a core component of
retailers’ strategies. We remain the property
manager of the HUt assets.
We also acquired a 26% equity interest
in a portfolio of sainsbury’s superstores for
£83 million, at a reversionary yield of 5.7%.
Held in a geared structure, the portfolio
consists of 26 high quality superstores in
affluent areas primarily in the south east.
all rental income until maturity will be used
to pay interest on the bonds and partially
amortise the securitised debt. at maturity it
is anticipated that the superstores will either
be refinanced or sold to repay the outstanding
debt. We expect to generate attractive returns
from the investment and have already seen
an uplift of more than 10%. this investment
should be viewed in conjunction with the sale
of smaller food stores within an overall
objective of focusing our superstore portfolio
on the highest quality locations.
over the coming year, we expect to make
further disposals. We currently have over
£150 million of properties either under
offer or in the market.
develOPMent
We have completed nearly 700,000 sq ft of
developments over the last year including the
305,000 sq ft old Market scheme in Hereford
shortly after the year-end.
our largest development completion was at
Whiteley shopping in Hampshire, where we
opened a new 321,000 sq ft retail and leisure
shopping scheme in May 2013. combining the
configuration, set up and experience of high
quality shopping centres and the accessibility
and convenience of retail parks, Whiteley
shopping has quickly become the preferred
destination for retailers and consumers in the
area, attracting over 4 million shopper visits
since opening. Whiteley shopping is over 96%
let to a strong mix of prominent national retail
brands including yo! sushi, Wagamama, fat
face and Joules. in april 2014, it won the icsc
european shopping centre new Development
award 2014 and is rated BreeaM excellent
for sustainability.
in september, we opened a 46,000 sq ft leisure
extension at our existing asset at glasgow fort
shopping Park. the development was fully
pre-let to a multiplex Vue cinema and 24,000
sq ft of restaurant space let to tgi friday’s,
Prezzo, Harvester, chiquito and Pizza express.
since opening, the glasgow fort has seen
significant uplifts in footfall, dwell time and
average consumer spend.
Post the year-end, we completed our 305,000
sq ft retail and leisure development in the
centre of Hereford. it is already 96% let/under
offer with a strong line-up of fashion retailers
including H&M, fat face, next, outfit and an
85,000 sq ft Debenhams, the city’s only
department store. leisure, comprising a multi-
screen cinema along with seven restaurant
and café units, accounts for 21% of the scheme
creating an evening economy and extending
the centre’s trading hours.
We have recently committed to 372,000 sq ft
of new development primarily focused on
upgrading and extending our existing assets,
and increasingly our food and leisure offer, to
improve the overall environment. this includes
leisure extensions at Whiteley shopping; fort
Kinnaird, edinburgh; and Broughton Park
in chester. We are also on site building a new
next Home and garden at Meadowhall and
a major extension to glasgow fort anchored
by an 80,000 sq ft M&s.
performance reviewThe British Land Company PLC Annual Report and Accounts 2014
BUsiness reVieW
office anD resiDential reVieW
Overview
london retained its position over the year as
the property market of choice reflecting its
ongoing global attractions as a place to work,
live and visit. More domestic and international
businesses are choosing to locate in london,
drawing on its highly skilled workforce and
quality working environments. More people
want to live in london closer to where they
work or with shorter commute times. our
increased investment in london has positioned
our business well to take advantage of both
the present market strength and longer-term
trends, serving the changing needs of its
growing population. accordingly, we are
focused on mixed-use campuses with strong
transport connections which include retail
and residential elements. these great working
environments are increasingly important
in attracting and retaining the best people –
not just good buildings to work in – but places
to live, shop and enjoy leisure time.
the london property market had a strong year.
although the economic recovery started to
take hold across the UK, london continued to
outpace the regional markets, with all sectors
performing strongly – offices, retail and
residential – and with the second half noticeably
stronger than the first. in the prime residential
market in london, where our residential
development is focused, international investors
remained active although price increases
were generally lower than in recent years.
the office market saw continued strong
investment flows driven both by international
investors along with the re-emergence of
domestic investors. this strong investor
demand led to prime office yields tightening
further. occupationally, after two years of more
subdued demand, the leasing market was
markedly busier, particularly in the second
half with occupiers more willing to look
in a number of different submarkets across
london to find the right quality of space.
tMt and insurance occupiers remained the
most active but there was also increased
take-up from other sectors, notably financial
services. overall, letting activity in central
london was around 50% ahead of the previous
year. With little new supply coming onto the
market, vacancy rates declined, particularly
for high quality, grade a space. accordingly,
rents grew across london with growth
in prime headline rents of 10% along with
a reduction in incentives.
our West end portfolio was up by 16.6% and
the city by 11.8%. the portfolio produced a
total property return of 19.4%, with our offices
outperforming the iPD sector benchmark
by 80 bps.
in offices, our standing investments
contributed around 60% of the uplift driven by
a 40 bps compression in yields along with asset
management. erVs were 5.8% ahead with a
7.9% increase in the city reflecting improving
market conditions and increased opportunity
from potential refurbishments. our office and
mixed-use development programme continues
to deliver strong returns, generating profits
of £252 million over the year, and a valuation
uplift of 23.0%. this uplift was driven by a
combination of factors including pre-lets signed
ahead of erV, profit release as we complete
our 2010 london development programme,
and improving market conditions. our stand-
alone residential portfolio was up 15.4% driven
primarily by increased sales values.
asset ManageMent
the strengthening occupational market was
reflected in our leasing activity during the
year. We signed 632,000 sq ft of lettings and
renewals across our investment and
development portfolio with investment lettings
and renewals at an average of 8.4% above erV.
our activity was primarily focused on new
lettings with 289,000 sq ft of deals signed
in our investment portfolio and 237,000 sq ft
of development lettings.
We continued to see healthy demand across
our portfolio from a range of occupiers from
financial and professional services through
to media, retail and technology companies,
not only attracted by the quality of our buildings
and built environments, but also our high levels
of customer service. We were particularly
successful in tapping demand from the
growing technology and media sectors and the
insurance sector which represented 51% of
lettings. Driven by our leasing success, our like-
for-like occupancy was 190 bps ahead, although
overall it is lower at 92.1% reflecting our newly
completed West end developments moving
into the investment portfolio. Post our year-
end, we have seen an increase in occupier
interest across our portfolio with over 150,000
sq ft of space let or under offer on attractive
rental terms. our vacant space is virtually all
new grade a accommodation, so we feel
positive about the letting prospects in a
strengthening occupational environment.
POrtfOliO PerfOrMance
our offices and residential portfolio is well
positioned to benefit from the strengthening
london market and our greater exposure to up
and coming areas. the value of our portfolio
grew by over £1.2 billion to £5.1 billion reflecting
both the investments made during the year
along with a 14.5% overall uplift in valuation;
We made significant progress with the on-
going re-positioning of our office-led campuses
and strengthening of their income profiles. at
regent’s Place, we completed our 505,000 sq ft
office and residential development, 10–30
Brock street. We continued to see strong
demand for both the offices and residential
units. as a result, all the office space at
49
tim roberts
Head of offices and residential
POrtfOliO valuatiOn
£5,099m
tOtal PrOPerty return
19.4%
erv grOwtH
5.8%
caPital return
15.5%
lettings/renewals versus erv
8.4%
OccuPancy rate
92.1%
lease lengtH tO first break
8.4 years
Office and residential
P21
More detail on british land properties
www.britishland.com/offices
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 BUsiness reVieW
office anD resiDential reVieW
continUeD…
10 Brock street, which is the largest of the
buildings, was let within three months of
practical completion to a strong and diverse
range of occupiers including facebook and
Manchester city football club achieving a new
rental high on the campus of £71 per square
foot. this added £18.8 million of annual rent
on a weighted average lease of 15.7 years.
98% of the residential units at 20 Brock street
have been profitably sold or are under offer.
the Brock street development has completed
regent’s Place, a vibrant 2 million sq ft mixed-
use campus where around 15,000 work and
live. With an occupancy of over 98%, it is well
served by major transport links, and is
enhanced by restaurants, shops, a health
club, a theatre, art studios, a children’s
nursery and landscaped open space.
at Paddington central, which we acquired in
July, we have let or put under offer 35,000 sq ft,
at terms ahead of our acquisition assumptions,
bringing occupancy on the campus to 94.2%.
We are confident that we will further improve
occupancy. We are also looking to improve
on the existing planning consents at 4 and
5 Kingdom street (see following development
section) and public space in addition to works
to the entrance of the campus and an
introduction of a greater variety of uses and
occupiers.
Broadgate is our largest campus with almost
4 million sq ft of office, retail and leisure space.
We have a strong vision of how Broadgate will
develop as a vibrant mixed-use environment
in the heart of the city and expect it to benefit
from its position around one of london’s
most important transport hubs and from the
completion of crossrail in 2018. in December,
we signed a joint venture agreement for
Broadgate with gic, the investment arm of
the government of singapore, following their
purchase of Blackstone’s 50% stake. as one
of our largest shareholders and with a long
history in direct real estate investment, we
look forward to working with them to deliver
our vision.
We continued to make good progress both
on our near-term and long-term plans at
Broadgate. at 199 Bishopsgate, a building we
recently fully refurbished, we let a further
63,000 sq ft of space, so the building is now
56% let. We signed over 89,000 sq ft of lettings
on space surrendered by UBs at 1 and
2 Broadgate. these lettings tie in with the
extension we signed with icaP last year,
enabling us to review options for refurbishment
or redevelopment of the whole building in 2019.
in the near term, activity is centred around
Broadgate south, where we are developing
a new office for UBs at 5 Broadgate, alongside
a full redevelopment of Broadgate circle,
to provide a more vibrant retail and restaurant
offer (see development section). the next
50
phase will include a major refurbishment
of 100 liverpool street, which will be well
timed to benefit from the advent of crossrail,
and more widespread improvements to the
surrounding area. We are working up a scheme
and aim to put in a planning application by the
end of financial year 2015.
our sales activity was primarily focused on the
residential development programme both within
our mixed-use and residential-led schemes
where we have continued to actively recycle
capital and crystallise development profits.
During the year we sold a further £41 million
of residential units 31% ahead of book value.
investMent activity
our strategic aim has been to grow the level
of investment in london through acquisitions
and development. We invested £531 million
in attractive, mainly off-market acquisitions,
not only adding core income to the portfolio
but also replenishing the development pipeline.
at £470 million, Paddington central, an office
led campus in the West end, was our most
significant acquisition and our largest since
2005. acquired on a net initial yield of 5.3%
rising to 6.2% once fully let, the campus
comprises 610,000 sq ft of income generating
properties along with 355,000 sq ft of
consented space at 4 and 5 Kingdom street
and an additional 80,000 sq ft of potential
development. this acquisition increases our
exposure to an up and coming part of the West
end market which is expected to benefit from
the opening of crossrail. as our success at
regent’s Place demonstrates, this is an asset
which plays to all of our strengths in managing
large mixed-use schemes in london, delivering
value through well-planned asset management
and development. it is still early days, but we
are confident we can deliver significant value
at Paddington central.
We also entered into an option agreement
with the city of london corporation for the
re-development of Blossom street, shoreditch,
further increasing our near-term development
pipeline and broadening our access to
occupiers in the vibrant and growing tMt
sector. Blossom st comprises three sites
covering 2 acres fronting onto shoreditch High
street just north of the core city of london
market, and which will be close to the new
liverpool street crossrail station. the sites
have potential for around 320,000 sq ft of
office, retail and residential accommodation
in a mix of new, retained and refurbished
buildings. We have the option to draw down
a development agreement, subject to securing
revised planning consent on the sites,
and on practical completion will be granted
a long leasehold interest in the sites.
During the year, we achieved planning consent
on, and consequently also completed the
purchase of aldgate Place, a potential 365,000
sq ft residential development programme.
We have committed to Phase 1 at aldgate
Place, a joint venture with Barratt Homes,
in a fast changing area close to the city
for 220,000 sq ft of residential including
154 private units.
develOPMent
Within our 2010 development programme,
the office space is now 73% let or under offer
with a weighted average lease length of
15.9 years. Having sold 114 units and with
a further three under offer, we now have 96%
sold or under offer. We also have a significant
pipeline of potential development projects
both from sites we have acquired in the last
two years and from within our existing portfolio.
over the year, we completed 820,000 sq ft of our
West end developments including 10–30 Brock
street; 10 Portman square; Marble arch
House; and 39 Victoria street, generating an
overall profit on cost of over 65%. in the city,
the leadenhall Building is on track to reach
completion in the summer. We were pleased
with our recent letting of level 30 to servcorp
on a rent of £72.50 psf and with a further 13,500
sq ft under offer, we remain positive about
the letting prospects for the remaining upper
and smaller floor plates. 5 Broadgate was
successfully topped out at the end of March
and will be ready for UBs to take delivery
of the building in early 2015 subject to fit-out.
We made good progress on our recently
committed development projects having
secured planning for clarges Mayfair,
yalding House and residential schemes at
the Hempel and aldgate Place. the majority
of this development is residential and we
will limit any future residential development
until we have made further inroads with
our forward sales. although it is early days,
we are seeing encouraging levels of interest.
Demolition is progressing at clarges Mayfair
with construction expected to start early
in the summer. following a successful planning
application we also committed to yalding
House, a refurbishment of 29,000 sq ft of
office space in the West end and have recently
started on site.
in terms of our near-term pipeline, we are
progressing with planning to put ourselves
in the position to be able to start as early as
possible, while retaining the optionality on
whether to commit. at Paddington, we have
made improvements to the design of 4 Kingdom
street and anticipate being on site by the end of
the year. on 5 Kingdom street, as part of a wider
master planning exercise for the whole campus,
we are looking to resubmit planning for an
improved, larger scheme next year. at Blossom
street, shoreditch, we have appointed four
architects to develop the design and we expect
to submit a planning application in the autumn.
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 financial reVieW
2014 was another active
year for British land as
we continued to deliver our
strategic objectives both
driving strong results during
the year as well as building
more growth and opportunity
into our portfolio for tomorrow.
lucinda bell
finance Director
accOunting return
20.0%
net asset value Per sHare
688p
dividend Per sHare
27.0p
net rental incOMe
£562m
underlying PrOfit befOre tax
£297m
underlying ePs
29.4p
ltv
40%
average weigHted interest rate
4.1%
new finance raised
£1.5bn
available facilities
£2.0bn
retail and leisure
P47–48
Office and residential
P49–50
More detail on british land properties
www.britishland.com/our-properties
51
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 financial reVieW
continUeD…
We generated total accounting returns of
20.0% for the year which was significantly
driven by our decisions and actions, not just
at the property level but also financially.
and here we benefited both from our capital
structure as well our ability to access
competitively priced finance. our naV, which
was up 15.4% at 688p, was driven by an 8.3%
increase in our valuation and our dividend was
2.3% ahead at 27.0 pence per share, in line with
our previous announcements. it is measure
of the Board’s confidence in the prospects
of the business that we are announcing our
intention to increase the dividend by 2.5%
for the 2014/15 financial year.
over the year we continued to develop our
financial and deal management and skills
both in pricing property risk and managing
complex situations. this enabled us to access
transactions with few other competitive
bidders. We successfully deployed the
proceeds of our March 2013 equity placing
ahead of the schedule we set ourselves.
this was accretive to our earnings and net
asset value performance during the year after
taking into account the dilutive effects of the
share placing. rental income from our 2010
development programme, where all of our
West end office projects completed during
the year, significantly offset the income we
have forgone through the sale of ropemaker
Place at the end of the 2013 financial year.
By selling more mature assets and investing
in ones with better long-term prospects, we
have deliberately given up near-term income
for longer-term total returns. this is likely
to continue as we further reshape our
retail portfolio.
Despite this significant activity, all our financial
metrics remain robust. our ltV is unchanged
over the year at 40%, at the bottom of our
range, and our average weighted interest rate
is lower at 4.1%. We have taken advantage of
improving debt markets to raise £1.5 billion of
new finance at competitive rates. this included
a £785 million revolving facility, our largest
single bank facility, with the lowest margin in
the last 7 years, which is a great example of
both our capabilities and the strength of our
banking relationships. our financing structure,
which is flexible and low cost, continues to
provide the business with the resources and
liquidity to deliver its strategy.
incOMe stateMent
The group financial statements are prepared
under iFRS where the after tax results of
joint ventures and funds are shown as a single
line item on the income statement, and the
net investment in joint ventures and funds
is shown as a single line on the balance sheet.
management reviews the performance of
the business principally on a proportionally
consolidated basis (i.e. on a line-by-line basis)
and comments on movements in the income
statement provided in the financial review
below are made on this basis. income
statements and balance sheets which show
British Land’s interests on this basis are also
included in Table A within the supplementary
disclosures (pages 159 and 160).
net rental income, including our share of joint
ventures and funds, increased by £21 million
to £562 million for the year (2013: £541 million).
the £690 million of investment in income
producing assets following the placing added
£31 million to full-year rent. this was offset
by a reduction of £26 million due to disposals
made in the last financial year, principally
ropemaker. all our West end 2010
developments completed during the year
and contributed materially to our income,
adding £13 million during the year.
incOMe stateMent
year ended 31 March
gross rental income
Property outgoings
net rental income
net financing costs
net rental income less finance
fees and other income
Joint ventures and funds underlying profit
administrative expenses
Joint ventures and funds underlying profit
underlying profit before tax
Underlying ePs
Dividend per share
2014
Joint
ventures
and funds1
£m
Proportionally
consolidated
£m
266
(14)
252
(123)
129
(6)
123
597
(35)
562
(202)
360
15
(78)
297
29.4p
27.0p
group1
£m
331
(21)
310
(79)
231
15
123
(72)
297
29.4p
27.0p
2013
Joint
ventures
and funds
£m
Proportionally
consolidated
£m
273
(13)
260
(126)
134
(4)
130
567
(26)
541
(206)
335
15
(76)
274
30.3p
26.4p
group
£m
294
(13)
281
(80)
201
15
130
(72)
274
30.3p
26.4p
1 2014 group and joint ventures and funds results are presented after elimination of HUt non-controlling interest.
52
performance reviewThe British Land Company PLC Annual Report and Accounts 2014
net rental income increased by 2.2% on a
like-for-like basis, adding £6 million. the retail
portfolio like-for-like growth was 3.0%, driven
by asset management initiatives and letting
of units which became void following prior year
administrations. lettings in the year increased
occupancy rates from 97.4% to 98.5%.
in offices, like-for-like rental income increased
0.4%, reflecting new lettings in the city offset
by the impact of lease extensions generating
long-term income streams.
net financing costs on a proportionally
consolidated basis were £202 million,
a decrease of £4 million compared to the prior
year. the sale of ropemaker and associated
swap close-outs reduced our interest charge
by £8 million and interest on completed West
end developments added £5 million. Underlying
profit before tax increased by £23 million,
or 8.4%, to £297 million. the increase in
underlying profit before tax is summarised
in the table below.
MOveMent in underlying
PrOfit befOre tax
year ended 31 March 2013
Placing investments
completion of 2010 developments
like-for-like rental income
Disposal of ropemaker
other movements
year ended 31 March 2014
£m
274
30
8
6
(18)
(3)
297
recycling was neutral to profits in the year,
despite being active in reshaping our retail
portfolio. We sold high yielding ex-growth
assets and invested in assets which offer
opportunity to add value through asset
management initiatives or development.
We have a competitive advantage with our
efficient operating model. our ePra cost
ratio (including direct vacancy costs) for the
year was 16.2% (2013:15.3%). this ePra metric
is substantially the same as the cost ratio the
group has previously presented. our ePra
cost ratio (excluding direct vacancy costs) for
the year was 13.9% (2013: 12.8%). the increase
was driven by the sale of ropemaker and
our continued investment in our people and
infrastructure.
Underlying profits from joint ventures and
funds for the year were £124 million. During
the year we increased our ownership of
Hercules Unit trust (HUt) to 58.6% as at
31 March 2014 and to 59.8% post our financial
year-end. as a result, HUt is treated as a
subsidiary and fully consolidated in British
land’s accounts, in line with international
accounting standards. this includes HUt’s
debt, all of which is non-recourse to British
land. We therefore now include 100% of its
results and financial position on a line by line
basis in the financial statements. a deduction
is then made for the equity in the subsidiary
not attributable to the group, i.e. the non-
controlling interest. the change in basis of
consolidation has had no impact on our KPis.
Underlying diluted earnings per share for the
year ended 31 March 2014 was 29.4 pence
(2013: 30.3 pence) based on underlying profit
after tax of £295 million (2013: £273 million) and
weighted average diluted number of shares of
1,004 million (2013: 901 million). as expected,
the relative dilution of ePs in the year is a
consequence of the sale of ropemaker at the
end of the prior year. the equity placing was
been accretive to earnings by 0.5 pence per
share in the current year after taking into
account of the additional shares in issue, ahead
of the target set at the time of the placing.
ifrs profit after tax for the full-year was
£1,116 million (2013: £284 million), including
£377 million from investments in joint ventures
and funds (2013: £67 million). in addition to
underlying profits, the most significant item
impacting ifrs profit was the net valuation
increase of £580 million for the group and
£258 million for our share of joint ventures
and funds.
annualised grOss rents
current passing rent
expiry of rent-free periods
fixed, minimum uplifts
2010 non-completed developments pre-let
recently committed developments pre-let
total contracted
Developments – 2010 committed developments to let
Developments – recently committed
Developments – near-term to let
investments – rPi and rent review uplifts
investments – letting of expiries and vacancies
Potential rent in five years
increase
casH flOw
net cash inflow from operating activities for
the year was £249 million on a proportionally
consolidated basis. the table below provides
a summary of the increase in ePra net debt
on the same basis for the year:
MOveMent in net debt
year ended 31 March 2014
opening net debt
investment acquisitions
Disposals
Development and other capital expenditure
net cash from operations
Dividend paid
other
closing net debt
£m
4,266
1,009
(592)
292
(249)
159
5
4,890
acquisitions absorbed £1,009 million,
significant purchases being the investment
of the placing proceeds at Paddington central
and the acquisition of southgate, Bath.
Disposals generated £592 million, with retail
recycling at Bon accord, aberdeen and
Basildon eastgate centre, in addition to the
sale of Puerto Venecia, Zaragoza.
£292 million was utilised on development and
capital expenditure, reflecting spend on our
committed development programme and
on replenishing the development pipeline.
We anticipate prospective development spend
of £399 million over the next three years on
our 2010 and recently committed development
programmes and £307 million on our near
term prospective programme. our investment
portfolio has strong rental growth potential
giving a platform for future growth which the
table below summarises:
Cash flow
basis
£m
Accounting
basis
£m
557
51
13
28
7
656
28
11
31
12
21
759
36%
584
25
5
614
23
9
25
12
18
701
20%
53
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
financial reVieW
continUeD…
current cash rent is £557 million with potential
to grow by around £200 million over the next
five years. We already have around £100 million
of further rent contracted and when fully let
the balance of the 2010 programme will add
£28 million to rents. recently committed
developments and the near term pipeline
should add a combined further £42 million
of rent. the investment portfolio benefits
from around 10% of rents being subject to rPi
and letting of vacancies will add £21 million.
dividends
the quarterly dividend was increased to
6.75 pence per share in the year, bringing the
total dividend declared for the current financial
year to 27.0 pence per share. this is in line
with the announcement made by the Board
in July 2013. the dividend paid in the financial
year was 26.7 pence (2013: 26.4 pence). the
fourth quarter dividend of 6.75 pence per share,
totalling £68 million was approved by the
Board on 13 May 2014 and is payable on
8 august 2014 to shareholders on the register
at the close of business on 4 July 2014.
the Board will announce the availability
of the scrip Dividend alternative via the
regulatory news service and on our website
(www.britishland.com), no later than four
business days before the ex-dividend date
of 2 July 2014. the Board expects to announce
the split between PiD and non-PiD income at
that time. in respect of the 2014 third quarter
dividend of 6.75 pence per share, totalling
£68 million, 30% of shareholders elected for
the scrip alternative in lieu of £48 million in
cash dividends. it is the Board’s intention that
for the 2014/15 financial year the dividend will
be increased 2.5% to not less than 6.92 pence
per share per quarter, reflecting confidence
in future cash flows.
balance sHeet
at 31 March 2014, ePra net asset Value per
share was 688 pence per share, an increase
of 15.4% compared to the prior year (2013:
596 pence per share).
at 31 March 2014, 40% of the property portfolio
and 41% of net debt was held within joint
ventures and funds. the ifrs balance sheet
shows our investment in joint ventures and
funds grouped together and shown net.
on this basis, our net investment at 31 March
2014 was £2,634 million, up from £2,463 million
at the previous year-end, reflecting the
increase in the property portfolio valuations
and our investment in developments.
MOveMent in ePra net asset
value Per sHare1
p
at 31 March 2013
Valuation movement
offices
retail
Developments
Underlying profit after tax
Dividends
other
at 31 March 2014
596
36
29
27
29
(27)
(2)
688
1 ePra net assets exclude the mark-to-market
on effective cash flow hedges and related debt
adjustments, as well as deferred taxation on
revaluations.
balance sHeet
Properties at valuation1
investment in joint ventures and funds
other non-current assets
other net current liabilities
net debt
other non-current liabilities
Joint ventures and funds’ net assets
ePra net assets
non-controlling interest2
ePra adjustments3
ifrs net assets3
ePra nav per share
group
£m
7,194
2,634
262
10,090
(191)
(2,877)
5
7,027
as at 31 March 2014
As at 31 march 2013
Joint
ventures
and funds
£m
Proportionally
consolidated
£m
4,846
12,040
(68)
194
4,778
(113)
(2,013)
(18)
2,634
12,234
(304)
(4,890)
(13)
7,027
371
(281)
7,117
688p
group
£m
5,554
2,463
76
8,093
(158)
(1,963)
(5)
5,967
Joint
ventures
and funds
£m
Proportionally
consolidated
£m
4,945
10,499
(23)
53
4,922
(116)
(2,303)
(40)
2,463
10,552
(274)
(4,266)
(45)
5,967
(280)
5,687
596p
1 includes european portfolio of £89 million and UK portfolio of £11,951 million.
2 the ePra net asset figures are presented after elimination of HUt non-controlling interest.
3 ePra net assets exclude the mark-to-market on effective cash flow hedges and related debt adjustments, as well as deferred taxation on revaluations.
it also includes trading properties at fair value and is diluted for the impact of share options.
54
performance reviewThe British Land Company PLC Annual Report and Accounts 2014
the 15.4% increase in ePra naV reflects the
8.3% valuation increase and is spread almost
equally across developments, offices and retail
and evenly split between the impact of our
actions and yield compression. standing
investment delivered 7% uplift, development
21%. the robust naV growth and increase
in the dividend in the year have translated into
a strong total accounting return for the year
ended 31 March 2014 of 20.0%.
net debt and financing
our balance sheet metrics remain strong.
net debt (ePra) at 31 March 2014 was
£2.9 billion for the group and £4.9 billion
including our share of joint ventures and
funds. the principal value of gross debt
excluding cash, short-term deposits and
liquid investments was £3.0 billion for the
group and £5.2 billion on a proportionally
consolidated basis. the strength of the
group’s balance sheet has been reflected
in British land’s senior unsecured credit
rating which remains rated by fitch at a-.
our weighted average interest rate at 4.1%
on a proportionally consolidated basis, is lower
than the previous year’s 4.6% and 4.2% at
30 september 2013. average debt maturity
has decreased from the prior year’s 9.9 years,
in part due to our choosing to draw on lower
cost facilities which are towards the end of
their agreed terms. the proportionally
consolidated ltV held at 40% at 31 March 2014
(40% at 31 March 2013), at the bottom of our
40 to 50% range.
financing statistics
full-year to 31 March 2014
ePra net debt1
Principal value of gross debt1
loan to value2
Weighted average interest rate of drawn debt
interest cover3
Weighted average debt maturity
We continue to achieve attractive financings
which improve liquidity. We have raised over
£1.5 billion of debt finance in the last 12 months,
on competitive terms from a broad range of
sources, adding further flexibility and term to
our already strong and well diversified debt
portfolio. Most recently, in april 2014, we signed
a £785 million unsecured revolving credit
facility with a syndicate of 14 banks at an initial
margin of 115 bps per annum. the facility has a
maturity of five years which may be extended to
a maximum of seven years on our request, and
on each bank’s approval for its participation.
at the end of March 2014, we drew down as
scheduled on the 12-year, £200 million UsPP
fixed rate notes, swapped to an effective floating
rate of 103 bps per annum over liBor, which
we had signed in august 2013. in May 2013 we
signed a £310 million unsecured revolving credit
facility, with an initial margin of 135 bps per
annum. all these unsecured borrowings
include our standard financial covenants.
British land has £2.6 billion of committed
banking facilities, including the £785 million
facility signed in april 2014, and £142 million
of cash and short-term deposits. of these
facilities, £2.3 billion have maturities of
more than two years.
We continue to manage our interest rate
exposure in accordance with our policy, and
currently an average 73% of projected net
debt (including our share of joint ventures
and funds) over the next five years is fixed.
this significantly mitigates the potential impact
of increasing interest rates, while retaining
valuable flexibility.
group
£2,877m
£2,990m
29%
3.5%
3.2
8.2 years
Proportionally
consolidated
£4,890m
£5,198m
40%
4.1%
2.5
8.7 years
1 group ePra net debt and principal value of gross debt presented after elimination of HUt non-controlling interest.
2 Debt to property and investments.
3 Underlying profit before interest and tax/net interest.
accOunting JudgeMents
in preparing these financial statements,
the key accounting judgement relates
to the carrying value of the properties and
investments, which are stated at fair value.
the group uses external professional
valuers to determine the relevant amounts.
the primary source of evidence for property
valuations should be recent, comparable
market transactions on an arms-length
basis. However, the valuation of the group’s
property portfolio is inherently subjective,
as it is made on the basis of assumptions
made by the valuers which may not prove
to be accurate.
reit status: the company has elected for
reit status. to continue to benefit from
this regime, the group is required to comply
with certain conditions as defined in the
reit legislation. Management intends that
the group should continue as a reit for the
foreseeable future.
accounting for joint ventures and funds:
an assessment is required to determine
the degree of control or influence the group
exercises and the form of any control to
ensure that financial statement treatment
is appropriate. interest in the group’s joint
ventures is commonly driven by the terms
of the partnership agreements which ensure
that control is shared between the partners.
these are accounted for under the equity
method, whereby the consolidated balance
sheet incorporates the group’s share of the
net assets of its joint ventures and associates.
the consolidated income statement
incorporates the group’s share of joint
venture and associate profits after tax
upon elimination of upstream transactions.
accounting for transactions: property
transactions are complex in nature and
can be material to the financial statements.
assessment is required to determine the
most appropriate accounting treatment of
assets acquired and of potential contractual
arrangements in the legal documents
for both acquisitions and disposals.
Management consider each transaction
separately and, when considered appropriate,
seek independent accounting advice.
lucinda bell
finance Director
55
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
financial Policies anD PrinciPles
We focus on having sufficient
competitively priced and flexible
borrowings available to deliver
our property strategy.
debt finance
the scale of our business combined with the
quality, security and stability of our rental
income means that we are attractive to a broad
range of debt providers and able to arrange
finance on attractive terms. good access
to the capital and debt markets is a competitive
advantage, both reducing our cost of funding
and allowing us to take opportunities when
they arise.
Debt financing involves risk from adverse
changes in the property and financing markets.
in arranging and monitoring our financing we
include important risk disciplines, ensuring
that relevant risks are fully evaluated and
managed. We choose the appropriate gearing
level and follow five guiding principles
explained on the opposite page that govern
the way we structure and manage our debt.
Managing risk
P36–41
gearing
in deciding our gearing level we weigh up the
potential increased returns obtainable from
greater leverage (through borrowing to buy
property) against the risks of having more
debt. We use a loan to value ratio (debt as
a percentage of the value of our assets, ltV)
to measure our gearing and settle on an
ltV range which reflects the strength of our
operational business and reliability of cash
flows, where we are comfortable that overall
returns will be enhanced without exposing
the group to undue risk.
our preferred ltV range is between 40% and
50% on a proportionally consolidated basis,
i.e. including our share of joint ventures and
funds. at 31 March 2014, this ratio was 40%.
from time to time we may fall below this
as a result of phasing of recycling activity or
valuation increases; we would not increase
leverage as a result of market improvements
in investment yields.
overall, and subject to transaction activity,
we aim to manage the level of gearing over the
property cycle such that when values are rising
from the low part of the cycle, ltV will be at a
higher level in the range, while when values are
around the high point of the cycle, ltV will be
in the lower level of the range. it is in the nature
of real estate that transactions are often large
in size which can cause significant movements
in ltV within our range.
56
We leverage our scale through joint ventures
and funds which are financed with debt,
in securitisations and loans, which are non-
recourse to British land. in doing so, the ltV
at 40% on a proportionally consolidated basis
is higher than the group measure for our
unsecured lenders, which is around 30%.
accordingly we can operate with a higher level
of gearing on a proportionally consolidated
basis without putting pressure on the British
land credit profile.
grOuP bOrrOwings
Unsecured financing for the group is raised
through: bilateral and syndicated unsecured
revolving bank facilities, most with terms of five
years; Us Private Placements with maturities
up to 2027; and the convertible bond maturing
in 2017.
secured debt is provided by debentures with
longer maturities up to 2035 at fixed rates
of interest.
unsecured borrowings
the same unsecured financial covenants apply
across each of the group’s unsecured facilities.
these covenants, which have been consistently
agreed with all unsecured lenders since 2003,
are:
net Borrowings not to exceed 175%
of adjusted capital and reserves; and
net Unsecured Borrowings not to
exceed 70% of Unencumbered assets.
cOvenant ratiO
2010
%
2011
%
2012
%
2013
%
2014
%
37
36
44
31
40
14
25
34
23
31
at 31 March
net borrowings
to adjusted
capital and
reserves1
net unsecured
borrowings to
unencumbered
assets2
Highest during the year to 31 March 2014:
1 43%; and
2 36%.
no income/interest cover ratios apply to these
facilities, and there are no other unsecured
debt financial covenants in the group.
the Unencumbered assets of the group, not
subject to any security, stood at £5.1 billion as
at 31 March 2014.
although secured assets are excluded from
Unencumbered assets for the covenant
calculations, unsecured lenders benefit from
the surplus value of these assets above the
related debt and the free cash flow from them.
During the year ended 31 March 2014, these
assets generated £44 million of surplus cash
after payment of interest. in addition, while
investments in joint ventures do not form part
of Unencumbered assets, our share of profits
generated by these ventures are regularly
passed up to the group.
secured borrowings
secured debt with recourse to British land is
provided by debentures at fixed interest rates
with long maturities and no amortisation.
these are secured against a single combined
pool of assets with common covenants; the
value of those assets is required to cover the
amount of these debentures by a minimum of
1.5 times and net rental income must cover the
interest at least once. We use our rights under
the debentures to withdraw, substitute or add
properties (or cash collateral) in the security
pool, in order to manage these cover ratios
effectively and deal with any asset sales.
Debentures without recourse to British land
and secured by specific properties comprise
two fixed rate debentures of £73 million in total.
borrowings in our joint ventures and funds
our joint ventures and funds are each financed
in ‘ring-fenced’ structures without recourse to
British land for repayment and secured on the
assets of the relevant entity, where gearing can
often be satisfactorily maintained at a higher
level than group debt.
external debt for these entities has been
arranged through long dated securitisations
or bank debt, according to the requirements
of the business of each venture.
Hercules Unit trust has term loan facilities
maturing in calendar years 2016 and 2017
arranged for its business and secured on its
property portfolios, without recourse to British
land. these loans include value and income
based covenants.
the securitisations of the Broadgate estate
(£1,765 million), Meadowhall (£747 million)
and the sainsbury’s superstores portfolio
(£589 million), have weighted average
maturities of 13.3 years, 11.6 years, and 8.0
years respectively. the only financial covenant
applicable to these securitisations is that
income must cover interest and scheduled
amortisation (1 times); there are no loan to
value covenants. these securitisations provide
for quarterly principal repayments with the
balance outstanding reducing to approximately
20% to 30% of the original amount raised
by expected final maturity, thus mitigating
refinancing risk.
other debt arrangements with banks and
other lenders include loan to value ratio
covenants with levels ranging from 40% to
90%; and most have rental income to interest
or debt service cover requirements. there
is no obligation on British land to remedy any
breach of these covenants and any remedy
needed would be considered by the parties
on a case-by-case basis.
performance reviewThe British Land Company PLC Annual Report and Accounts 2014
Our five guiding PrinciPles
diversify
Our sOurces
Of finance
Maintain
liquidity
extend and
stretcH
Maturity
Of debt
POrtfOliO
Maintain
flexibility
Maintain
strOng
balance
sHeet Metrics
We monitor the finance markets and seek to access
different types of finance when the relevant market
conditions are favourable to meet the needs of our business.
the scale and quality of the group’s business enables
us to access a broad range of secured and unsecured,
recourse and non-recourse debt. We arrange our finance
across different types of debt to meet our own and, where
appropriate, our partner’s needs.
We enjoy and encourage long-term relationships with banks
and debt investors. We aim to avoid reliance on particular
sources of funds and borrow from a large number of
lenders from different sectors in the market and a range
of geographical areas, with a total of 41 debt providers
in addition to our drawn term debt, we aim always to have
a good level of undrawn, committed, unsecured revolving
bank facilities. these facilities provide financial liquidity,
reduce the need to hold resources in cash and deposits,
and minimise costs arising from the difference between
borrowing and deposit rates while reducing credit exposure.
We arrange these revolving credit facilities in excess
of our committed and expected requirements to ensure
the maturity profile of our debt is managed by spreading
the repayment dates and extending or renewing facilities.
We monitor the various debt markets so that we have the
ability to act quickly to arrange new finance as opportunities
arise. Maturities of different types of debt are well spread,
taking into account term debt and undrawn revolving
facilities reducing our refinancing risk in respect of timing
and market conditions. as a result of our financing activity,
We negotiate flexibility into our debt facilities to support the
operations of our business across investment, development
and asset management. our bank revolving credit facilities
provide full flexibility of drawing and repayment (and
cancellation if we require) at short notice without additional
cost. these are arranged with standard terms and financial
covenants and are committed for terms of generally five
years. operational flexibility is maintained with our
British land’s operational metrics are strong. the strength
of our property portfolio is emphasised by the quality of our
cash flows; high occupancy (96.1%); the in-built growth of our
portfolio (28.9% with fixed or rPi linked uplifts); low levels
of lease expiries over the next three years (12.4% of income);
and managed levels of development risk (with £64.2 million
already contracted future income from pre-lets).
the strength of our debt portfolio and low refinancing risk
is illustrated by the range of debt maturities; the diversified
pool of finance confirming our avoidance of reliance on
of bank facilities and private placements alone. We also
aim to ensure that potential debt providers understand our
business and we adopt a transparent approach so that
lenders can understand the level of their exposure within
the overall context of the group. these factors increase our
attractiveness to debt providers, and since 1 april 2011 we
have arranged £4 billion (British land share £3.5 billion) of
new finance in unsecured and secured bank loan facilities,
Us Private Placements and convertible bonds.
tOtal debt POrtfOliO
£7.2bn
we have adequate financing availability to support business
requirements and opportunities.
undrawn cOMMitted facilities
£2.0bn
we are comfortably ahead of our preferred two year
re-financing date horizon. the range of debt maturities
is one to 21 years.
average debt Maturity
8.7 years
combination of this unsecured revolving debt and secured
term debt with good substitution rights, where we have
the ability to move assets in and out of our debentures.
revOlving credit facilities
£2.6bn
single debt sources; our efficiency with a weighted average
interest rate of 4.1%; our interest cover of 2.5 times
proportionally consolidated; our use of non-recourse debt;
and the operational flexibility, supported by our continued
success at raising debt at competitive prices.
ltv (PrOPOrtiOnally cOnsOlidated)
40%
57
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 financial Policies anD PrinciPles
continUeD…
MOnitOring and cOntrOlling
Our debt
We monitor our projected ltV and our debt
requirement using several key internally
generated reports focused principally on
borrowing levels, debt maturity, covenant
headroom and interest rate exposure. We also
undertake sensitivity analysis to assess the
impact of proposed transactions, movements
in interest rates and changes in property
values on the key balance sheet, liquidity
and profitability ratios.
in assessing our ongoing debt requirements,
including those of our development
programme, we consider potential downside
scenarios such as an unexpected fall in
valuations and the effect that might have
on our covenants.
Managing interest rate exPOsure
We manage our interest rate risk independently
from our debt. the Board sets an appropriate
maximum level of sensitivity of underlying
earnings and cash flows to movements in
market rates of interest over a rolling five-
year period. the proportion of fixed rate
debt required to remain within the target
sensitivity varies with the levels of gearing
and interest cover.
our debt finance is raised at both fixed and
variable rates. Derivatives (primarily interest
rate swaps) are used to achieve the desired
interest rate profile across proportionally
consolidated net debt. currently 73% of
projected net debt (including our share
of joint ventures and funds) is at fixed
rate over the five year policy time period.
the use of derivatives is managed by a
Derivatives committee. the interest rate
management of joint ventures and funds
is addressed by each entity for its business.
cOunterParties
We monitor the credit standing of our
counterparties to minimise our risk exposure
in respect of placing cash deposits and
derivatives. regular reviews are made of the
external credit ratings of the counterparties.
fOreign currency
our policy is to have no material unhedged
net assets or liabilities denominated in foreign
currencies.
When attractive terms are available, the
group may choose to borrow in freely available
currencies other than sterling, and will fully
hedge the foreign currency exposure.
tax
British land is a real estate investment trust
(reit) and does not pay tax on its property
income or gains on property sales, provided
that we distribute as a dividend at least 90%
of our property income to shareholders,
which becomes taxable in their hands.
in addition, we have to meet certain conditions
such as ensuring our property rental business
represents more than 75% of our total profits
and assets. We are subject to tax on overseas
properties depending on the requirements
of each jurisdiction. any UK income that
does not qualify as property income within
the reit rules (such as fees and interest)
is subject to tax in the normal way. We also
collect Vat and withholding tax on the
dividends, as well as employment taxes,
on behalf of HMrc.
We administer the tax compliance for 466
companies covering group and joint ventures
and funds (377 UK companies and 89 overseas
companies); details of which are shown in our
annual return filed with companies House
on 28 february 2014.
HMrc continue to award us a low risk tax
rating which is in part a reflection of our reit
status together with our transparent approach
where we keep them informed. also, we
maintain a regular dialogue with HMrc and,
in complex areas where there is a range
of ways in which a transaction could be
undertaken, we seek clearance from HMrc
for what we do. We also discuss with HMrc
potential or proposed changes in the taxation
system that might affect us, particularly
those relating to reit legislation.
in the year to 31 March 2014, British land paid
and collected more than £200 million across
all taxes to HMrc.
58
performance reviewThe British Land Company PLC Annual Report and Accounts 2014 goVernance anD
reMUneration
chairman’s governance review
our governance structure
Board of Directors
governance review
report of the audit committee
report of the nomination committee
remuneration report
remuneration Policy
remuneration implementation report
additional disclosures
The sections from Strategic Report to governance
and Remuneration make up the directors’ Report
for the purposes of the Companies Act 2006.
60
62
66
68
74
79
82
84
94
108
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
2
–
4
2
P
e
r
f
o
r
m
a
n
c
e
r
e
v
i
e
w
4
3
–
5
8
g
o
v
e
r
n
a
n
c
e
a
n
d
r
e
m
u
n
e
r
a
t
i
o
n
5
9
–
1
0
8
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
1
0
9
–
1
8
0
chairman’s governance review
This annual report marks the end of my
first full-year as chairman of British Land.
During the year i have visited a wide range
of the company’s assets and developments,
including the grade a office space of the
Leadenhall Building, scheduled to achieve
practical completion in mid-2014, and the
opening of whiteley shopping, witnessing
our vision of next generation retail come to life.
i have also had the opportunity to meet with a
number of our major shareholders to discuss
British Land’s performance, strategy and
objectives, and take on board their comments.
The Board has continued to apply good
governance practices throughout the year,
operating in compliance with the UK corporate
governance code (the code) and embracing the
changes to the code that have come into force,
including stating the Board’s Diversity Policy
(page 79), enhanced disclosures in the
report of the audit committee (page 74) and
confirmation from the Board that they believe
that this annual report is fair, balanced and
understandable. The process undertaken to
enable the Board to provide this confirmation
to shareholders is described in the
accountability section, on page 71.
This year’s remuneration report has been
prepared in accordance with new regulations
and includes a specific statement of our
remuneration Policy, which will be presented
to shareholders for approval at the 2014 agm.
we have endeavoured to provide a clear and
in-depth description of our approach to
Directors’ remuneration and explain how the
different elements are carefully designed to
support our strategic objectives and reward
performance that will benefit shareholders
over the long-term.
good governance is about much more
than sitting in a boardroom. while the
chief executive and executive Directors take
responsibility for day-to-day management,
the entire Board must have sufficient
engagement with the business to allow
us to lead the company with an in-depth
understanding of its strengths and
capabilities, and the challenges it faces.
Delegation of responsibilities to Board-level
and management committees within our
governance structure ensures that the Board
has sufficient oversight of all key aspects of
the business, with well-established reporting
lines allowing all necessary information
to flow from the committees to the Board.
our governance framework and each
committee’s responsibilities are regularly
reviewed to monitor their effectiveness, and
improvements are made as necessary to meet
the changing requirements of the company.
The financial year ended 31 march 2013 saw
the establishment of the risk committee,
reporting into the audit committee, with the
specific remit of focusing on the management
of strategic and operational risk. This year,
a new management committee, the operations
committee, has been formed to improve the
flow of information between the executive
committee and the wider company, to
improve the strategic and tactical decisions
that are made.
The design of our governance structure
ensures that the right people have access to
the right information. internally, this means
that matters can be discussed and agreed
at the appropriate level of the business,
in the appropriate level of detail, allowing the
business to operate with maximum efficiency.
stringent systems of control are in place to
ensure that decisions are taken by people with
the appropriate authority to do so, and that all
relevant information is reported to the Board.
major decisions taken by the Board during
the year include the acquisition of the majority
of Paddington central, which increased our
exposure to London and replenished our
development pipeline, and the sale of our stake
in Puerto venecia, Zaragoza, a significant part
of our exit from europe – both of which are
fully aligned with the company’s strategy.
it is essential that our strategy is understood
throughout the company, to enable our people
to work to source and deliver opportunities
such as these. monthly company meetings
presented by executive Directors and senior
executives, tailored training sessions and an
annual company conference are all used to
share our vision and objectives with employees.
Dear ShareholDer,
welcome to the corporate
governance section of our
annual report.
60
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 governance review
60-81
our governance structure
Board of Directors
governance review
report of the audit committee
report of the nomination committee
remuneration report
additional disclosures
62
66
68
74
79
82
108
communication with other key stakeholders
is another important aspect of our governance
framework. This includes maintaining a regular
and open dialogue with our lenders to help
us understand their appetite and investment
criteria, and building close relationships
with our occupiers to develop a deeper
understanding of their requirements. This
accumulation of knowledge and experience
is fundamental if we are to create places people
prefer and meet our objective of generating
long-term sustainable total returns for our
shareholders.
on a final note, Tony Braine, who has been with
British Land since 1987 and has been group
secretary since 1995, will be retiring in July
2014. The Board wishes Tony a long and happy
retirement with sincere thanks for his support
and diligent service over the years.
John gildersleeve
non-executive chairman
These opportunities are also used to seek
employees’ ideas and feedback, which help
the Board further develop the company vision
and improve the running of the business.
we’re proud to employ highly-skilled individuals
throughout British Land, with the competencies
and expertise necessary to implement the
Board’s strategy to its maximum effect. During
the year a number of initiatives have been
implemented which focus on developing and
growing talent within the company, detailed
in the report of the nomination committee
on page 81. This is particularly important from
the perspective of succession planning, as
the Board and nomination committee identify
people with the potential to fill Board, senior
executive and executive vacancies which may
arise in the future.
externally, our governance structure facilitates
open, two-way dialogue with shareholders.
This is another key element in the successful
development of our vision; shareholder views
and preferences set the boundaries in which
the Board constructs strategy. conversation
with shareholders is ongoing throughout the
year, and shareholder views are conveyed to
the Board as a whole. The executive Directors
regularly communicate with investors through
meetings and conference calls, with the chief
executive relaying shareholder opinions back
to the full Board, both positive and negative.
Together with the rest of the Board, i look
forward to addressing shareholders at the
agm and responding to any comments
or questions they may have in person.
The agm also presents an opportunity for
all shareholders to meet Tim score, who
was appointed a non-executive Director
of British Land on 20 march 2014. Details
of Tim score’s appointment process can
be found in the report of the nomination
committee on page 80.
61
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 oUr governance sTrUcTUre
The BoarD
The BoarD
Develops strategy and leads British Land to achieve long-term success.
comprises the chairman, the chief executive, six independent non-executive Directors and three
further executive Directors.
The Board delegates certain responsibilities to Board-level and management committees. Defined
terms of reference for Board-level committees, formal documentation of powers delegated to executive
Directors and clear reporting lines ensure that the Board receives all relevant information about the
business and that decisions are made by people at the right level with the authority to do so.
Board biographies
P66–67
Business model
P14–15
Delivering our strategy
P30–35
BoarD-level commiTTeeS
auDiT commiTTee
remuneraTion commiTTee
Reports on activities to the Board
Reports on activities to the Board
oversight of financial and narrative
reporting, internal control, risk
management systems, internal
and external audit processes.
comprises independent non-executive Directors:
Tim score (committee chairman), aubrey adams
and simon Borrows.
sets the remuneration of the
chairman, chief executive and
executive Directors.
comprises independent non-executive Directors:
Lord Turnbull (committee chairman), Dido harding
and william Jackson.
report of the audit committee
P74–78
Terms of reference
www.britishland.com/about-us/
governance/committees
remuneration report
P82–107
Terms of reference
www.britishland.com/about-us/
governance/committees
managemenT commiTTeeS
riSk commiTTee
operaTionS commiTTee
Biannual reports to the
Audit Committee
Supports the
Executive Committee
manages strategic and operational
risk in achieving the company’s
performance goals.
comprises executive Directors.
chaired by Lucinda Bell.
supports the executive committee
with operational matters.
comprises executive committee members
and senior individuals who head specific
functions within the retail, offices, investment,
Development, Finance, residential, strategy,
investor relations, corporate communications
and information systems departments.
chaired by chris grigg.
managing risk in delivering our strategy
P36–37
principal risks
P38–41
62
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 responsibilities of the Board and
management committees are outlined
on the following pages
Reports on activities to the Board
nominaTion commiTTee
Leads the process for Board
appointments and evaluates
composition of the Board.
comprises the chairman, John gildersleeve
(committee chairman) and independent
non-executive Directors: Lord Turnbull and
Dido harding.
report of the nomination committee
P79–81
Terms of reference
www.britishland.com/about-us/
governance/committees
Chief Executive presents a regular Management
Report on Management’s activities to the Board
Recommends transactions
for Board approval
Presents quarterly CR updates to the Board, plus
an annual review of CR strategy
execuTive commiTTee
inveSTmenT commiTTee
corporaTe reSponSiBiliTy commiTTee
Deals with the ongoing management
of the group.
reviews and approves capital
transactions.
acts as a custodian for corporate
responsibility strategy.
comprises executive Directors and five senior
executives: nigel webb, head of Developments;
Jean marc vandevivere, head of residential;
simon carter, head of strategy; Tony Braine,
group secretary; and Joff sharpe, human
resources Director.
chaired by chris grigg.
comprises executive Directors.
chaired by chris grigg.
attended by senior executives from the executive
committee and the executives responsible for the
transaction under consideration.
comprises Lucinda Bell, committee chair, and
four executives with defined areas of responsibility:
Justin snoxall, head of Business group,
responsible for our managed portfolio and
reporting; sarah cary, sustainable Developments
executive, responsible for developments;
anna Devlet, head of community, responsible
for our community programme; and helen wyeth,
group reporting manager, responsible for
financial control.
executive committee biographies
www.britishland.com/about-us/
leadership/executive-committee
investment: Sticking to our strategy
P69
corporate responsibility at British land
P42
www.britishland.com/responsibility
63
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
oUr governance sTrUcTUre
conTinUeD…
overview of reSponSiBiliTieS of The BoarD
The BoarD
The chairman
non-execuTive DirecTorS
The Board develops British Land’s
strategy and leads the company with
the aim of achieving long-term success.
The Board determines the nature
and extent of the significant risks
it is willing to take in achieving its
strategic objectives.
The Board establishes control
mechanisms to ensure that the
business is effectively managed.
The Board presents an accurate
representation of the company’s
performance and future plans to
shareholders in a way that is fair,
balanced and understandable,
and ensures that a satisfactory
level of dialogue with shareholders
takes place.
The chairman leads the Board and
ensures that it operates effectively;
this includes setting appropriate agendas
for Board meetings and ensuring that
all matters are given due consideration.
The chairman maintains a culture of
openness and debate in the boardroom
and builds constructive relationships
between executive and non-executive
Directors, to allow in-depth discussion
to take place with participation from
all Directors.
The chairman ensures effective dialogue
takes place between shareholders
and the Board, with the full Board being
made aware of shareholder views.
non-executive Directors work with and
challenge the executive Directors in the
development of the company’s strategy.
non-executive Directors provide an
independent, external perspective on the
business and contribute a broad range
of experience and expertise to the Board.
Board-level committees, each of
which has been delegated specific
responsibilities by the Board and
operates in accordance with defined
terms of reference, are formed
of non-executive Directors.
The chief execuTive anD execuTive DirecTorS
The chief executive is responsible for the
day-to-day management of the business
and for ensuring that the Board’s strategy
is implemented.
The management of the business is
undertaken by the chief executive and
the executive Directors, exercising
powers delegated to them by the Board.
certain decisions may be made by the
executive Directors, or by the management
committees on which they sit.
executive Directors’ areas of
responsibility within the business
are shown below.
The chief executive and executive Directors
are responsible for updating the Board and
Board-level committees on the overall
performance of the company and on specific
aspects of the business, as required.
chriS grigg
Corporate performance
Implementing strategy
Communications
Public affairs
Human resources
lucinDa Bell
Finance
Risk
Investor relations
Corporate responsibility
Health and safety
charleS mauDSley
Retail portfolio
Leisure portfolio
Investments
Developments
Property performance
Tim roBerTS
Office portfolio
Residential portfolio
Investments
Developments
Property performance
64
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 our Board and committee structure
is detailed on the previous page
corporate responsibility committee
The corporate responsibility (cr) committee
provides quarterly updates on cr to the Board,
alongside an annual review of cr strategy.
During the year Lucinda Bell was appointed
as chair of the committee.
The committee acts as a custodian for
cr strategy, reviewing performance and
monitoring progress against targets and key
initiatives. The committee assesses emerging
social, environmental and ethical issues to
determine whether a response is required
and considers social, environmental and
governance risks, and the mitigating actions
that are in place. The committee also reviews
cr communications activity. any proposed
changes in cr strategy are presented
to the executive committee for approval.
Corporate Responsibility Panel
a separate corporate responsibility Panel,
comprising four independent experts and
chaired by chris grigg, meets twice annually
alongside relevant internal representatives
from British Land. The Panel receives
and provides expert comment on emerging
social, environmental and ethical issues
and challenges British Land’s cr strategy.
overview of managemenT commiTTeeS
executive committee
The executive committee generally meets
twice each month and its purpose is to deal
with the ongoing management of the group.
risk committee
The risk committee meets at least quarterly,
and reports to the audit committee twice
a year.
The committee considers day-to-day
operational matters for running the business
and reviews the performance of the group’s
assets and development programme.
internal procedures and cost control are
also considered by the committee.
matters are often considered and discussed
by the executive committee before being
recommended to the Board or Board-level
committees for approval in accordance
with the schedule of delegated authorities.
Principal matters relating to planning,
directing and controlling activities are
reserved for Board approval.
The committee receives and reviews reports
from across the business, and discusses
emerging trends. These reports include
key performance metrics for retail, offices,
residential, Leisure and Finance.
operations committee
The operations committee was established
during the year and now meets at least
quarterly to assist the executive committee
with operational matters arising in the day-
to-day management of the business.
The operations committee forms a link
between the executive committee and wider
teams of employees at British Land. heads
of business functions are members of the
operations committee and act as conduits
for information between their teams and the
executive committee members. This helps
increase the flow of information throughout
the company (both upwards and downwards)
to improve overall understanding of the
business and the reasoning behind
and impacts of the strategic and tactical
decisions that are taken.
The committee manages strategic and
operational risk in achieving the company’s
performance goals and recommends
appropriate risk appetite levels to the Board.
The committee monitors the company’s
risk exposure against the Board’s target risk
appetite and reviews the effective operation
of risk management processes, including
risk identification, monitoring and mitigation.
Health and Safety Committee
a health and safety committee, comprising
staff with relevant responsibilities from across
the business and chaired by Lucinda Bell,
meets quarterly to review performance against
targets and drive forward actions in pursuit
of the company’s health and safety goals. The
health and safety committee reports health
and safety performance to the risk committee
and contributes to the management report to
the Board.
investment committee
The investment committee meets as required
to review, approve or recommend capital
transactions:
acquisition and disposal of assets;
investment in other companies, partnerships
and joint ventures; and
proposed capital expenditure above
£20 million.
major transactions require approval of the
Board following the initial recommendation
for approval by the investment committee in
accordance with the approval limits established
by the Board.
other formal Board approvals may also be
required, for example for proposed joint venture
expenditure.
65
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 BoarD oF DirecTors
auBrey aDamS
non-executive Director
lucinDa Bell
finance Director
Simon BorrowS
non-executive Director
Appointment to the Board: aubrey was
appointed a non-executive Director of the
company in september 2008.
Committee membership: audit committee.
External appointments: aubrey is head of
Property within rBs’s global restructuring
group and non-executive chairman of
max Property group PLc. he is chairman
of the Board of Trustees of wigmore hall.
Previous experience: Until may 2008,
aubrey was chief executive of savills PLc.
he was formerly a non-executive Director
of Pinnacle regeneration group Limited,
senior independent Director of associated
British Ports PLc, non-executive chairman
of Unitech corporate Parks PLc and
non-executive chairman of air Partner PLc.
Appointment to the Board: Lucinda joined the
executive committee in 2010, joined the Board
in march 2011 and became Finance Director
in may 2011.
Committee membership: executive
committee, investment committee, operations
committee and chair of the risk committee
and corporate responsibility committee.
Previous experience: Lucinda is a chartered
accountant with over 20 years of industry
experience. she has held a range of roles
in real estate finance including Director of
Financial Planning, Tax Director and head
of accounting (with hr responsibility for a
quarter of the company’s people). in 2006
she was the only company representative
on the h.m. Treasury appointed working
party which designed the successful
implementation of the reiT regime.
Appointment to the Board: simon was
appointed a non-executive Director of the
company in march 2011.
Committee membership: audit committee.
External appointments: simon is chief
executive of 3i group plc and a non-executive
Director of inchcape plc.
Previous experience: Before joining 3i simon
worked for 28 years in the banking and finance
industry, most recently as chairman of
greenhill & co. international LLP, having
previously served as co-chief executive officer
of the firm and co-President. Prior to greenhill,
simon held the position of chief executive
officer of Baring Brothers international Limited,
the corporate finance division of ing Barings.
william JackSon
non-executive Director
charleS mauDSley
head of retail and leisure
Tim roBerTS
head of offices and residential
Appointment to the Board: charles joined the
Board in February 2010. he has responsibility
for the retail and Leisure sectors of the
company’s portfolio.
Committee membership: executive
committee, investment committee, operations
committee and risk committee.
Previous experience: charles joined British
Land from Lasalle investment management
where he was co-head of europe, managing
Director of the UK business, a member of the
management Board and an international
Director. Prior to joining Lasalle he was with
aXa real estate investment managers for
seven years where he was head of real estate
Fund management in the UK.
Appointment to the Board: Tim was appointed
to the executive committee in august 2005
and elected as an executive Director in July
2006. he has responsibility for the office and
residential sectors of the company’s portfolio.
Committee membership: executive
committee, investment committee,
operations committee and risk committee.
External appointments: Tim is a Trustee
and Board member of Landaid, the property
industry charity.
Previous experience: Before joining British
Land in 1997 Tim was a partner at Drivers
Jonas, in the investment agency team.
Appointment to the Board: william was
appointed a non-executive Director of the
company in april 2011.
Committee membership: remuneration
committee.
External appointments: william is managing
Partner of Bridgepoint, a leading private equity
firm. william has served on a number of
Bridgepoint portfolio Boards. he is currently
chairman of Pret a manger and President of
Dorna sports sL.
Previous experience: william began his
career in natwest’s investment banking arm,
before working extensively on private equity
transactions in europe. he was appointed
managing Partner of Bridgepoint, formerly
natwest equity Partners, in 2001.
66
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014
John gilDerSleeve
non-executive chairman
chriS grigg
chief executive
DiDo harDing
non-executive Director
Appointment to the Board: John became a
non-executive Director in september 2008.
he was senior independent Director from
november 2010 until he was appointed
chairman of the company on 1 January 2013.
Committee membership: chairman of the
nomination committee.
External appointments: John is Deputy
chairman of carphone warehouse group PLc
and a non-executive Director of TalkTalk
Telecom group PLc.
Previous experience: Until 2004, John
was a Director of Tesco plc. he was formerly
chairman of new Look retail group
Limited, emi group, gallaher group and
carphone warehouse group and was also
a non-executive Director of Lloyds TsB
Bank PLc and vodafone group.
Appointment to the Board: chris joined British
Land as chief executive in January 2009.
Committee membership: chairman of the
executive committee, the investment
committee and the operations committee
and member of the risk committee.
External appointments: chris is a member
of the executive Board of ePra, the european
Public real estate association, a non-
executive Director of Bae systems plc and
a Board member of the British Property
Federation.
Previous experience: chris was chief executive
of Barclays commercial Bank until november
2008, having joined the bank in 2005 as group
Treasurer. Prior to Barclays, he held a broad
range of leadership positions at goldman
sachs, where his career spanned 20 years,
rising to partner. chris held the position of
President of the British Property Federation
for the year ended July 2013.
Appointment to the Board: Dido was appointed
a non-executive Director of the company
in January 2010.
Committee membership: remuneration
committee and nomination committee.
External appointments: Dido is chief executive
officer of TalkTalk Telecom group PLc and
is also a trustee of charity go on UK, which
aims to make the UK the most digitally skilled
nation in the world.
Previous experience: Prior to joining
TalkTalk in early 2010, Dido was sainsbury’s
convenience Director and a member of
J sainsbury plc’s operating Board.
Dido previously held senior management
positions within Tesco plc, Kingfisher Plc
and Thomas cook Ltd.
Tim Score
non-executive Director
lorD TurnBull
Senior independent Director (SiD)
anThony Braine
group Secretary
Appointment to the Board: Tim was appointed
a non-executive Director of the company
on 20 march 2014.
Appointment to the Board: andrew was
appointed a non-executive Director in april
2006 and became siD in January 2013.
Tony joined British Land in 1987 as assistant
secretary and became group secretary
in 1995. he is retiring in July 2014.
Committee membership: chairman of the
audit committee.
External appointments: Tim is chief Financial
officer of arm holdings PLc, a position he
has held since joining the company in 2002.
Previous experience: Prior to joining arm, Tim
held senior financial positions at rebus group
Limited, william Baird plc, Lucas varity plc and
BTr plc. From 2005 to 2014, Tim was a non-
executive Director of national express group
PLc. he was chairman of the audit committee
and also a member of the remuneration and
safety committees. Tim was interim chairman
of national express from December 2008
to april 2009 and was senior independent
Director of national express from 2008 to 2014.
Committee membership: nomination
committee and chairman of the remuneration
committee.
External appointments: andrew is a
non-executive Director of Prudential PLc and
Frontier economics Ltd. he entered the house
of Lords in 2005 as a crossbench Life Peer.
Previous experience: andrew retired as
secretary of the cabinet and head of the home
civil service in July 2005. he had previously
held the positions of Permanent secretary of
hm Treasury and Permanent secretary at the
Department of the environment. andrew was
a non-executive Director of the arup group
from 2006–07 and chairman of Bh global
Limited for five years until January 2013.
There are four additional members of the
executive committee that are not on the Board,
please see the website for full information.
executive committee biographies
www.britishland.com/about-us/leadership/
executive-committee
67
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 governance review
The 2012 UK corporate
governance code (the code)
is the standard against which
we were required to measure
ourselves during the year.
This section of the corporate
governance report outlines
how we have applied the code’s
principles and provisions;
a copy of the code is available
to view at www.frc.org.uk.
The Board considers that the
company has fully complied
with the code throughout the
year ended 31 march 2014.
leaDerShip
The Board’s core responsibilities include setting
British Land’s strategic aims and leading the
company as it works to achieve these aims and
attain long-term, lasting success. The Board
focuses on strategy throughout the year; the
annual strategy Days, described in the box on
the facing page, provide a principal opportunity
to do this. Progress against, and the
appropriateness of, the agreed strategy are
considered at Board meetings during the year,
in light of company performance and changes
to the external environment.
To ensure that no one individual has
unfettered powers of decision, there is a
written division of responsibilities between
the chairman (responsible for leading the
Board) and the chief executive (responsible
for running the business), which has been
approved by the Board.
responsibilities of the Board
P64
The executive Directors, led by the chief
executive, are responsible for ensuring that the
business is run in accordance with the Board’s
strategy. The relatively small number of
employees at British Land means that the
executive Directors are involved in, or aware
of, all major activities of the group – hence they
are extremely well placed to ensure that actions
are aligned with the Board’s strategy. This is
exemplified in the process by which investment
opportunities are appraised, see ‘investment:
sticking to our strategy’ on the facing page.
key acTiviTieS of The BoarD 2013/14
regular agenda items included:
outcomes of the Board strategy Days,
key agenda items also considered
in the year included:
and feedback.
acquisitions, including:
reports of the activities of the audit,
remuneration and nomination
committees.
chief executive’s management reports;
quarterly updates on the business.
Updates on the portfolio, including
developments, acquisitions and disposals.
Updates on financing.
risk appetite.
results of the Board performance
appraisal and feedback.
reappointment of Directors at the
2013 agm.
conflicts of interest.
approval of year-end results, the annual
report and accounts, the agm circular
and dividends.
succession planning.
− the majority of Paddington central; and
− 50% of southgate shopping centre, Bath.
sales, including:
− Puerto venecia, Zaragoza;
− Bon accord and st nicholas shopping
centre, aberdeen; and
− eastgate shopping centre, Basildon.
Financings of £1.5 billion:
− Us Private Placements; and
− syndicated bank facilities, including
£785 million revolving credit facility
signed in april 2014.
Future-proofing the retail portfolio.
Launch of whiteley shopping, hampshire.
Development pipeline.
corporate responsibility.
68
The Board sets the parameters and controls
in which the company’s management may
operate when undertaking the day-to-day
running of the business. These controls ensure
that decisions are taken by people with the
correct authority to do so.
The division between major decisions reserved
for Board approval and other decisions
delegated to the executive Directors is formally
documented. The executive Directors make
decisions within these predefined parameters.
Decisions that would normally fall within
these parameters may still be taken to the
full Board for approval where such decisions
relate to activities outside the ordinary course
of business. specialised management
committees deal with their specific areas of
responsibility, before making decisions (where
they have authority to do so), or recommending
actions for Board-level approval, if this is
required. a key consideration when making
each decision hinges on whether the proposed
action is aligned with the strategy the Board
has developed.
management committees
P65
The chairman meets with individual Directors
outside of formal Board meetings, as part of
each Director’s continuing contribution to the
delivery of the company’s strategy to achieve
superior returns for shareholders. This process
also allows for open, two-way discussion about
the effectiveness of the Board, its committees
and individual Directors, both executive and
non-executive. By these means, the chairman
is continually aware of the views of individual
Directors and can act as necessary to deal
with any issues relating to Board effectiveness
before they become a risk to the company.
culTure anD compoSiTion
of The BoarD
The composition of any Board is fundamental
if it is to provide strong and effective leadership;
our non-executive Directors provide a breadth
of knowledge, skills and experience, as
detailed in their biographies. The nomination
committee is responsible for reviewing the
composition of the Board and Board-level
committees, to assess whether the balance
of skills, experience, knowledge and
independence is appropriate and enables them
to operate effectively. During the year the
committee identified the need to appoint a new
independent non-executive Director to take
on the role of chairman of the audit committee,
leading to the appointment of Tim score. The
procedure for the appointment of new Directors
is rigorous and transparent; more detail on
Tim score’s appointment can be found in the
report of the nomination committee.
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Board biographies
P66–67
Tim Score’s appointment
P80
non-executive Directors are appointed
for specified terms and all Directors offer
themselves for election or re-election by
shareholders at the annual general meeting
each year, if the Board, on the recommendation
of the nomination committee, deems it
appropriate that they remain in office.
we continue to have a strong mix of
experienced individuals on the Board, with the
majority being non-executive Directors who
are independent and can offer an external
perspective on the business and constructively
challenge the executive Directors, particularly
when developing the company’s strategy.
The non-executive Directors scrutinise the
performance of management in meeting their
agreed goals and objectives, and monitor the
reporting of performance. They satisfy
themselves of the integrity of financial
information and that financial controls and
systems of risk management are robust and
defensible.
The STraTegy DayS
The Board culture is one of openness and
constructive debate; the Directors voice
their opinions in a relaxed and respectful
environment, allowing coherent discussion.
The chairman is responsible for maintaining
this culture. he does so by ensuring information
of an appropriate quality is provided in
a timely manner before Board meetings;
the opportunity to properly consider such
information in advance leads to focused
discussion in the boardroom. when running
Board meetings the chairman maintains a
collaborative atmosphere and ensures that all
Directors contribute to debates. The chairman
arranges informal meetings and events
throughout the year to help build constructive
relationships between the Board members.
The high calibre of debate and the participation
of all Directors, executive and non-executive,
is a quality that was highlighted in our most
recent external Board evaluation, and
reiterated in the two subsequent internal Board
evaluations. These characteristics allow the
Board to utilise the experience and skills of the
individual Directors to their maximum potential
and make well-considered decisions that are
in the best interest of the company.
The annual strategy Days are attended by
the full Board and the executive committee.
areas focused on at the february 2014
Strategy Days included:
The executive Directors and senior executives
deliver a number of presentations to the
Board, providing an in-depth analysis on
all aspects of the business and the external
environment. The strategy Days are an
opportunity to discuss, challenge and develop
the company’s strategy.
as well as considering the group as a
whole and the overall corporate strategy,
consideration is given to each part of the
group’s current and prospective portfolio,
and to group financing.
The days are carefully structured to achieve
a balance between presentations and time
for debate and discussion.
The strategy Days also provide an opportunity
for the full Board to consider succession
planning, at Board-level and cascaded down
through the senior executive and executive
levels of the company.
corporate strategy: performance,
progress and pace.
Finance strategy.
London strategy: performing
in a competitive market:
− offices;
− residential.
Development:
− replenishing the development pipeline.
retail strategy:
− future-proofing the retail portfolio.
Developing people at British Land.
overview of maTTerS reServeD
for full BoarD approval
Transactions and financing arrangements
over £100 million.
employee share and option schemes.
issue of securities.
Documents for distribution to shareholders
and the annual report and accounts.
Dividends.
establishing authority levels below those
of the Board.
inveSTmenT:
STicking To our STraTegy
executive Directors are
involved throughout the
investment process and
alignment with the Board’s
strategy is considered from
the initial discussion of a
transaction, right through
to final approval.
1.
All new investment opportunities are discussed
at weekly deal sourcing meetings, attended by
Executive Committee members and investment
executives. Attractive deals that are in line
with strategy are selected to be investigated
and analysed in detail by project teams.
2.
Project teams assess whether investment
opportunities should be pursued, conducting
detailed property and corporate due diligence;
ongoing dialogue with relevant Executive
Committee members takes place throughout
the process.
3.
Investment opportunities with potential are
presented for Investment Committee approval.
Depending on the size and nature of a transaction,
the Investment Committee can approve the
proposed transaction outright or recommend
it for approval by the full Board if this is required.
4.
Investment opportunities are presented
to the full Board for approval, when required.
69
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 governance review
conTinUeD…
The Board considers that aubrey adams,
simon Borrows, Dido harding, william
Jackson, Tim score and Lord Turnbull are
independent. in making this determination,
the Board has considered whether each
Director is independent in character and
judgement, and whether there are relationships
or circumstances which are likely to affect,
or could affect, the Director’s judgement.
The Board believes that the non-executive
Directors’ biographies demonstrate that they
are of the stature and experience required to
properly perform their roles as independent
non-executive Directors. Following this year’s
Board evaluation, the Board believes each
non-executive Director standing for election
or re-election at the next agm continues
to effectively fulfil and remain committed to
their role within British Land. The terms and
conditions of appointment of non-executive
Directors are available for inspection at the
company’s registered office and at the agm.
effecTiveneSS
regular Board and Board-level committee
meetings are scheduled throughout the year,
and the Directors ensure that they allocate
sufficient time to discharge their duties
effectively. Board meetings may be held at
short notice, when Board-level decisions
of a time-critical nature need to be made.
non-executive Directors’ letters of
appointment set out the time commitments
expected and each Director’s attendance
record (shown on page 71) is considered when
assessing whether they should stand for
reappointment by shareholders. Fees payable
to non-executive Directors are dependent
on their level of attendance at Board and
committee meetings.
The chairman considers that all the Directors
continue to devote sufficient time to discharging
their duties to the required high standard and
remain committed to their roles. British Land’s
policy is to allow executive Directors to take
one non-executive directorship at another
FTse 100 company, subject to British Land
Board approval. with the approval of the
British Land Board, chris grigg was elected
as a non-executive director of Bae systems plc
on 1 July 2013. The chairman believes the
appointment is beneficial to the Board by
increasing chris grigg’s wider experience,
particularly in relation to the application
of advanced technology and in relation to
government-level relationships around the
world, which are critical to British Land’s
current and future business prospects.
The chairman does not believe that the
appointment has had an adverse effect on
chris grigg’s ability to discharge his duties
as chief executive of British Land. other
external appointments of the Directors are
disclosed in their biographies.
The Directors are required to notify the
company of any potential conflicts of interest
that may affect them in their roles as Directors
of British Land. all potential conflicts of interest
are recorded and reviewed by the full Board
at least annually. any conflicts of interest that
materialise in the course of the company’s
business are therefore identified and addressed
appropriately.
The non-executive Directors are kept well
informed of the key developments in the
business by both the executive Directors and
other senior executives, through regular
reports and presentations. reports include
management reports delivered by the chief
executive and updates from the risk
committee and corporate responsibility
committee.
Throughout the year presentations and reports
on specific aspects of the business and specific
assets are also delivered, along with updates
on the regulatory and external environment,
provided by external speakers.
care is taken to ensure that information is
circulated in good time before both Board and
committee meetings whenever possible, and
that reports are presented clearly and contain
the appropriate level of detail to allow valid
conclusions to be drawn. The group secretary
ensures good information flows within the
Board and its committees, and between senior
management and non-executive Directors,
and is responsible for advising the Board on all
governance matters, through the chairman.
The non-executive Directors are therefore able
to monitor the management of the business
and the implementation of the strategic aims
effectively, and are able to assess the suitability
of the current strategy and the performance of
the chairman and executive Directors.
BoarD evaluaTion
The effectiveness of the Board is reviewed
annually, with an independent, externally
facilitated review being conducted at least once
every three years. The latest external review
was conducted in 2011, with the next due to
take place in 2014/15.
The internal review conducted in 2013/14
took the format of an anonymous survey,
in which the Directors were required to
respond to a series of statements covering
the following areas:
role and organisation of the Board;
agenda;
corporate governance;
non-executive Directors;
executive Directors;
information;
monitoring company performance;
Board leadership and culture; and
Board appraisal process.
The results of the 2013/14 Board evaluation
were marginally improved from the previous
year, showing strong agreement with the
statements and concluding that the Board
was functioning effectively.
in addition to the survey, peer reviews took
place at a number of private meetings between
the Directors. The chairman met each non-
executive Director individually to discuss their
contribution to the Board and the senior
independent Director met with the other non-
executive Directors to discuss the performance
of the chairman. The remuneration committee
was provided with a written appraisal of the
chief executive’s performance by the
chairman, and was provided with a written
appraisal of the performance of the executive
Directors by the chief executive.
BoarD Training anD DevelopmenT
British Land provides for all Directors a
tailored and thorough induction, including the
opportunity to meet with senior executives
to be given an overview of their specific areas
of responsibilty within the business, and
the opportunity to visit the company’s key
properties and developments.
The company also offers Directors
opportunities to update and refresh their
knowledge on an ongoing basis, to enable them
to continue fulfilling their roles as Board
members and committee members effectively.
This includes training opportunities and further
visits to the company’s assets, as required.
regulatory and environmental updates are
delivered to the Board and relevant committees
by external speakers, including corporate
governance updates.
70
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 remuneraTion
The company’s remuneration Policy is
designed to attract and retain the best people to
the company, allowing us to maintain a strong
and effective Board and leadership team.
The Policy is also structured to complement
our strategy, linking a significant proportion of
executive Directors’ remuneration to corporate
and individual performance. The Policy is
developed by the remuneration committee and
will be presented to shareholders for approval
at the agm in 2014.
remuneration policy
P84–93
accounTaBiliTy
The Board is responsible for preparing the
annual report and accounts and, as confirmed
in the Directors’ responsibility statement, the
Board believes that this annual report and
accounts, taken as a whole, is fair, balanced
and understandable, and provides the
information necessary to assess British Land’s
position and prospects. The basis on which the
company creates and preserves value over the
long-term is described in the business model.
Directors’ responsibility statement
P110
Business model
P14–15
The annual report and accounts is compiled
by the relevant responsible individuals
across the company. specific sections
are reviewed by Department heads and
executive committee members as appropriate,
ensuring that all key stakeholders across
the business are involved. The executive
Directors are closely involved in drafting and
reviewing their relevant sections of the
report, before formally signing them off.
Finance and company secretariat teams
conduct a robust due diligence process,
verifying key statements made within the
report. The full report is then reviewed
thoroughly by the audit committee, before
it is presented to the Board for approval.
The procedure undertaken to enable the
Board to provide the fair, balanced and
understandable confirmation to shareholders
has been reviewed by the audit committee.
The process has been enhanced this year, with
the addition of a specific meeting between the
Finance Director, head of investor relations and
the group Financial controller to review and
document the key considerations undertaken to
ensure that information presented is fair,
balanced and understandable. a report detailing
those considerations was reviewed by the audit
committee alongside both a summary of the
detailed procedures undertaken and the annual
report and accounts.
riSk managemenT anD inTernal
conTrol
The Board determines the nature and extent
of the significant risks it is willing to take in
achieving the company’s strategic objectives.
DirecTorS’ aTTenDance aT BoarD anD BoarD-level commiTTee
meeTingS During The year enDeD 31 march 2014
The maintenance of the company’s risk
management and internal control systems is
the responsibility of the Board, as is ensuring
that they continue to operate effectively.
The Board combines a top-down risk review
with a complementary bottom-up approach to
ensure that risks are fully considered. as well
as complying with the code, the best practice
recommendations in ‘internal control:
guidance to Directors’ have been adopted.
internal control and risk management
processes apply equally to all entities which
British Land administrates, including all
material joint ventures and funds.
British Land’s approach to risk, including the
roles of the Board and the risk committee
in setting risk appetite and monitoring risk
exposure, is described in managing risk in
delivering our strategy.
managing risk in delivering our strategy
P36–37
Formal and transparent arrangements exist
for considering how corporate reporting, risk
management and internal control principles
are applied and for maintaining an appropriate
relationship with the company’s auditor.
The group’s internal control system is built
on the following fundamental principles,
and is subject to review by internal audit:
a defined schedule of matters reserved
for approval by the full Board;
a detailed authorisation process: no material
commitments are entered into without
thorough review and approval by more than
one authorised person;
formal documentation of all significant
transactions;
main Board
audit
committee
remuneration
committee
nomination
committee
a robust system of business and financial
Director
John gildersleeve
chris grigg
Lucinda Bell
charles maudsley
Tim roberts
aubrey adams
simon Borrows
Dido harding
william Jackson1
Tim score2
richard Pym3
Lord Turnbull
8/8
8/8
8/8
8/8
8/8
7/8
8/8
8/8
7/8
0/0
2/3
8/8
1/1
1/1
6/6
6/6
3/3
0/0
3/3
4/4
4/4
4/4
1/1
planning: includes cash flow and profitability
forecasting and scenario analysis performed
on major corporate, property and financing
proposals;
a robust process for property investment
appraisals;
monitoring of key outcomes, particularly
expenditure and performance of significant
investments, against budget and forecast;
clearly defined policies and review of actual
performance against policies;
benchmarking of property performance
against external sources such as the
investment Property Databank;
key controls testing;
a comprehensive property and corporate
insurance programme; and
1 william Jackson was appointed a member of the audit committee for the interim period between richard Pym’s
resignation and Tim score’s appointment.
2 Tim score was appointed a non-executive Director and chairman of the audit committee on 20 march 2014.
no Board or audit committee meetings took place between his appointment and the year-end.
3 richard Pym resigned as a non-executive Director and chairman of the audit committee on 5 september 2013.
a formal whistle-blowing policy.
71
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
governance review
conTinUeD…
The report of the audit committee provides
more detail on the internal control system that
operated through the year, including the
approach to internal audit.
report of the audit committee
P74–78
The Board reviews the effectiveness of the
group’s system of internal control over financial
reporting annually, including that of material
joint ventures and funds. During the course of
its review of the risk management and internal
control systems over financial reporting, the
Board has not identified, nor been advised of,
a failing or weakness which it has determined
to be significant. Therefore a confirmation
in respect of necessary actions is not required.
a number of policies are in place to ensure
that the company not only meets its legal
obligations, but also behaves ethically, acts
with integrity and protects its assets from the
unlawful activities of others. These include
an anti-Bribery and corruption Policy, a
competition Policy and a Fraud Policy and
investigation protocol. all employees are made
aware of the policies and procedures in place,
with understanding enhanced by staff
communications and training. The need for
and appropriateness of policies guiding the
conduct of business is regularly reviewed.
going concern
The group’s business activities, together
with the factors likely to affect its future
performance and position are set out in the
strategic report. The financial position of the
group, its cash flows, liquidity position and
borrowing facilities, together with the group’s
financing policy, are described in the
Performance review.
performance review
– Financial review P51–55
– Financial policies and principles P56–58
The group currently has considerable undrawn
debt facilities and cash deposits which are
expected to be sufficient to meet its financing
requirements for several years. The group’s
recent record of raising £1.5 billion of financing
over the last 12 months gives the Directors
confidence in the group’s ability to raise further
finance as and when required.
72
The group has substantial headroom against
covenants on unsecured banking facilities and
is not overly reliant on any single lender. it also
benefits from a secure income stream from
leases with long average lease terms, and
is not over reliant on any single occupier or
industry group.
covenant ratio
P56
as a consequence of these factors, the
Directors believe that the group is well placed
to manage its financing and other business
risks satisfactorily in the current economic
environment. The Directors have a reasonable
expectation that the company and the group
have adequate resources to continue in
operational existence for the foreseeable
future and therefore continue to adopt the
going concern basis in preparing the annual
report and accounts.
relaTionS wiTh ShareholDerS
The Board remains committed to maintaining
open channels of communication with
shareholders. it is important to us that
shareholders understand the company’s
strategy and objectives: these must be
explained clearly and shareholders’ feedback
must be heard and the issues and questions
raised properly considered.
British Land has a dedicated investor relations
team which reports to the Finance Director.
communication with investors and analysts
is an ongoing process throughout the year.
This includes regular scheduled investor
relations events, summarised in the box
below, one-to-one and group meetings with the
chairman and executive Directors and tours of
our properties, as well as regular contact with
the investor relations department. During the
year, the chairman, chief executive, Finance
Director and our investor relations team met
with representatives from over 170 institutions.
The chairman’s meetings are part of a continuing
programme to build a strong two way dialogue
with our biggest shareholders. The full Board
plans to attend the annual general meeting,
which provides an opportunity for all
shareholders to question the Directors in person.
Lord Turnbull has been appointed senior
independent Director, and is available to
address concerns shareholders may wish
to raise other than via the usual channels
of the chairman, chief executive or other
executive Directors.
significant emphasis is placed on the
importance of feeding shareholder views,
both positive and negative, back to the Board.
a written investor relations report which
includes direct market feedback on activity
during the period is presented at each
scheduled Board meeting for discussion
by the full Board. shareholder opinions are
also given due consideration throughout
the annual strategy Days.
key inveSTor relaTionS acTiviTieS During The year incluDeD
may 2013
June 2013
July 2013
September 2013
november 2013
December 2013
January 2014
february 2014
march 2014
Full-year results presentation for 2012/13.
Full-year roadshow, London and Us.
roadshow including private client lunch, scotland.
roadshow, netherlands.
investor conference, London.
Q1 interim management statement – investor call.
annual general meeting.
Private client meetings, London.
investor conference, new York.
investor day showcasing key retail assets.
Property tour, London.
half-year results presentation.
half-year results roadshow, London.
investor conference, London.
Q3 interim management statement – investor call.
Property tour, London.
roadshow, netherlands.
investor lunch with head of retail, London.
investor conference, miami.
roadshow, mid-atlantic, new York, Boston.
investor conference, London.
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 The benefit of diversity, both on the Board and
throughout the company, continues to be a key
consideration when searching for candidates
for Board and other appointments. in addition,
the company continues to support the
Pathways to Property programme, which aims
to increase diversity within the property
industry as a whole by attracting students from
diverse backgrounds into the property sector.
Diversity policy
P79–81
funDing To chariTy anD gooD cauSeS
British Land has a charity and community
Funding Policy which states that giving is
focused on young people, education, training,
employment and local regeneration.
charity funding policy
www.britishland.com/crpolicies
we allocate funding to national, regional and
local community causes, with most funds going
to support initiatives around our properties
and developments.
The charity and community committee, which
approves all spend under the charity and
community Budget, is chaired by edward cree,
senior retail asset manager, and reports to
the executive committee on an annual basis.
The executive committee approves the
company’s charity and community Funding
Policy and the annual Budget. Donations during
the year totalled £1,120,699, compared with
£1,079,305 in the previous year. British Land
does not make any donations to political
organisations.
Following the Board’s appointment of a new
hr Director in July 2013, British Land has
implemented a number of initiatives to help
develop our employees and grow internal
talent, reinforcing the company culture of
excellence and embedding values and
behaviours to drive a high performance culture.
as a relatively small company in terms of
number of employees we are proud to be able
to invest in our people on an individual basis,
taking time to understand specific
requirements to progress careers and enhance
experiences across the company. more
information is provided in the report of the
nomination committee.
Developing people at British land
P81
wellbeing
P28
we have well-established all-employee share
schemes to incentivise employees at all levels
in the company, and align their interests with
those of shareholders by building a holding
of British Land shares. in the UK, separate
pension fund reports are made available
to members.
STaff Turnover
2013/14
2012/13
2011/12
head office
Broadgate estates 42 (20%) 31 (16%)
32 (15%) 28 (13%) 24 (12%)
16 (8%)
Total (average)
74 (17%) 59 (14%) 40 (10%)
reporTaBle acciDenTS
acroSS our porTfolio
2013/14
2012/13
2011/12
3
–
2
32
47
54
0.12
0.24
0.35
British Land
occupied
demises1
at our managed
properties
rate per 100,000
hours worked on
our developments2
1 British Land occupied demises refers to space
occupied by British Land, Broadgate estates Ltd
and The source.
2 on our developments, there were six reportable
accidents across 5,148,238 working hours in
2013/14 compared to 15 reportable accidents
across 6,215,235 working hours in 2012/13.
The British Land website was re-launched
in may 2013, with the aim of making it more
informative and accessible for shareholders.
results and other key announcements are
now accompanied by short videos, providing
information on a timely basis to both retail
and institutional shareholders. a number
of case studies, covering topics that range
from profiles of our key assets to corporate
responsibility activities, are also available
to view online. a facility on the website allows
all shareholders to ask questions directly,
at any time.
contact British land
www.britishland.com/contacts
we are pleased with the level of engagement
with shareholders achieved during the year,
particularly in relation to the new Long-Term
incentive Plan recommended for adoption by
shareholders at the annual general meeting
in 2013. Following detailed consultations
the new plan was adopted by shareholders
with over 96% votes cast in favour.
The Board also recognises the important
contribution of providers of capital other than
shareholders, namely our lenders and bond
holders. we maintain a regular and open
dialogue with our lenders to help us understand
their investment appetite and criteria.
employeeS
having expert people at British Land is one of
the four core focuses of our business model.
This applies both to the individuals on the Board
with the responsibility for leading the company,
and the employees who work throughout
British Land.
expert people
P28–29
we encourage a high degree of employee
involvement in the company and provide
regular information on business activities and
explanations of strategy through company
meetings, training sessions, internal
communications and an annual company
conference. employee feedback is also
strongly encouraged.
During the year a new management committee,
the operations committee, comprising the
executive committee and heads of specific
business functions, was established to assist
the executive committee with operational
matters arising in the day-to-day management
of the business. The committee forms a link
between the executive committee and wider
teams of employees, enhancing the flow of
information around the company, both
upwards and downwards, to improve the
strategic and tactical decisions that are made.
73
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
rePorT oF The
aUDiT commiTTee
Dear ShareholDer,
welcome to the report of the
audit committee.
we are committed to
monitoring the integrity of
the group’s reporting and to
developing and maintaining
sound systems of risk
management and internal
control. Key initiatives adopted
by the committee this year
included tendering the external
audit, enhancing our review
of valuer effectiveness and
heightening procedures
to ensure the annual report
and accounts is fair, balanced
and understandable.
74
compoSiTion of The commiTTee
at the start of the year the committee
comprised richard Pym (committee
chairman), aubrey adams and simon Borrows.
The committee’s composition changed during
the year. Following richard Pym standing down
as a non-executive Director of British Land in
september, aubrey adams took on the role of
chairman of the committee on an interim basis
and william Jackson joined the committee as
a member. i was appointed a non-executive
Director of British Land and chairman of the
audit committee on 20 march 2014, at which
point aubrey once again became a committee
member and william Jackson stepped down.
The committee now comprises myself, as
committee chairman, aubrey adams and
simon Borrows.
i am now the member of the committee
nominated as having recent and relevant
financial experience, as required by the UK
corporate governance code. aubrey was
the nominated member during his time as
chairman of the committee, as was richard
before him. i would like to thank aubrey
and william for their contribution during
the transition period, and look forward
to leading the committee.
acTiviTieS of The commiTTee
The committee operates within defined Terms
of reference, which were reviewed during
the year and can be found on the company’s
website at www.britishland.com/about-us/
governance/committees.
During the year the committee has undertaken
each of its principal responsibilities, receiving
relevant reports from the valuers, the internal
and external auditors, the risk committee and
management, and challenging assumptions
and judgements made. The table on page 76
details the responsibilities of the committee
and its activities throughout the year.
The committee performs a detailed review of
the content and tone of the annual and half-year
press releases and the annual report and
accounts, as well as interim management
statements. The committee has satisfied itself
that controls over the accuracy and consistency
of information presented in the annual report
and accounts are robust, and has confirmed
to the Board that it believes this annual
report and accounts is fair, balanced and
understandable. an assurance opinion is
obtained for the company from Pwc over
the corporate responsibility statement
and a verification exercise is performed
by management to ensure consistency
and accuracy of information presented.
The allocation of time spent on the committee’s
principal responsibilities is shown in the
chart on page 77. significant additional time
continues to be spent by members of the
audit committee meeting with executive
management to understand the key issues.
The committee regularly meets with the
external auditor and internal auditor without
management being present to ensure honest
and challenging conversations take place.
exTernal auDiTor
Following best practice and in accordance
with its Terms of reference, the audit
committee annually reviews the audit
requirements of the group, both for the
business and in the context of the external
environment, and considers whether or not
to undertake a formal tender. There are no
contractual obligations which would restrict
the selection of a different auditor.
when conducting the annual review, the audit
committee considers the performance of the
external auditor as well as their independence,
compliance with relevant statutory, regulatory
and ethical standards and objectivity.
The committee concluded that the findings of
this year’s review were satisfactory. however,
following 12 years of external audit from
Deloitte, it was decided that the external audit
should be put out to tender for the year ending
31 march 2015; the tender process is described
in the box on the facing page. This complies
with new governance requirements, and
facilitated an evaluation of the merit of different
audit approaches.
There are no matters in connection with
Deloitte’s prospective resignation as auditor
which, in the view of the Board, need to be
brought to the attention of shareholders.
SignificanT iSSueS
The audit committee pays particular attention
to matters it considers to be important by virtue
of their size, complexity, level of judgement and
potential impact on the financial statements
and wider business model. identification
of the issues deemed to be significant takes
place following open, frank and challenging
discussion between the committee members,
with input from the Finance Director, external
and internal auditors, external experts and
other relevant British Land employees.
The significant issues considered by the
committee during the year ended 31 march
2014 are detailed in the table on page 77,
alongside the actions taken by the committee
to address these issues.
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 exTernal auDiT TenDer
in the 2012 annual report the audit
committee indicated that, once there was
clarity on auditor appointment guidance
from the Financial reporting council
and european Union, it would tender the
external audit and that this was expected
to be within the next two years.
in the 2013 annual report the audit
committee confirmed that it would tender
the audit in the coming year for the financial
year ending march 2015.
a number of firms were approached to tender
for the audit, including mid-tier firms as well
as members of the Big Four. The list of firms
was selected based upon their experience,
industry skills and knowledge, their ability
to perform the audit to a high standard,
and any pre-existing business relationships
that might affect their independence.
it was agreed that, in light of the longevity
of Deloitte’s appointment, they would
not be invited to tender for the audit.
over a number of months senior
management within Finance built
relationships with each selected firm,
assessing their performance in a range
of competencies. on this basis two firms
were shortlisted and each was requested
to submit a tender. each shortlisted firm
was given access to personnel across
the business before presenting their
audit proposal to the management Panel
and selection Panel.
The management Panel consisted of audit
stakeholders from across Finance and
the wider business. The selection Panel
consisted of the audit committee; chris
grigg, chief executive; Lucinda Bell,
Finance Director; and rob hudson, group
Financial controller.
The Board accepted the selection Panel’s
recommendation that Pricewaterhousecoopers
be selected as the new external auditor.
Deloitte will resign as the company’s auditor
after completing the audit of this annual
report and accounts. The Board intends
to appoint Pricewaterhousecoopers
to fill the casual vacancy created and will
recommend the appointment of
Pricewaterhousecoopers to shareholders
at the 2014 annual general meeting.
policy on The auDiTor proviDing
non-auDiT ServiceS
with respect to other services provided by
the external auditor, the following framework
was in place during the year and will continue
to apply on the appointment of the new
external auditor:
audit related services: audit related
services include formal reporting relating to
borrowings, shareholder and other circulars
and various work in respect of acquisitions
and disposals. where the external auditor
must carry out the work because of their
office or because they are best placed to
auDiT commiTTee memBerS
do so, the external auditor is selected.
in other circumstances the selection
depends on which firm is best suited;
tax advisory: the selection depends
on which firm is best suited in the
circumstances; and
general consulting: the external auditor is
not selected to provide general consultancy
services except in certain circumstances,
and then only after consideration that they
are best placed to provide the service
and that their independence and objectivity
will not be compromised.
Tim Score1
aubrey adams1
Simon Borrows
auDiT commiTTee aTTenDeeS
chairman of the audit committee
member
member
Deloitte
attends as independent external auditor to the group
knight frank and cBre
John gildersleeve
attends by invitation
chris grigg
attends by invitation
lucinda Bell
attends by invitation
anthony Braine
attends by invitation
rob hudson
attends by invitation
marc furlonger
attends by invitation
rachel wagg
attends by invitation
nicola Thomas
attends by invitation
Sally Jones
attends by invitation
charles middleton
attends by invitation
Jonathan rae
attends by invitation
chris Dicks
attends by invitation
Stephen Spellman
attends by invitation
attend twice a year to present their valuations
as the group’s external valuers
chairman of the company
chief executive
Finance Director
group secretary
group Financial controller
head of Financial Forecasting and Financial reporting
head of reporting
head of Property valuation
head of investor relations
head of Tax
secretary to the risk committee
head of internal audit, KPmg
internal audit Partner, KPmg
1 richard Pym was chairman of the audit committee until 5 september 2013, when he stood down as a non-
executive Director of British Land. subsequently aubrey adams, previously a member of the committee, was
appointed chairman of the committee and william Jackson was appointed as a member of the committee.
Tim score was appointed chairman of the committee on 20 march 2014 at which point aubrey adams became
a member of the committee and william Jackson stood down from the committee.
75
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 rePorT oF The aUDiT commiTTee
conTinUeD…
principal reSponSiBiliTieS of The auDiT commiTTee
key areaS formally DiScuSSeD anD revieweD
By The commiTTee During 2013/14 incluDe
reporTing
anD exTernal
auDiT
monitoring the integrity of the company’s
financial statements and all formal
announcements relating to the company’s
financial performance; reviewing financial
reporting judgements contained within
them.
making recommendations to the Board
regarding the appointment of the external
auditor and approving the external auditor’s
remuneration and terms of engagement.
monitoring and reviewing the external
auditor’s independence, objectivity and
effectiveness.
Developing and implementing policy on
the engagement of the external auditor
to supply non-audit services, taking
into account relevant ethical guidance.
results, commentary and announcements.
Key accounting policy judgements, including valuations.
impact of future financial reporting standards.
going concern.
external auditor effectiveness.
external audit tender.
selection and recommendation of new external auditor.
half-yearly external auditor reports on planning, conclusions and
final opinion.
external auditor management letter, containing observations arising
from the annual audit leading to recommendations for control or
financial reporting improvement.
external auditor’s remuneration and level of non-audit fees.
valuaTionS
monitoring and reviewing the valuation
annual report on the effectiveness of our valuers, which considers the
process.
quality of the valuation process and judgement, with a half-yearly update.
reviewing the company’s internal financial
controls, its compliance with the Turnbull
guidance and the effectiveness of its
internal control and risk management
systems.
assessing the principal risks of the
business including those that would
threaten solvency or liquidity.
reviewing disclosures on our approach
to risk in interim and annual reports.
monitoring and reviewing the
effectiveness of the company’s internal
audit function, including its plans,
level of resources and budget.
reviewing internal audit reports,
recommendations and progress
in implementation of those
recommendations.
valuer presentations to the committee.
The outputs of the risk register process including identification
of the group’s principal risks and movement in the exposure to these
risks in the year.
oversight of the group’s risk management processes and their
effectiveness, including activities of the risk committee.
an annual report on the effectiveness of internal control systems.
Planning internal audit reviews to map the principal risks and a
commitment to review transaction procedures.
Focus on issues relating to Joint ventures.
an annual fraud risk assessment and an independent fraud
resilience review.
insurance programme for property, development and corporate risks.
credit limits of counterparties.
monitoring KPmg’s execution of the internal audit.
internal audit effectiveness.
internal audit charter defining its role and responsibilities.
internal audit programme of review of the group’s processes and
controls to be undertaken, and an assurance map showing the coverage
of audit work over three years against the principal risks.
implementation status reports on internal audit recommendations.
The group’s internal audit function reports, including those on:
− iT governance Benchmarking; Tax reiT compliance; retail managing
agents; risk management Processes; sustainability acquisitions Brief;
Business continuity; governance review of eden walk; Full scope
review of the hercules Unit Trust; governance review of southgate,
Bath; Technical information security review; Tax reputation risk;
Fraud resilience review; and annual key financial controls testing.
reviewing the committee’s Terms of
reference and monitoring its execution.
considering compliance with legal
requirements, accounting standards and
the Listing rules.
reviewing the whistle-blowing policy and
operation.
review of the audit committee’s Terms of reference.
review of the effectiveness of the audit committee.
maintenance of the group’s reiT status.
compliance with changes to the UK corporate governance code,
including the fair, balanced and understandable concept.
compliance with changes in accounting standards, including iFrs 13:
Fair value measurement.
annual tax update and Tax Policy.
mandatory carbon reporting.
review of Pwc corporate responsibility assurance report.
Treasury policy.
riSk anD
inTernal
conTrol
inTernal
auDiT
oTher
76
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 ALLOCATION OF TIME SPENT AT AUDIT
COMMITTEE MEETINGS DURING THE YEAR
4%
14%
18%
40%
Reporting and
External Audit
Valuations
Risk and
internal control
Internal Audit
Other
24%
This does not include time spent outside formal Audit
Committee meetings relating to the external audit tender.
The following commitment protocol operated
throughout the year and applied to any
engagement of other work (excluding audit
and half-yearly reporting) performed by the
external auditor:
audit committee approval is required where
there are any doubts as to whether the
external auditor has a conflict of interest;
and
approval by the audit committee chairman
on behalf of the committee is required
for each additional project over £0.1 million
in value where cumulative fees for other
work performed by the external auditor
are projected to exceed 75% of the combined
fee for audit and half-yearly reporting
review work.
During the year no project approvals by the audit
committee chairman were required, however
as a precaution approval was requested and
obtained for two non-audit engagements.
non-auDiT work carrieD ouT By The
exTernal auDiTor During The year
enDeD 31 march 2014
Deloitte real estate (formerly Drivers Jonas
Deloitte) provides advice on the masterplanning
of the 75 acres of potential development land
around meadowhall shopping centre, together
with occasional advice or services on other
matters. it was appointed to this role prior
to its acquisition by Deloitte. The committee
considered and agreed that this and other
non-audit related services provided by
Deloitte could be provided during the year,
subject to approval by the committee where
expenditure was above the established
approval limits.
as shown in note 5 to the financial statements,
total fees payable to Deloitte in the last
financial year amounted to £0.8 million
of which £0.2 million was for non-audit related
services provided by Deloitte real estate.
SignificanT iSSueS conSiDereD
By The commiTTee During The year
how TheSe iSSueS were aDDreSSeD
By The commiTTee
exTernal
auDiT TenDer
as confirmed in the 2013 annual report,
the audit committee tendered the external
audit for the march 2015 financial year.
a detailed description of the tender process is provided in the box
on page 75.
valuaTionS
although conducted by external, independent
valuers, the valuation of the investment
property portfolio is inherently subjective
as it is made on the basis of assumptions
made by the valuer which may not prove
to be accurate. The outcome of this
judgement is significant to the group in
terms of its investment decisions, results
and remuneration.
The audit committee reviews the methodology and outcomes of the
valuations and compares those of cBre and Knight Frank. The external
valuers present to the committee and are asked to highlight any significant
judgements or disagreements with management. The committee
assesses the independence of both external valuers, Knight Frank and
cBre. more information on this can be found on page 78. Furthermore,
the external auditor challenges the independent valuations as part
of their audit procedures and report their findings to the audit committee.
accounTing for
TranSacTionS
increased risk is encountered through
transactions, as large and non-standard
accounting entries are often required.
The committee reviews management papers on key judgements as well
as the external auditor’s report presented following their detailed review
of accounting entries.
going concern
risks to the company’s ongoing solvency
and liquidity and the appropriateness of
preparing the group financial statements
for the half-year and the full-year on a
going concern basis.
The committee considers the financing requirements of the group in the
context of available committed facilities and the diversity and longevity
of existing debt. in addition a paper is provided to the committee covering
customer concentration, financing options and covenant headroom.
The external auditor shares their review of these papers and their
assumptions with the committee.
reiT STaTuS
maintenance of the group’s reiT status
through compliance with certain conditions
has a significant impact on the group’s
results.
The audit committee reviews compliance with the reiT tests annually.
management present the methodology and results of the reiT tests,
highlighting any change in long-term trends and the current level of
headroom.
fair,
BalanceD anD
unDerSTanDaBle
Under the UK corporate governance code
the Board should establish arrangements
to ensure the annual report presents a fair,
balanced and understandable assessment
of the company’s position and prospects.
on behalf of the Board, the audit committee
considered what enhancements were
necessary to current procedures to ensure
that this statement could be made.
enhanced procedures and documentation were adopted during
the year, as detailed in the accountability section of the governance
review on page 71.
77
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 rePorT oF The aUDiT commiTTee
conTinUeD…
inTernal auDiT
The company’s internal audit function has been
outsourced to KPmg, who reports regularly to
the committee, as detailed in the table on page
76. The committee monitors the performance
of the internal audit function throughout the
year, as well as performing an annual review
of its effectiveness. The committee believes
KPmg continues to discharge its internal
audit duties effectively.
valuaTionS
The external valuation of British Land’s
portfolio is a key determinant of the group’s
balance sheet, performance and senior
management remuneration. in accordance
with its Terms of reference, the committee
undertakes a rigorous approach to monitoring
and reviewing the valuation process and the
effectiveness of the group’s valuers, Knight
Frank and cBre. The committee performed
a detailed review of the effectiveness of the
valuers in the current year, based upon a series
of qualitative and quantitative measures which
consider the quality of the valuation process
and judgements, with comparison against
actual transactions.
The valuers present directly to the audit
committee at the half-year and year-end
review of results, including confirmation of
their valuation process, market conditions and
significant judgements made. The company’s
external auditor reviews the valuations and
valuation process and reports its findings
to the audit committee, having full access
to the valuers and exchange of information to
determine that due process has been followed
using appropriate information. The valuation
process is also subject to regular internal
audit review, the most recent being undertaken
by KPmg on behalf of the company in 2013.
For the valuation of the group’s wholly-
owned assets, the company has fixed fee
arrangements with Knight Frank and cBre, in
line with the recommendations of the carsberg
committee report. copies of the valuation
certificates of Knight Frank and cBre can be
found on the website at www.britishland.com/
investors/operational-performance.
iDenTificaTion anD evaluaTion of
commercial riSkS anD relaTeD
conTrol oBJecTiveS
The audit committee holds responsibility
for overseeing the effectiveness of sound risk
management and internal control systems.
it fulfils this role by monitoring the activities
of the risk committee, the risk management
processes in place and the activities of the
internal audit function, including its
reporting on the effectiveness of controls.
risk committee
P65
managing risk in delivering our strategy
P36–37
principal risks
P38–41
The risk committee minutes are circulated
to the audit committee for review, with
any significant matters highlighted for audit
committee discussion. Twice yearly the
principal risks, which are derived from the risk
register process, are presented to the audit
committee, along with commentary on how
the exposure to these risks has moved in the
period, for oversight and discussion. annually,
a report on the effectiveness of internal
controls is prepared by internal audit for
presentation to the audit committee as well
as a fraud risk assessment. internal audit
and the risk committee work closely together
to ensure that identified risk areas inform
the internal audit programme and similarly,
findings of internal audit reviews are taken
into account in identifying and evaluating risks
within the business. British Land maintains a
framework of controls related to key financial
processes and management of the associated
risks. The effectiveness of such controls
is reviewed by internal audit annually, either
through dedicated procedures or in the
course of other internal audit reviews.
Tim Score
chairman of the audit committee
78
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 rePorT oF The
nominaTion commiTTee
Dear ShareholDer,
welcome to the report of the
nomination committee. The
principal responsibilities of the
committee and the key areas
discussed in the year ended
31 march 2014 are highlighted
in the box on the page 81.
changeS To The BoarD anD
BoarD-level commiTTeeS
During the year the nomination committee
has spent significant time discussing and
recommending changes to the Board and
Board-level committees outside of formal
meetings, including consulting other Board
members and working with russell reynolds
associates, an external search agency.
on 5 september 2013 richard Pym stood down
as a non-executive Director of British Land,
following his appointment as chair of The co-
operative Banking group and The co-
operative Bank. richard Pym was chairman
of the audit committee and a member of the
nomination committee before standing down.
The nomination committee identified the
need to appoint a new non-executive Director
to broaden the Board’s collective experience
and add a fresh perspective to boardroom
discussions regarding the company’s strategy,
position and prospects. The time commitment
required by the company from the chairman
of the audit committee is such that the
nomination committee decided that an
external candidate would be best placed to
devote sufficient time to the role in the long-
term. The committee also considered that
the new appointee should have the appropriate
degree of financial experience and expertise
to fulfil the role of chairman of the audit
committee effectively.
Following a rigorous selection process,
detailed in the box on the next page, Tim score
was appointed a non-executive Director
of British Land and chairman of the audit
committee on 20 march 2014. Tim score’s
biography on page 67 details his financial
experience working at companies in a
range of different sectors; he is a chartered
accountant and has nine years’ experience
of chairing the audit committee at national
express group PLc.
The nomination committee recommended
a number of changes to Board-level committee
memberships following richard Pym’s
resignation to maintain an appropriate
balance of skills, knowledge, experience
and independence on each committee and
to remain compliant with the UK corporate
governance code.
aubrey adams undertook the role of chairman
of the audit committee between richard Pym’s
departure and Tim score’s appointment, and
william Jackson joined the audit committee
as a member for the period between richard
Pym’s resignation and Tim score’s appointment.
Dido harding was appointed a member of the
nomination committee, replacing richard Pym.
Throughout the year the membership of each
Board-level committee has comprised
independent non-executive Directors to the
extent required by the code.
compoSiTion of The BoarD
The committee considers that the Board
consists of individuals with the right balance
of skills, experience and knowledge to provide
strong and effective leadership of the company.
The majority of the Board, excluding the
chairman, are independent non-executive
Directors, and the Board’s collective
experience covers a range of relevant sectors,
as illustrated in the ‘maintaining a Balanced
Board’ box on the next page. as well as a
breadth of property and financial experience,
the Board members have personal experience
of working in the retail and corporate
environments that are typical of many of our
occupiers.
Board biographies
P66–67
Board evaluation
P70
Tim score will stand for election and all
of British Land’s other Directors will retire
and submit themselves for re-election by
shareholders at the 2014 annual general
meeting. The committee believes that all
the Directors continue to demonstrate
commitment to their roles as Board and
committee members, continue to discharge
their duties effectively and each make
a valuable contribution to the leadership
of the company.
DiverSiTy policy
British Land pays full regard to the benefits
of diversity, including gender diversity, both
when the nomination committee is searching
for candidates for Board appointments and
when the company is searching for candidates
for other appointments.
nominaTion commiTTee memBerS
John gildersleeve
chairman of the nomination committee
lord Turnbull
member
Dido harding1
member
1 richard Pym was a member of the committee until
5 september 2013, when he stood down as a non-
executive Director of British Land and Dido harding
was appointed as a member of the committee.
79
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 rePorT oF The nominaTion commiTTee
conTinUeD…
appoinTmenT of Tim Score aS
a non-execuTive DirecTor anD
chairman of The auDiT commiTTee
During the year the nomination committee
identified the need to appoint a new non-
executive Director to the Board of British
Land, with the appropriate experience and
available time commitment to take on the
role of chairman of the audit committee.
The nomination committee was chaired
by John gildersleeve, chairman of the
company, during the selection process.
russell reynolds associates1, an external
search agency, was engaged by the
committee to assist with the selection
process. The role of russell reynolds
associates included:
− preparing a detailed role specification,
incorporating the expected time
commitment and duties to be performed
as a non-executive Director of the
company and as chairman of the audit
committee;
− searching for and benchmarking
candidates for the role; and
− producing detailed profiles of the
candidates, to be considered by the
committee.
During the committee’s search, candidates
from a range of business backgrounds
were considered, including both male and
female candidates.
The committee consulted with British
Land’s advisors throughout the process
and took detailed references.
Following this rigorous selection process,
the nomination committee recommended
that Tim score be appointed to the role.
The Board accepted the recommendation,
and Tim score was duly appointed on
20 march 2014.
1 russell reynolds associates have been engaged
by the company in a search consultancy capacity
in the past; they do not provide any other services
for the company.
80
GENDER DIVERSITY AT BRITISH LAND
Board of Directors
18%
Male
Female
82%
Senior Executives
(Executive Committee and Operations Committee)
19%
Male
Female
81%
Employees of the Company
43%
57%
Male
Female
MAINTAINING A BALANCED BOARD
Composition of the Board
9%
36%
55%
Non-Executive
Chairman
Independent
Non-Executive
Directors
Executive Directors
Length of Non-Executive Directors’ tenures
14%
29%
Under 3 years
3 to 6 years
Over 6 years
57%
Executive Directors’ appointments
Internal appointments
External appointments
50%
50%
Directors’ core areas of expertise1
7%
13%
40%
Property
Finance
Retail and consumer
Public sector
40%
1 Some Directors are represented in more than
one category.
The Board agrees with the conclusions of the
Davies review of women on the Board that
greater efforts should be made in improving
the gender balance of corporate boards and
that quotas for female Board representation
are not the preferred approach. The company
currently has two female directors: Dido
harding, who was appointed as a non-
executive Director in January 2010, and
Lucinda Bell, who was appointed Finance
Director in may 2011. This currently represents
18% female Board membership.
The promotion of women to Board and
other senior positions within the company
is dependent on the recruitment, development
and retention of women in the workforce,
both within the company and more widely
throughout the business and professional
community.
our recruitment practices have long included
a commitment to diversity and gender equality,
and will continue to do so throughout the
company. as of 31 march 2014, British Land’s
employees comprised 96 females and 127
males; of the employees considered to be
executives, 39 are female and 98 are male.
senior executives, comprising the executive
committee and operations committee,
consisted of six females and 26 males. These
are full time equivalent figures. The head
count at 31 march 2014 was 242.
To encourage and help mothers return to work
after childbirth, we offer enhanced maternity
leave payments and support flexible working
patterns; currently 25 of our female employees
take advantage of this facility. we also offer
enhanced paternity leave payments and
support flexible working patterns for all
parents and other employees whose personal
circumstances may make this beneficial.
currently five men work flexibly and nine men
took advantage of enhanced paternity leave
during 2013/14. Training and mentoring
programmes are provided to ensure that all
our employees achieve their potential, taking
account of their diverse development needs.
it is pleasing that our Finance Director, Lucinda
Bell, was an internal appointment, reflecting
the development of our own people.
The nomination committee seeks to increase
the percentage of female Board members as
quickly as we are able. The speed at which we
can achieve this will be subject to the availability
of suitable candidates and compliance with the
requirements of the equality act: the Board
has a fundamental obligation to ensure that
appointments are of the best candidates to
promote the success of the company and we
do not consider that it would be to the long-term
benefit of the company if appointments were
made on any other basis. subject to these
requirements, we have an ongoing commitment
to further strengthening female representation
at Board and top management level.
governance and remunerationThe British Land Company PLC annual report and accounts 2014 a coaching and mentoring programme
being introduced, which particularly
focuses on supporting female employees
as they develop their careers; and
biannual chairman and ceo awards to
recognise employees’ contributions to the
business, in areas ranging from citizenship
to commercial acumen. winners are
selected after a comprehensive peer
nomination process, which encourages
positive feedback to, and recognition of,
employees at all levels of the business.
John gildersleeve
chairman of the nomination committee
principal reSponSiBiliTieS
of The nominaTion commiTTee
regular review of the structure, size
and composition of the Board.
recommendations to the Board with
regard to Board changes and Board-level
committee membership changes.
succession planning for Directors and
other senior executives.
identifying suitable candidates for Board
vacancies, to be nominated for Board
approval.
reviewing the leadership needs of the
company.
reviewing time commitments required
from non-executive Directors.
non-executive Directors’ letters of
appointment and recommendations
for re-election.
key areaS formally DiScuSSeD
anD revieweD By The commiTTee
During 2013/14 incluDe
review of Board and committees’:
− structure, size and composition; and
− skills, knowledge and experience
to ensure that they remain able
to discharge their duties and
responsibilities effectively and
to the required high standard.
richard Pym stepping down as a
non-executive Director of the company:
− consequent changes to Board-level
committee memberships; and
− the selection and appointment of Tim
score as a non-executive Director
and chairman of the audit committee.
succession planning, including
identification of potential internal
candidates for senior vacancies which
may arise on a crisis, short, medium
or long-term basis.
recommendations to the Board regarding
Directors retiring for re-election by
shareholders at the 2014 agm.
recommendations to the Board for the
renewal of the letters of appointment
of simon Borrows, william Jackson
and aubrey adams.
The policy throughout the company is
to employ the best candidates available in
every position, regardless of sex, race
(ethnic origin, nationality, colour), age, religion
or philosophical belief, sexual orientation,
marriage or civil partnership, pregnancy,
maternity, gender reassignment or disability.
applications for employment by disabled
persons are always fully considered, bearing in
mind the aptitudes of the applicants concerned.
in the event of members of staff becoming
disabled, every effort is made to ensure
that their employment continues and that
appropriate training is arranged. The policy
provides that the training, career development
and promotion of disabled people should,
as far as possible, be identical to that of
other employees.
SucceSSion planning
succession planning is a key area of focus
for the nomination committee, and for each
role potential successors have been identified
for crisis, short, medium and long-term
timescales. successors for Board, senior
executive and executive positions are
considered by the committee. The annual
strategy Days are an opportunity for the
committee to discuss succession planning
in conjunction with the full Board of Directors.
Developing people aT BriTiSh lanD
The Board recognises the importance
of developing people at British Land,
particularly in relation to succession planning
for senior positions within the company.
People development was a core topic discussed
at the Board’s strategy Days in February
2014, as well as being considered by the
nomination committee. having ‘expert
people’ is one of the four core focus areas
of our business model.
expert people
P28–29
During the year a new Director of human
resources, Joff sharpe, was appointed and a
number of new initiatives are being developed
to recognise and grow internal talent, including:
the introduction of a formal talent review
process to strengthen the company’s
approach to identifying high-potential
employees and tailoring development
plans for them;
People management and Leadership
Development programmes being rolled out;
81
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 REmunERation REpoRt
this year you are asked to vote separately
on our Remuneration policy and our
Remuneration implementation Report.
our Remuneration policy is set out first
on pages 84 to 93 and the Remuneration
implementation Report that shows pay for
2013/14 follows this. Both parts are in the
format required by the Large and medium-
sized Companies and Groups (accounts and
Reports) (amendment) Regulations 2013.
the vote on the Remuneration policy is
binding and the vote on the Remuneration
implementation Report is advisory.
RemuneRation PhilosoPhy
at British Land, our objective is to deliver
superior total shareholder returns;
to achieve this we must produce consistent
outperformance of our peers over a sustained
period of time, through focusing our efforts
on the activities that we believe will be most
value-enhancing to shareholders. We do this
by creating places people prefer. pages 30
to 37 in our Strategic Report describe how
we deliver this strategy and manage risk.
We ensure that we have strong alignment of
management incentives with our stated
strategy, thereby matching the interests of the
Directors with those of the shareholders. the
different elements of Directors’ remuneration
packages at British Land have been carefully
chosen so that they are supportive of and
relevant to the four focus areas of our business
model: right places, customer orientation,
capital efficiency and expert people. pages 31
to 35 describe the link between our focus
areas and our key incentive measures. these
measures are regularly reviewed by the
Committee to ensure that this crucial link
is maintained.
as part of this, pay policy should provide
effective incentives for exceptional Company,
team and individual performance, with
significant upward and downward variability.
the Company targets a high-performance,
open and meritocratic culture where people
are motivated individually and as a team
to outperform competitors, subject to
maintenance of quality and security. the
business model is people-light and asset-heavy
– it leverages the work, skill and judgement
of a relatively small team over a large
value of assets. this means British Land’s
expectations of staff are high and there
is a scarcity value on proven performers.
When setting pay the Committee also bears
in mind that, as well as providing motivation
to perform, pay plays an important role in
attracting and retaining the most talented
employees. our policy needs to be competitive
with alternative employment opportunities.
in the current environment the Committee
recognises that a listed company’s
remuneration policy can be a contentious
issue; as such, consultation with shareholders,
regular policy reviews and clear, transparent
reporting are essential to ensure that British
Land’s Remuneration policy meets the
requirements of its shareholders.
this approach has led us to use two main
structures within each Director’s remuneration
package. Firstly, we have basic salary and
benefits that are fixed annually at norms broadly
consistent with the Company’s FtSE position,
with appropriate variance for specialist
positions. Secondly, each Director’s annual
incentive and share scheme awards (under the
matching Share plan (mSp) and Long-term
incentive plan (Ltip)) are variable; their
magnitudes reflect both Company performance
and the performance of the Director’s specific
areas of responsibility. these variable elements
can move total pay above median into the upper
quartile, but only for upper quartile
performance. the amount received is strongly
linked to outperformance of our peers, hitting
our challenging goals, share price performance
and meeting the Company’s strategic targets
over one and three-year time horizons.
Full details of the approach including the
performance measures and maximum
amounts are set out in the Remuneration policy.
substantial changes maDe
DuRing the yeaR
our Ltip expired in July 2013 and we asked
you to approve a new Ltip. after detailed
consultation with shareholders and
shareholders’ advisory bodies the following
changes were introduced:
the Ltip performance condition was
changed so that 50% will be measured
by comparing British Land’s annual total
property Return against ipD’s annual uK
total property Return, as this best measures
our business strategy of targeting property
outperformance. the other 50% of the
condition will measure our total accounting
Return against 16 FtSE 350 peers, as this
best measures our business strategy of
producing outperformance at the return
on capital level and takes into account
naV per share and dividends.
DeaR shaReholDeR,
it is my pleasure to introduce
our new format Remuneration
Report.
82
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 to support the ‘one team’ approach, the
Chief Executive’s maximum annual incentive
award was reduced from 180% of basic
salary to 150%, and his Ltip maximum
award value was reduced from 250%
of basic salary to 200% – these changes
brought the Chief Executive in line with
the other Executive Directors;
to reflect shareholder views, the vesting
percentage for median performance under
the mSp was reduced from 35% to 25%;
the number of companies within the
mSp total shareholder return measure peer
group was increased from five to 16. this
is the same peer group used under the Ltip
total accounting Return measure; and
clawback provisions were introduced within
the new Ltip and the mSp awards.
the new Ltip and the Remuneration Report
received overwhelming support from you at
the aGm in July 2013 with votes in favour of
over 96% and 98% respectively. the detailed
results of the voting are set out on page 107.
Salaries for Executive Directors were not
increased on 1 april 2013.
context of Decisions maDe in 2013/14
as you will see from our financial results the
Company has performed strongly throughout
the financial year, meeting or exceeding all
but one of its targets. Details of British Land’s
performance and the targets set for the next
financial year can be found on pages 97 and
94 respectively.
no salary increases for Executive Directors
were given on 1 april 2014, as the current
salary levels remain correctly positioned
in the market around the median of our
comparator group.
Following the detailed consultation and
changes made in 2013/14 it is not proposed
that any further changes be made to our
Remuneration policy at the present time.
We very much valued your comments and
support for our Remuneration policy last
year and hope that you will continue to be
supportive of our Remuneration policy and
our Remuneration implementation Report
at our aGm in July.
lord turnbull
Chairman of the Remuneration Committee
key activities of the RemuneRation
committee 2013/14
approval of the 2012/13 Remuneration
RemuneRation RePoRt
82–107
Remuneration policy
Remuneration implementation Report
84
94
Report.
Review of Company performance
against targets for 2012/13.
approval of Company and Directors’
performance objectives for 2013/14.
Review of:
− Chief Executive’s Remuneration;
− Executive Directors’ salaries and
bonuses;
− employees’ salaries and bonuses; and
− the Committee’s response to the
Financial Reporting Council’s Directors’
Remuneration Consultation.
approval of discretionary share scheme
grants and vestings.
approval of all-employee share scheme
grants.
Consideration of the new regulations
applying to the 2013/14 Remuneration
Report and the binding shareholder vote
on Remuneration policy at the 2014 aGm.
RemuneRation committee membeRs
lord turnbull
Chairman of the
Remuneration
Committee and
Senior independent
Director
Dido harding
William Jackson
member
member
RemuneRation committee attenDees
alan Judes1
attends by invitation
anthony braine
attends as Secretary
to the Committee
Strategic
Remuneration,
Committee’s
independent advisor
Group Secretary
John gildersleeve
attends by invitation
Chairman of the
Company
chris grigg
attends by invitation
Chief Executive
Joff sharpe
attends by invitation
Human Resources
Director
1 the Committee has appointed alan Judes as its
independent advisor. Further detail is provided in the
‘Consideration by the Directors of matters relating
to Directors’ remuneration’ paragraph on page 107.
83
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
REmunERation poLiCy
the following Remuneration
policy is designed to attract
the right people to British Land
and to reward the Executive
Directors for performance
that supports British Land’s
strategy.
the policy will take effect from 18 July 2014,
pursuant to shareholder approval of the policy
at the annual General meeting on that day.
benefits
the elements contained in Directors’ usual
remuneration packages are summarised
to the right.
executive DiRectoRs’ RemuneRation Policy
chairman
non-executive
Directors
executive Directors
chairman’s fee
fees
basic salary
annual incentive
fixed
variable
benefits
Pension/pension
allowance
all-employee share
schemes
matching
share Plan
long-term
incentive Plan
comPonent anD PuRPose
oPeRation
maximum oPPoRtunity
PeRfoRmance measuRes
not applicable.
maximum levels of salary will not
be greater than the upper quartile
of the chosen comparator group.
typically increases, if required,
will be in line with inflation and
general salary increases across
the Company.
Executive Directors’ fees for
sitting on the boards of certain
subsidiary companies are capped
at a maximum of £1,500 per
annum in aggregate, for all
qualifying appointments.
not applicable.
the maximum car allowance
permitted under the policy is
£20,000 per annum.
the maximum cost of the other
taxable benefits permitted under
the policy is the amount required
for the Company to continue
providing these benefits at a
similar level year-on-year.
Salaries are reviewed annually
by the Remuneration Committee,
with any increases taking effect
on 1 april for the following year.
Levels of basic salary are
positioned around the median of
the chosen comparator group,
which consists of FtSE 100
companies with broadly similar
market capitalisations. When
setting the level of basic salary,
the Committee will take into
account the Executive Director’s
responsibilities and, when
reviewing the salaries of the
Executive Directors, the Committee
will also take into account the
employment conditions and salary
increases awarded to employees
throughout the British Land Group.
in addition to their basic salary,
Executive Directors may be
eligible to receive fees for
sitting on the boards of certain
subsidiary companies.
the Company’s policy is to pay
a car allowance in lieu of providing
a Company car. the Executive
Directors are also provided with
private medical insurance, covering
themselves, their spouses and
any children under the age of 25;
access to independent actuarial,
financial and legal advice when
necessary; the option to take up
gym membership, which is paid for
in part by the Company; and certain
other benefits on substantially
the same basis as for all other
employees.
basic salary
the purpose of basic salary is to
attract the right people for the job.
the level of salary offered is
intended to attract and retain
high-calibre individuals,
with an appropriate degree
of expertise and experience.
taxable benefits
the purpose of the taxable
benefits receivable by the
Executive Directors is to form
part of a remuneration package
which will attract and retain the
best people for the Company.
84
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 executive DiRectoRs’ RemuneRation Policy
comPonent anD PuRPose
oPeRation
maximum oPPoRtunity
PeRfoRmance measuRes
the maximum level of annual
incentive which may be awarded
is equivalent to 150% basic salary;
the Committee may choose to
award no annual incentive if the
performance of the Company and/
or the individual has not met the
required standards to warrant
an award being made.
the maximum number of mSp
matching Shares receivable is
dictated by the size of the annual
incentive award.
the maximum face value of the
mSp matching Shares is equivalent
to two thirds of the value of the
annual incentive award, which
would equate to 100% of the value
of basic salary if the maximum
permitted level of annual incentive
was granted.
annual incentive
the purpose of the annual incentive
award is to reward performance
that supports the Company’s key
strategic priorities.
the level of annual incentive
award reflects both Company
performance and the Director’s
individual contribution over the
preceding year, against annually
tailored targets.
annual incentive awards are
made annually by the Committee
to the Executive Directors. Levels
of award are dependent on both
individual and Company
performance over the financial
year against measures determined
by the Committee. awards are
granted after the end of the
financial year when actual
performance has been measured.
one third of each Executive
Director’s annual incentive is
deferred and used to purchase
shares (mSp Bonus Shares)
under the matching Share plan,
as detailed below.
the Committee may require some
or all of the mSp Bonus Shares to
be forfeited at any time before the
three-year holding period elapses
if it is discovered that the annual
incentive with which they were
purchased was granted on the
basis of materially misstated
accounts or other data.
matching share Plan (msP)
the mSp is designed to ensure
that participants are focused
on long-term performance,
aligning their interests with those
of shareholders.
the mSp has two performance
measures; one measures total
shareholder return and one
measures gross income growth.
the Company’s aim is to
deliver superior total returns
to shareholders over time.
the mSp total shareholder return
performance measure directly
links the level of remuneration
received by participants with
the level of returns delivered
to shareholders.
Having the right assets in our
portfolio and managing them
the right way creates enduring
occupier demand for our
properties. this delivers long-term
growth in our rental income, which
in turn drives value creation.
the mSp gross income growth
performance measure links the
level of remuneration received to
the degree of growth in income,
thereby rewarding the creation
of value.
one third of the annual incentive
award is deferred and used to
purchase mSp Bonus Shares
which are deferred for a period
of three years from grant before
being released, during which time
the Executive Directors receive
any dividends paid on the mSp
Bonus Shares.
the Company makes a conditional
award of mSp matching Shares,
which matches the mSp Bonus
Shares on a 2:1 basis. the mSp
matching Shares are held for a
three-year performance period
following grant and the proportion
vesting, if any, is dependent on both
Company performance against the
mSp performance measures and
the mSp Bonus Shares being held
for the requisite three-year period.
Shares are immediately transferred
to the individuals upon vesting, along
with payments equivalent to the
dividends accrued on those shares.
During the three-year performance
period, the Committee may require
some or all of the mSp matching
Shares that have been granted but
have not yet vested to be forfeited
if it is discovered that they were
awarded on the basis of materially
misstated accounts or other data.
targets relate to the Company’s
strategic focus areas as well as
each Director’s individual areas
of responsibility. tailored Company
and individual targets are set by
the Committee at the beginning
of the financial year over which
performance will be assessed. the
annual incentive targets are not
strictly weighted; when determining
the level of a Director’s annual
incentive award the Committee
will take into account performance
against all of the quantitative and
qualitative Company targets, as
well as the individual’s targets,
over the year and make an
assessment in the round.
if actual performance averaged
over all targets is equal to the
median level of performance, the
annual incentive award granted
will be equivalent to 37.5% of basic
salary. up to 75% of basic salary
is payable for performance that is
in line with expectations. if average
performance is below the median
level of performance, no annual
incentive award will be granted.
mSp performance is assessed
against two equally weighted
performance measures. one
performance measure assesses
the Company’s total shareholder
return (tSR) against that of a
comparator group; the other
assesses the Company’s gross
income growth (GiG) against
that of the investment property
Databank (ipD) uK annual
property index.
the comparator group against
which tSR is measured is
determined prior to each
performance period and consists
of FtSE 350 property companies.
it may be amended during a
performance period if there
is a corporate event affecting
any member of the Group.
the mSp vesting hurdles are
stepped, requiring high levels of
outperformance for 100% of the
mSp matching Shares to vest. 25%
of the mSp matching Shares will
vest if the minimum performance
threshold is met. performance
below the minimum threshold
will result in the entire award
of mSp matching Shares lapsing.
85
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 REmunERation poLiCy
ContinuED…
executive DiRectoRs’ RemuneRation Policy
comPonent anD PuRPose
oPeRation
maximum oPPoRtunity
PeRfoRmance measuRes
the maximum value of Ltip
award which may be granted is
equivalent to 200% of basic salary;
the actual value of award granted
within this limit is determined
by the Committee. For these
purposes, the value of an Ltip
award is the aggregate fair value
of the relevant performance
shares and/or options at the date
of grant.
the fair value of a performance
share is the average market value
of the Company’s shares over the
three dealing days immediately
preceding the grant date, and the
fair value of an option is such
fraction of that average market
value as the Committee sets
from time to time. this fraction
is currently one quarter, but the
Committee may change the
fraction as it sees fit to reflect
the economic models used by
the Company for the valuation
of options.
Ltip awards are discretionary,
therefore the Committee is
under no obligation to grant
an Ltip award to a Director.
two equally-weighted
performance measures are used
to assess Ltip performance.
the first performance measure
assesses the Company’s total
property return against that
of the index.
the second performance
measure assesses the Company’s
total accounting return (taR)
(which measures change in naV
plus dividends paid) against the
total accounting return of a chosen
peer group of FtSE 350 property
companies. the comparator
group against which the
taR condition is measured is
determined prior to each
performance period and may be
amended during a performance
period if there is a corporate
event affecting any member
of the group.
the Ltip vesting hurdles are
stepped, requiring high levels
of outperformance for 100%
of the Ltip awards to vest. 25%
of the Ltip award will vest if the
minimum performance threshold
is met. performance below the
minimum threshold will result
in the entire Ltip award lapsing.
long-term incentive Plan (ltiP)
the Ltip is designed to ensure
that participants are focused on
long-term performance, aligning
their interests with those of
shareholders.
the Ltip has two performance
measures; one measures total
property return and one
measures total accounting return.
the Ltip total property return
performance measure rewards
strong performance at the
property level, assessing British
Land’s performance against the
investment property Databank
uK annual property index (the
index). the index has been
chosen as it contains property
valued at £154 billion, representing
294 entities and funds as at
31 December 2013, so provides
a large enough sample to be a
statistically relevant benchmark
against which to assess our
property performance. the level
of remuneration received under
this performance measure is
linked to the degree that British
Land outperforms the index.
British Land aims to deliver
superior total returns to
shareholders over time. We
believe that concentrating on
achieving strong total accounting
returns will translate into
delivering strong total shareholder
returns in the long-term.
the Ltip total accounting return
performance measure links the
level of remuneration received
to the level of total accounting
return achieved, thus rewarding
performance which we believe
will lead to superior shareholder
returns over time.
Both Ltip performance measures
assess the Company’s ability to
choose the right sectors to invest
in and are appropriate measures
in fluctuating property markets,
as the vesting hurdles use
quartiles, not fixed percentage
outperformance of the median.
Ltip awards are made annually
by the Committee to the Executive
Directors and may consist of
performance shares and/or
options. Each Director can
indicate a preference as to the
proportions of the award they
wish to receive as performance
shares (i.e. conditional rights
to receive shares) and market
value options.
the value used to determine the
number of performance shares
and/or options granted is the fair
value, as described in the next
column. the fair value of an
option is based on the accounting
cost and expected life of an
option. the cost to the Company
of an award is the same
regardless of whether it is
comprised of options or
performance shares, and
allowing the Director to indicate
a preference as to the proportions
of options and performance
shares they receive increases the
perceived value of the incentive.
the exercise price of any options
comprised in the award will be
the average market value of the
Company’s shares over the three
dealing days immediately
preceding grant.
Ltip awards are held for a three-
year performance period
following grant, and the
proportion vesting, if any, is
dependent on Company
performance against the Ltip
performance measures. any
vesting performance shares will
immediately be transferred to the
Directors, along with payments
equivalent to the dividends
accrued on those performance
shares and the interest on those
deferred dividends. any vesting
options can be exercised at any
point during the seven years
following vesting; the exercise
price being paid by the Director.
the Committee may require
some or all of the performance
shares or options that have been
granted but have not yet vested or,
in the case of options, have vested
but have not yet been exercised,
to be forfeited if it is discovered
that they were awarded on the
basis of materially misstated
accounts or other data.
86
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 executive DiRectoRs’ RemuneRation Policy
comPonent anD PuRPose
oPeRation
maximum oPPoRtunity
PeRfoRmance measuRes
other items in the nature
of remuneration
Executive Directors are eligible
to participate in the Company’s
two HmRC-approved, all-
employee share schemes, the
Share incentive plan (Sip) and
the Sharesave Scheme. Both
schemes encourage employees,
including Executive Directors,
to build a holding of shares
in the Company.
Executive Directors are also
eligible to receive non-taxable
benefits, designed to form part
of a remuneration package
which will attract and retain the
best people for the Company.
Pension
the Company aims to provide
the Executive Directors with
an appropriate level of pension
on retirement as part of a
remuneration package that
will attract and retain the best
people for the Company.
not applicable.
not applicable.
the maximum opportunity under
the Sip and Sharesave Scheme
is set by the rules of the Schemes
and is determined by the statutory
limits. to achieve the maximum
opportunity permitted by the
rules of each scheme, the
Director must contribute the
maximum permitted monthly
amount (deducted from salary)
to purchase shares or fund
options under the scheme.
the maximum cost of the non-
taxable benefits permitted under
the policy is the amount required
for the Company to continue
providing these benefits at a
similar level year-on-year. Such
benefits are provided on similar
terms to all eligible employees.
the maximum accrual rate
for a defined benefit member
is that which will give the target
benefit at age 60, subject to the
accrual rate being no greater
than one thirtieth and no less
than one sixtieth of salary.
the target benefit is the pension
that can be provided by the
£1.8 million lifetime allowance
at 31 march 2012, uplifted by
Rpi from that date.
Employer pension contributions
to Executive Directors eligible for
the defined contribution scheme
are made at a fixed percentage
of salary, between 15% and 35%.
Executive Directors participate
in the Sip and the Sharesave
Scheme on the same basis as
other eligible employees.
Executive Directors are eligible
to receive non-taxable benefits
including life assurance cover,
under which a lump sum of four-
times basic salary will be paid
out on the event of death in
service; permanent health
insurance, under which 75%
of basic salary will be paid to
the Director in the event of long-
term absence due to certain
medical reasons; annual
medical checks; any relevant
professional subscription fees
and certain other benefits on
substantially the same basis
as for all other employees.
Executive Directors who joined
the Company before 2006 accrue
benefits under the defined
benefit scheme, which is now
closed to new members. their
accrual rates are determined
by the rules of the scheme and
are dependent on the age at
which they joined the Company.
Benefits up to the limit permitted
by the tax legislation are
provided in a registered plan.
Benefits over that limit are
provided in an employer financed
retirement benefit scheme
(EFRBS). EFRBS participants
can choose annually whether
they wish to be EFRBS
members, or to receive a
cash payment in lieu.
Directors who joined, or join,
the Company after 2006 are
eligible to be members of the
defined contribution scheme.
Directors may choose whether
contributions are made into the
Company’s defined contribution
scheme or into their own
personal pension plan, or may
elect to take all or part as cash
in lieu of pension contributions.
87
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 REmunERation poLiCy
ContinuED…
chaiRman anD non-executive DiRectoRs’ RemuneRation Policy
comPonent anD PuRPose
oPeRation
maximum oPPoRtunity
PeRfoRmance measuRes
the maximum annual fee will not
be greater than the upper quartile
of the chosen comparator group.
typically increases, if required,
will be in line with inflation.
not applicable.
the maximum opportunity is the
cost to the Company of providing
this grossed-up taxable benefit
at a similar level each year.
not applicable.
not applicable.
the maximum aggregate
amount of basic fees payable
to all non-Executive Directors
shall not exceed the £600,000
limit set in the Company’s
articles of association.
chairman’s annual fee
the level of the Chairman’s annual
fee is intended to attract and retain
a high calibre individual with an
appropriate degree of expertise
and experience.
chairman’s benefits
Benefits are provided to facilitate
the Chairman’s travel in the
fulfilment of his or her duties.
non-executive Directors’ fees
Fees are set to take into account
the level of responsibility,
experience and abilities required,
as well as to reflect attendance at
Board and Committee meetings.
the annual fee of the Chairman
is a matter for the Remuneration
Committee and is reviewed
annually. the level of the
Chairman’s annual fee is
positioned around the median
of our chosen comparator
group, which consists of FtSE
100 companies with broadly
similar market capitalisations.
the Chairman is provided with
a car and chauffeur.
the remuneration of the non-
Executive Directors is a matter
for the Executive Directors,
and fees are reviewed annually.
non-Executive Directors receive
a basic annual fee, along with
additional fees if they hold the
position of Senior independent
Director or Committee Chair,
plus a fee for each Board or
Committee meeting attended.
the Company’s policy is to
deliver a total fee at a level in
line with similar positions at our
chosen comparator group, which
consists of FtSE 100 companies
with broadly similar market
capitalisations. the non-
Executive Directors’ fee
structure is designed so that
full attendance at Board and
Committee meetings is required
to achieve a total fee that is in
line with our comparator group.
the Company may reimburse
expenses reasonably incurred
by the non-Executive Directors
in fulfilment of the Company’s
business, together with any
taxes thereon.
88
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 hoW the vaRiable elements of ouR Policy oPeRate
annual incentive and matching share Plan
long-term incentive Plan
Annual Incentive award magnitude
dependent on Company and individual
performance over year.
LTIP award granted: consists of performance
shares and/or market value options.
Two thirds paid as cash
on award.
One third deferred to
purchase MSP Bonus
Shares. Conditional
award of MSP
Matching Shares
granted, subject to
performance
measures.
Performance measures assessed over
three years.
Performance measures assessed
over three years.
Number of
performance shares
released dependent
on performance.
Number of options
vesting dependent
on performance.
Exercisable for a
further seven years.
MSP Bonus Shares released. Number of
MSP Matching Shares vesting dependent
on performance.
notes to the RemuneRation
Policy table
Remuneration Policy for other employees
Salary reviews across the Group are carried
out on the same basis as salary reviews for
the Executive Directors; consideration is given
to the individual’s role, duties, experience
and performance, along with consideration
of typical salary levels of employees in similar
roles in comparable companies, where the
data is available.
Employees are entitled to taxable and non-
taxable benefits, with executives being entitled
to substantially the same benefits as the
Executive Directors.
all employees are eligible to receive an annual
incentive, the level of which will be dependent
on both individual and Company performance,
as for the Executive Directors.
Senior executives may be invited to take part
in the matching Share plan. Executives may
be granted Long-term incentive plan awards
and executives with responsibilities for the unit
trusts and Retail and office portfolios may be
eligible for awards under the Fund managers’
performance plan (Fmpp). the Fmpp is not
offered to Executive Directors.
all new employees join the Company’s defined
contribution pension scheme, on the same
terms as the eligible Directors other than the
Chief Executive. the Company’s all-employee
share schemes (the Sip and the Sharesave
Scheme) are also open to eligible employees.
long-term incentive Plan awards granted
prior to 2013
the current Long-term incentive plan (Ltip)
was approved by shareholders in 2013. Ltip
awards granted in 2012 and earlier are
assessed against a different performance
measure, under the rules of the previous Ltip
awards. performance is measured over the
three years following grant and vesting is
dependent on performance of the Company’s
net asset value per share compared to the
capital growth component of the ipD uK annual
property index. Vesting is stepped, requiring
stretching outperformance for 100% of the
performance shares and/or options granted to
vest. these performance hurdles are detailed
on page 98.
Pre-existing obligations and commitments
it is a provision of this policy that the Company
can honour all pre-existing obligations and
commitments that were entered into prior to
this Remuneration policy taking effect. the
terms of those pre-existing obligations and
commitments may differ from the terms of the
Remuneration policy and may include (without
limitation) obligations and commitments
under service contracts, long-term incentive
schemes, pension and benefit plans.
89
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 REmunERation poLiCy
ContinuED…
consiDeRations When setting
RemuneRation Policy
in drawing up the Remuneration policy, the
Committee took into account views expressed
by shareholders during meetings and
communicated in writing to the Company.
the Company engaged with its shareholders
via consultation meetings with investor bodies,
and by writing to its top 20 shareholders,
offering each a meeting to discuss
remuneration proposals.
the main topics that the Company discussed
with its shareholders in 2013 when drawing up
the current policy were the introduction of a
general clawback arrangement for deferred
variable pay, changing the performance targets
for the Ltip and reducing the annual incentive
and Long-term incentive entitlements of the
Chief Executive. the shareholders’ reactions
to these changes were favourable. there have
been no changes in Remuneration policy
since then. However, we have discussed
our draft policy with investor bodies and
shareholders during the preparation
of this Remuneration Report.
Each year the Remuneration Committee
takes into account the pay and employment
conditions of employees in the Group, noting
the general increase in salary proposed
for all employees and levels of incentive
payments and performance, before
setting the remuneration of the Directors.
the Committee did not consult with the
Company’s employees or use remuneration
comparison measurements when drawing
up the Directors’ Remuneration policy.
under the Cip a director may invest a maximum
of 125% salary (200% salary for a Chief
Executive) to purchase British Land shares,
these limits being determined by the Director’s
minimum shareholding guideline. the
Company will match the purchased Cip shares
on a 1:1 basis. all the Cip shares are then
deferred for three years, subject to the Director
remaining employed by the Group and holding
the shares for this time. Should the Director
leave the Group before the qualifying period is
completed, all of the matching shares will lapse
and the purchased shares will be released to
the Director. Dividends paid on the purchased
Cip shares during the vesting period are paid
directly to the Director; a dividend equivalent
payment is made on vesting to compensate
for dividends accrued on matching Cip shares.
the Committee will impose performance
measures on Cip awards, which must be
achieved over the three-year holding period
for the matching shares to vest. the Committee
will determine the most relevant measures
to use at the time of award, bearing in mind
the responsibilities of the individual being
appointed and the Company’s strategic
priorities at the time.
the Company’s policy is to give notice periods
of no longer than 12 months. However, when
recruiting an external candidate it may be
necessary to give an initial notice period
of up to 24 months; this reduces at the end
of 12 months’ work to 12 months.
the remainder of the package offered to a new
Executive Director would be in line with the
Company’s ongoing Remuneration policy.
aPPRoach to RecRuitment
RemuneRation
executive Directors
Basic salary is set at a level appropriate to
recruit a suitable candidate, taking into account
external market competitiveness and internal
equity. the level of basic salary may initially
be positioned below the median of the chosen
comparator group, with the intention of
increasing it to around the median of the
comparator group after an initial period of
satisfactory service.
Where a recruit is forfeiting incentive awards
granted by his or her existing employer,
compensation in the form of a Restricted Share
plan (RSp) award may be made (in accordance
with Listing Rule 9.4.2), the maximum value
of which will be that which the Committee,
in its reasonable opinion, considers to be equal
to the value of the awards which have lapsed.
Dividends paid on the RSp shares during the
vesting period are paid directly to the Director.
Vesting of the shares granted under the
RSp award will be subject to the Director
completing a minimum period of qualifying
service, so the award will not be released until
this condition has been satisfied. the vesting
of the RSp award may be subject to additional
performance measures being met over the
same period; the Committee will determine
the most relevant measures to use at the time
of award, bearing in mind the responsibilities
of the individual being appointed and the
Company’s strategic priorities at the time.
the Committee may choose to offer a
Co-investment Share plan (Cip) award to
a new Executive Director on recruitment
(in accordance with Listing Rule 9.4.2), to assist
the Director in building a holding of British
Land shares with the aim of further aligning
the Director’s personal interests with those
of British Land’s shareholders.
90
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 the circumstances of the loss of office dictate
whether the individual is treated as a good
leaver or otherwise, in accordance with
the Company’s policy. the Remuneration
Committee uses its discretion to form a view
taking into account the circumstances.
Good leavers typically receive pro-rata annual
incentive and Long-term incentive awards,
subject to performance measurement, and
other leavers forfeit their entitlements.
in the event of a change of control the rules
of the share plans generally provide for
accelerated vesting of awards, subject
(where applicable) to time apportionment
and achievement of performance targets.
all of the Company’s Executive Directors have
contracts that pre-date 27 June 2012 but these
do not contain contractual provisions that
could impact on the amount of any payment for
loss of office and which fall outside the policy.
Details of the Executive Directors’ service
contracts and notice periods are given in the
table below:
Director
chris
grigg
lucinda
bell
charles
maudsley
tim
Roberts
12 mths
10.03.11
12 mths 12 mths
12 mths
03.11.09
12 mths 12 mths
12 mths
14.11.06
12 mths 12 mths
the Company may terminate a Director’s
appointment with immediate effect without
notice or payment in lieu of notice under certain
circumstances, prescribed within the Director’s
service contract.
chairman and non-executive Directors
on recruitment, the Chairman will be offered
an annual fee and benefits in accordance with
the policy. the level of the annual fee may
initially be positioned below the median of the
chosen comparator group, with the intention
of increasing it to around the median of the
comparator group after an initial period of
satisfactory service.
non-Executive Directors will be offered
non-Executive Directors’ fees in accordance
with the policy.
appointment of internal candidates
if an existing employee of the Group is
appointed as an Executive Director, Chairman
or non-Executive Director, any obligation or
commitment entered into with that individual
prior to his or her appointment can be honoured
in accordance with the terms of those
obligations or commitments, even where
they differ from the terms of the policy.
Policy on loss of office
executive Directors
the Executive Directors’ service contracts can
be lawfully terminated by either party giving
12 months’ notice, or by the Company making
a lump sum payment in lieu of notice (piLon)
equal to the Executive Director’s base salary
for the notice period. additionally when the
Company makes a piLon, it may either pay a
lump sum equal to the value of any benefits for
the notice period or continue to provide benefits
until the notice period expires or the Executive
Director starts new employment (whichever
is the earlier). these lawful termination
mechanisms do not prevent the Company,
in appropriate circumstances, from terminating
an Executive Director’s employment in breach
of his or her service contract and seeking to
apply mitigation in determining the damages
payable. the Company’s policy, where possible,
is to structure any settlement arrangements in
such a way that the termination payment is paid
in instalments and to reduce the instalments
by an amount equal to any earnings received
from the outgoing Director’s new employment,
consultancy or other paid work.
Length
of service
contract
Date of
service
contract
normal
notice
period to
be given by
Company
notice
period to
be given by
Director
12 mths
19.12.08
12 mths 12 mths
William Jackson
11.04.141
tim score
lord turnbull
20.03.14
01.04.12
chairman and non-executive Directors
the letters of appointment of non-Executive
Directors are subject to renewal on a triennial
basis. in accordance with the uK Corporate
Governance Code, all Directors stand for
election or re-election by the Company’s
shareholders on an annual basis. the
Directors’ service contracts and letters of
appointment are available for inspection during
normal business hours at the Company’s
registered office and at the annual General
meeting. the unexpired terms of the
Chairman’s and non-Executive Directors’
letters of appointment are shown below:
Director
John
gildersleeve
(Chairman)
aubrey adams
simon borrows
Dido harding
Date of letter of
appointment
unexpired term
of appointment at
31 march 2014
01.01.13
21 mths
01.09.11
17.03.14
01.01.13
5 mths
36 mths
21 mths
36 mths
36 mths
12 mths
1 Letter of appointment renewed post year-end.
although the Chairman’s and non-Executive
Directors’ appointments are for fixed terms,
their appointments may be terminated
immediately without notice if they are not
reappointed by shareholders or if they are
removed from the Board under the Company’s
articles of association or if they resign and do
not offer themselves for re-election. in addition,
their appointments may be terminated by either
the individual or the Company giving three
months’ written notice of termination (or,
for the Chairman, six months’ written notice
of termination). Despite these terms of
appointment, neither the Chairman nor the
non-Executive Directors are entitled to any
compensation (other than accrued and unpaid
fees and expenses for the period up to the
termination) for loss of office for any reason.
91
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 CHRIS GRIGG
Chief Executive
Minimum
In line with
expectations
100%
£1,131,360
41%
22%
37%
£2,731,360
Maximum
24%
25%
LUCINDA BELL
Finance Director
Minimum
100%
£569,862
In line with
expectations
38%
23%
39%
£1,499,862
Maximum
22%
26%
CHARLES MAUDSLEY
Head of Retail and Leisure
Minimum
In line with
expectations
100%
£526,595
38%
23%
39%
£1,376,595
Maximum
22%
26%
TIM ROBERTS
Head of Offices and Residential
Minimum
In line with
expectations
100%
£538,929
39%
23%
38%
£1,388,929
Maximum
22%
26%
Minimum remuneration
Annual Incentive
Total long-term incentives
51%
£4,731,360
52%
£2,662,362
52%
£2,439,095
52%
£2,451,429
REmunERation poLiCy
ContinuED…
illustRations of aPPlication
of RemuneRation Policy
the following bar charts illustrate the levels
of remuneration receivable by the Executive
Directors under the Remuneration policy.
these illustrations have been prepared in
accordance with the Large and medium-sized
Companies and Groups (accounts and Reports)
(amendment) Regulations 2013 and do not
allow for share price appreciation between
grant and vesting of awards.
the scenarios given represent remuneration
receivable for minimum performance, for
performance that is in line with expectations
and for maximum performance.
For each scenario, the percentage that each
remuneration element represents of the total
remuneration package is shown, along with
the total value of the remuneration package.
Further detail on the underlying calculations
is shown in the tables on the facing page.
92
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 minimum performance
For minimum performance, no annual incentive or Long-term incentive awards will be made; each Director will receive only the minimum
remuneration, as detailed in the table below.
minimum remuneration1
annual
incentive2
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
Salary
£
800,000
465,000
425,000
425,000
Benefits4
£
44,160
29,857
30,645
30,333
SIP5
£
Pension4
£
7,200
280,000
7,200
67,805
7,200
63,750
7,200
76,396
total long-term incentives³
MSP Matching
Share Awards
£
LTIP awards
£
–
–
–
–
–
–
–
–
£
–
–
–
–
Performance in line with expectation
For performance in line with expectations, annual incentive awards will be granted at a level equivalent to 75% basic salary, mSp matching Share
awards are expected to vest at a level equivalent to 25% basic salary and Ltip awards are expected to vest at a level equivalent to 100% basic salary,
as detailed in the table below.
minimum remuneration1
annual
incentive2
total long-term incentives³
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
Salary
£
800,000
465,000
425,000
425,000
Benefits4
£
44,160
29,857
30,645
30,333
SIP5
£
Pension4
£
7,200
280,000
7,200
67,805
7,200
63,750
7,200
76,396
£
600,000
348,750
318,750
318,750
MSP Matching
Share Awards
£
200,000
116,250
106,250
106,250
LTIP awards
£
800,000
465,000
425,000
425,000
maximum performance
For maximum performance, the annual incentive will be granted and long-term incentive awards will vest at the maximum levels permitted by the
relevant schemes. annual incentive awards will be granted at a level equivalent to 150% basic salary, mSp matching Share awards are expected to vest
at a level equivalent to 100% basic salary and Ltip awards are expected to vest at a level equivalent to 200% basic salary, as detailed in the table below.
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
minimum remuneration1
annual
incentive2
total long-term incentives³
Salary
£
800,000
465,000
425,000
425,000
Benefits4
£
44,160
29,857
30,645
30,333
SIP5
£
Pension4
£
MSP Matching
Share Awards
£
£
7,200
280,000
1,200,000
7,200
67,805
7,200
63,750
7,200
76,396
697,500
637,500
637,500
800,000
465,000
425,000
425,000
LTIP awards
£
1,600,000
930,000
850,000
850,000
1 Executive Directors are eligible to participate in the Company’s all-employee Sharesave Scheme. the Sharesave options have not been included in the above bar charts.
Details of the Directors’ current Sharesave interests are provided on page 103. any profits on vestings under the Sharesave Scheme are included within the single total
figure of remuneration table.
2 one third of the annual incentive award value shown will be used to purchase shares, deferred for three years, under the Company’s mSp.
3 Figures include the fair values of Ltip awards granted, as described on page 86. Figures do not allow for share price appreciation or dividend equivalent payments.
4 it has been assumed that the values of taxable and non-taxable benefits receivable will be equal to those received in 2013/14, as there has been no change to the policy.
in practice the values may vary immaterially due to external factors, such as changes in the cost of providing life assurance or permanent health insurance.
the Directors’ differing pension arrangements are represented in the same manner as in the single total figure of remuneration table.
5 under the Company’s all-employee Share incentive plan each Director will be entitled to receive matching shares at nil cost, awarded by the Company, conditional on them
continuing to purchase shares under the Sip. the Directors may be entitled to receive free shares at nil cost, awarded annually by the Company, should this award be made
to all eligible employees. these figures assume the maximum permitted levels of matching and free shares are awarded during the year.
93
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 REmunERation
impLEmEntation REpoRt
PRoPoseD aPPlication of the Policy DuRing
the yeaR commencing 1 aPRil 2014
the Committee intends to apply the policy as follows during the year
commencing 1 april 2014:
annual incentive award
the targets against which annual incentive performance will
be assessed during the year are:
executive Directors’ basic salaries
Basic salaries have been set at the following levels for the year
commencing 1 april 2014; no increases have been made to basic salaries.
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
Basic salary
£
800,000
465,000
425,000
425,000
Quantitative targets:
accounting return: total naV-based return plus dividends relative
to property majors and ipD (total returns basis);
unlevered property capital returns relative to ipD;
rental growth above ERV and ipD; and
operating costs as a percentage of rents and assets against
budget and property majors.
Qualitative targets:
successful progress on developments;
successful execution of targeted acquisitions and disposals;
chairman and non-executive Directors’ fees
the following levels will apply for the Chairman’s and non-Executive
Directors’ fees paid during the year commencing 1 april 2014; no
increases have been made to the Chairman’s or the non-Executive
Directors’ fees.
successful execution of debt financings;
progress on strengthening the dividend;
quality of people and management renewal; and
Company reputation with all stakeholders.
all Executive Committee members (including the Executive
Directors) have a corporate responsibility target linked to their
annual incentive award.
chairman
annual fee
non-executive Directors
Basic annual fee
Senior independent Director fee per annum
Committee Chair fee per annum
attendance at Board meeting in person
attendance at Committee meeting in person
attendance at Board or Committee meeting by telephone
£351,750
£34,250
£9,450
£5,775
£4,200
£1,890
£840
94
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 long-term incentive Plan (ltiP)
the thresholds against which the Ltip performance will be assessed
are detailed in the tables below.
iPD total Property Return
Below median
median
top quartile
total accounting Return
Below median
median
top quartile
percentage
vesting
%
0
25
100
percentage
vesting
%
0
25
100
Each Ltip performance measure relates to half of the total award.
For both Ltip performance measures there will be straight-line vesting
between median and top quartile performance.
the comparator group against which performance will be assessed
for the taR performance measure is the same group as that against
which mSp tSR performance will be assessed, and has not been
changed since the 2013 Ltip award.
matching share Plan (msP)
the mSp is assessed against two equally weighted performance
measures. as each performance measure relates to half of the total mSp
award, no more than half of the total mSp award can vest if one of the
performance measures does not meet its minimum vesting threshold.
the performance thresholds are detailed in the tables below.
The Total Shareholder Return (TSR) Part
25% of the tSR part (i.e. 12.5% of the total mSp award) will vest if
British Land’s tSR performance is equal to the median tSR of the
comparator group. a further 18.75% of the tSR part will vest for
each 1% by which British Land’s tSR exceeds the median tSR
of the comparator group, up to a maximum of 100% of the tSR part
(i.e. 50% of the total mSp award) vesting.
The Gross Income Growth (GIG) Part
25% of the GiG part (i.e. 12.5% of the total mSp award) will vest if British
Land’s GiG performance is equal to the Growth Requirement (the Growth
Requirement being GiG over the three-year performance period that is
equal to that of the investment property Databank uK annual property
index). a further 25% of the GiG part will vest for each 0.5% (in absolute
terms) by which British Land’s annualised GiG exceeds the Growth
Requirement, up to a maximum of 100% of the GiG part (i.e. 50%
of the total mSp award) vesting.
the comparator group against which performance will be assessed
for the tSR performance measure consists of: Great portland Estates
plc, Hammerson plc, intu properties plc, Land Securities Group pLC,
SEGRo plc, Big yellow Group pLC, Capital & Counties pLC, Derwent
London plc, Grainger plc, Hansteen Holdings plc, Helical Bar plc,
Londonmetric property plc, St. modwen properties pLC, Shaftesbury
pLC, the unitE Group plc and uK Commercial property trust Ltd.
the Committee has not changed the composition of this comparator
group since the 2013 mSp award, when it was expanded to include
a broader range of property companies.
british land’s tsR relative to the comparator group
at the end of the performance period
Below median
median
Further vesting per each 1% tSR exceeds median
(to maximum of 100% matching shares)
british land’s gig rental growth relative to the
iPD benchmark at the end of the performance period
Below Growth Requirement
Equal to Growth Requirement
Further vesting per each 0.5% per annum
GiG exceeds Growth Requirement
(to a maximum of 100% of matching shares)
percentage
vesting
%
0
25
18.75
percentage
vesting
%
0
25
25
95
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 REmunERation impLEmEntation REpoRt
auDitED inFoRmation
ContinuED…
aPPlication of Policy DuRing the yeaR enDeD 31 maRch 2014
the following pages detail how British Land’s Remuneration policy has been implemented throughout the year ended 31 march 2014.
single total figuRe of RemuneRation table
all elements of remuneration received by the Directors during 2013/14 are disclosed in the following table, alongside the comparative figures from
2012/13. the Directors have confirmed to the Company, in writing, that they have not received any other items in the nature of remuneration beside
those detailed below.
Salary/fees
taxable benefits
annual incentive
Long-term incentives
other items
pension
total
executive Directors
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
chris grigg
800,000 800,000
20,253
19,802
1,080,000 1,080,000
2,715,766 2,601,859
29,907
28,370 280,000 280,000 4,925,926 4,810,031
lucinda bell
465,000 465,000
20,153
19,702
465,000
465,000
1,261,081
260,476
15,706
22,611
61,746
61,667 2,288,686 1,294,456
charles
maudsley
425,000 425,000
21,041
20,032
505,000 505,000 1,432,613 1,179,382
15,606
14,754
63,750
63,750 2,463,010 2,207,918
tim Roberts
426,500 426,500
20,411
19,502
505,000 505,000 1,154,192 1,121,138
15,924
23,543
70,764
69,817 2,192,791 2,165,500
stephen smith1
425,000
20,132
300,000
1,358,547
16,894
63,750
2,184,323
chairman and non-executive Directors
John
gildersleeve2
(Chairman)
chris gibson-
smith3
351,750
147,593
31,396
8,688
263,812
39,328
aubrey adams
71,244
69,320
simon borrows
70,702
60,920
Dido harding
69,530
67,640
William Jackson
72,470
68,480
Richard Pym4
30,313
82,445
tim score5
1,210
lord turnbull
85,808
81,946
1 Stephen Smith resigned as a Director of the Company on 31 march 2013.
2 John Gildersleeve was appointed as Chairman of the Company on 1 January 2013.
3 Chris Gibson-Smith resigned as a Director and Chairman of the Company on 31 December 2012.
4 Richard pym resigned as a Director of the Company on 5 September 2013.
5 tim Score was appointed a Director of the Company on 20 march 2014.
96
383,146
156,281
303,140
71,244
69,320
70,702
60,920
69,530
67,640
72,470
68,480
30,313
82,445
1,210
85,808
81,946
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014
notes to the single total figure of remuneration table
Notes to the single total figure of remuneration table: Taxable benefits
the figures shown in the ‘taxable benefits’ column are comprised as follows (all figures being gross values including tax):
Director
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
Chauffeur costs
Car allowance
private medical insurance
other taxable benefits1
total taxable benefits
John gildersleeve2
31,396
8,688
chris gibson-smith3
39,328
chris grigg
lucinda bell
charles maudsley
tim Roberts
stephen smith4
16,800
16,800
3,453
3,002
16,700
16,700
3,453
3,002
16,700
16,700
3,753
2,902
16,170
16,170
3,653
2,902
16,700
3,002
588
588
430
430
430
31,396
8,688
39,328
20,253
19,802
20,153
19,702
21,041
20,032
20,411
19,502
20,132
1 other taxable benefits includes Company contributions to gym membership.
2 John Gildersleeve was appointed as Chairman of the Company on 1 January 2013.
3 Chris Gibson-Smith resigned as a Director and Chairman of the Company on 31 December 2012.
4 Stephen Smith resigned as a Director of the Company on 31 march 2013.
Notes to the single total figure of remuneration table: Annual Incentive
the level of annual incentive is determined by the Remuneration Committee, based on the Company’s performance and the individual’s
contribution during the preceding year. the assessment for the year ended 31 march 2014 was undertaken with reference to performance
against the following quantitative and qualitative targets, using data available at the year-end:
2013/14 targets
Quantitative targets
accounting return – total naV-based return
plus dividends relative to property majors
and ipD (total return basis)
2013/14 performance
accounting return was above the average of the property majors and total property return
outperformed ipD.
unlevered property capital returns relative to ipD
the Company outperformed ipD at all property levels.
Rental growth above ERV and ipD
Both sectors performed well, with rental growth ahead of both ERV and ipD.
operating costs as a percentage of rents and assets
against prior year and property majors
operating costs have decreased as a percentage of asset values but increased as a percentage of rents;
operating costs were still below budget. the Company maintained its market leading operating costs
ratio compared to other property majors.
Qualitative targets
Successful progress on developments
the 2010 development programme has seen completion of four major developments during the
year and delivered £608 million of profit to date. the development pipeline has been replenished,
ten significant retail projects are underway or approaching completion and planning consent has
been secured for a number of developments including Clarges and the Hempel.
Successful execution of targeted acquisitions
and disposals
£1,033 million of acquisitions and £710 million of disposals (British Land share) during the year
to 31 march 2014, including strategic disposals of European assets.
Successful execution of debt financings
£1.5 billion of new debt finance arranged during the year to 31 march 2014.
progress on strengthening the dividend
Full-year dividend increased by 2.3% for the year ended 31 march 2014.
Quality of people and management renewal
Strengthened the Human Resources function, including appointing a new HR Director.
new strategies and priorities agreed for the coming year.
Company reputation with all stakeholders
Retained our 1* times 100 rating for employee satisfaction. over 77% of head office staff supported
community volunteering projects during the year and over £1 million was donated to good causes.
Corporate responsibility
CR successes include retaining our Dow Jones Sustainability index score of 70; remaining as a member
of the DJSi World and Europe indices; being ranked joint first in the FtSE 350 Carbon Disclosure project
performance Leadership index; being recognised as the leading REit for Community and Environmental
Responsibility in the management today’s most admired Companies in Britain.
the maximum annual incentive award achievable is 150% of base salary. taking into account the above performance, the Remuneration Committee,
set the aggregate annual incentive received by the Executive Directors for the year ended 31 march 2014 at 80% of the maximum (121% of base salary)
(as compared with 70.5% of the maximum in 2012/13).
one third of each Executive Director’s annual incentive award shown above was deferred and used to purchase mSp Bonus Shares, subject to a
three-year holding requirement under the Company’s matching Share plan. no further performance measures apply to these deferred shares.
the mSp is described on page 85.
97
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
REmunERation impLEmEntation REpoRt
auDitED inFoRmation
ContinuED…
Notes to the single total figure of remuneration table: Long-Term Incentives
the figures for the ‘Long-term incentives’ column are comprised of award vestings under three share schemes: the 2011 Long-term incentive plan
(Ltip), the 2011 matching Share plan (mSp) and, for Charles maudsley and Stephen Smith’s 2012/13 comparative figures only, the Charles maudsley
2010 Co-investment Share plan and the Stephen Smith 2010 Co-investment Share plan.
the performance measure attached to awards under the 2011 Ltip measures the growth in the Company’s net asset value (naV) per share
against the capital growth component of the investment property Databank uK annual index (the index), over a performance period of three years
commencing at the start of the financial year in which the awards were granted. Growth in the Company’s net asset value per share has to exceed
that of the index for a minimum proportion of the award to vest. Stretching outperformance is required for the entire award to vest, as detailed below.
Percentage by which the average annual growth of british land’s net asset value per share exceeds
the average annual increase in the capital growth component of the investment Property Databank uk annual index
4.5% or more
3.5% or more but less than 4.5%
2.5% or more but less than 3.5%
1.5% or more but less than 2.5%
0.5% or more but less than 1.5%
more than 0% but less than 0.5%
0% or less
percentage
vesting
%
100
80
60
40
20
10
0
the vesting values of the 2011 Ltip awards, due to vest on 28 June 2014, have been calculated using the average mmQ for the period from 1 January
2014 to 31 march 2014 (667.7143 pence) as the vesting share price. aon Hewitt has calculated that the 2011 Ltip will vest at a rate of 100%, reflecting
British Land’s growth in naV of 6.7% per annum during the performance period, compared to the index increasing by 1.4% per annum. this produces
the following estimated values on vesting:
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
Ltip award date
28.06.2011
28.06.2011
28.06.2011
28.06.2011
number of
options
awarded1
695,652
award price
(exercise price)
p
number of
performance
shares
awarded1
173,913
147,826
147,826
575
575
575
575
73,913
295,652
percentage
of award
vesting
%
Estimated
value of
award on
vesting
£
Estimated
dividend
equivalent
payment due
including
interest
£
100
100
100
100
1,806,211
138,834
987,055
118,009
987,055
118,009
767,639
59,004
1 For the 2011 Ltip award Chris Grigg and tim Roberts received their awards as mixtures of options and performance shares; Lucinda Bell and Charles maudsley received
their entire awards as performance shares.
the mSp performance is assessed using two equally-weighted
performance measures, each relating to half of the total mSp matching
Share award. For the 2011 mSp matching Share award one performance
measure was based on total Shareholder Return (the tSR part); the
other on the Company’s gross income growth (the GiG part). the table
above shows the performance required by the Company’s tSR compared
to a comparator group of companies across the three-year performance
period for any matching Shares to vest under the tSR performance
condition. For the 2011 mSp award the comparator group consisted of
Great portland Estates pLC, Hammerson pLC, Land Securities Group
pLC, intu properties pLC and Segro pLC.
For the second mSp performance measure, the Company’s gross
income growth during the three-year performance period needed
to at least equal that of the investment property Databank uK annual
index (the Growth Requirement) for any mSp matching Shares to vest,
as shown below.
british land’s gig relative to the investment Property Databank
uk annual index at the end of the performance period
Below Growth Requirement
Equal to Growth Requirement
percentage of
award which vests
%
0
35
21.67
british land’s tsR relative to the comparator group
at the end of the performance period
Below median
median
Further vesting per each 1% tSR exceeds median
(to a maximum of 100% of notional Shares)
percentage of
award which vests
%
Further vesting per each 0.5% per annum
GiG exceeds Growth Requirement
(to a maximum of 100% of matching Shares)
0
35
16.25
98
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014
the vesting values of the 2011 mSp award, due to vest on 24 may 2014, have been calculated using the average mmQ for the period from 1 January 2014
to 31 march 2014 (667.7143 pence) as the vesting share price. aon Hewitt has confirmed the tSR performance of the comparator group which will
result in vesting at a rate of 76.9%, as British Land’s tSR over the performance period was 40% compared to a median of 37.5% for the comparator
group. it is estimated that the GiG part will vest at a rate of 78%; the actual vesting rate will be calculated once the relevant figures are published by
the index. this produces the following estimated values on vesting:
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
mSp award date
24.05.2011
24.05.2011
24.05.2011
24.05.2011
number of
matching shares
awarded
percentage
of award
predicted to vest
%
Estimated
value of award
on vesting
£
Estimated dividend
equivalent
payment due
£
133,222
26,968
56,618
56,618
77.45
77.45
77.45
77.45
688,951
139,464
292,797
292,797
81,770
16,553
34,752
34,752
the 2012/13 Long-term incentives comparator figures for Charles maudsley and Stephen Smith include the vestings of their respective Co-investment
Share plan awards (the Charles maudsley 2010 Co-investment Share plan and the Stephen Smith 2010 Co-investment Share plan). the vestings
of these awards are detailed on page 107 of the 2013 annual Report.
Stephen Smith stood down as a Director of the Company on 31 march 2013 and remained in the Company’s employment until 30 June 2013;
his termination payment provisions are detailed on page 101 of the 2013 annual Report. the 2012/13 Long-term incentives comparator figure for
Stephen Smith includes the vesting of his 2010 Ltip award, which consisted of 190,156 performance shares and vested at 60%, as scheduled, before
he left the Company’s employment. the 2012/13 comparator figure also includes the vesting of his 2010 mSp award. the mSp award was pro-rated
to reflect departure date, as disclosed in the 2013 annual Report, resulting in 10,262 matching shares vesting and 604 matching shares lapsing.
Dividend equivalents accrued on all vesting Long-term incentive share awards are also included within the ‘Long-term incentives’ column, along
with the interest accrued on dividend equivalents paid on vesting Ltip shares.
Notes to the single total figure of remuneration table: other items in the nature of remuneration
the values shown in the ‘other items’ column comprise the Executive Directors’ interests under the Company’s all-employee share schemes (the
Share incentive plan (Sip) and the Sharesave Scheme) and non-taxable benefits received by the Directors during the year, as shown in the table below.
these share schemes are offered on the same terms to all eligible employees of the Company. the figures shown are the values of free and matching
shares awarded under the Sip during the year and the notional gain on the vesting of any Sharesave options during the year. Further details of the
Executive Directors’ Sharesave Scheme interests can be found on page 103.
Life assurance
permanent health
insurance
other non-taxable
benefits1
matching and free
shares awarded
under the Sip
Vesting of
sharesave options
total
other items
Director
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
2013/14
£
2012/13
£
chris grigg
10,047
9,303
13,335
12,573
lucinda bell
2,238
2,267
6,941
6,241
525
525
500
860
6,000
5,994
29,907
28,370
6,002
5,994
7,249
15,706
22,611
charles maudsley
2,360
2,375
6,113
5,690
1,131
695
6,002
5,994
15,606
14,754
tim Roberts
2,360
2,375
6,344
5,704
1,218
3,672
6,002
5,994
5,798
15,924
23,543
stephen smith2
4,710
5,690
500
5,994
16,894
1 other non-taxable benefits include annual medical checkups and relevant professional subscription fees.
2 Stephen Smith resigned as a Director of the Company on 31 march 2013.
Notes to the single total figure of remuneration table: pension
the figures shown in the ‘pension’ column represent the differing pension arrangements of the Executive Directors. Chris Grigg receives 35%
of basic salary as cash in lieu of pension. Charles maudsley receives a pension allowance of 15% of basic salary, of which £13,750 was paid as cash
in lieu of pension contribution over the £50,000 annual allowance for the year ended 31 march 2014.
Lucinda Bell and tim Roberts earned pension benefits in defined benefit schemes sponsored by the Company during the year; the increase in
value over the year of their respective pensions is shown in the single total figure of remuneration table and further detail is provided on page 101.
99
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
REmunERation impLEmEntation REpoRt
auDitED inFoRmation
ContinuED…
scheme inteRests aWaRDeD DuRing the financial yeaR
awards granted under the long-term incentive Plan
the total fair value of each Director’s Ltip award for the year ended 31 march 2014 was equivalent to 200% basic salary at grant. at grant each
Director can indicate a preference as to the proportion of the award that they wish to receive as performance shares and the proportion that they
wish to receive as market-value options. the share price used to determine the face value of performance shares and fair value of options – and
therefore the number of performance shares and/or options awarded – is the average market value of the Company’s shares over the three dealing
days immediately prior to the day of award. the proportion of the award that vests, if any, is dependent on Company performance against the Ltip
performance measures over the three years following grant. these are detailed on page 95.
Performance shares
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
Options
Director
lucinda bell
Grant date
05.08.2013
05.08.2013
05.08.2013
05.08.2013
number of
performance
shares granted1
266,222
116,056
141,430
141,430
Face value
£
1,599,994
697,497
849,994
849,994
End of
performance
period
31.03.2016
Vesting date
05.08.2016
31.03.2016
05.08.2016
31.03.2016
05.08.2016
31.03.2016
05.08.2016
Grant date
number of
options
granted1
Face value
£
Fair value2
£
Exercise price3
p
End of
performance
period
Vesting date
percentage
vesting on
achievement
of minimum
performance
threshold
%
25
25
25
25
percentage
vesting on
achievement
of minimum
performance
threshold
%
05.08.2013
154,742
929,999
232,500
601
31.03.2016
05.08.2016
25
1 Lucinda Bell received her award as a mixture of performance shares and market-value options. the other Executive Directors received their entire awards as performance
shares.
2 options are currently valued at one quarter of the value of a performance share (see note 9 to the accounts, page 129); therefore the fair value of each option awarded is one
quarter of the face value of the option.
3 the options awarded under the Ltip are market-value options; therefore the exercise price (which is the average market value of shares over the three dealing days immediately
prior to the day of award) must be paid by the individual on the exercise of each option.
awards granted under the matching share Plan
the total face value of each Director’s mSp matching Share award for the year ended 31 march 2014 was equal to two thirds of their annual incentive
award for the year 2012/13, equivalent to 90% basic salary at grant for Chris Grigg, 67% for Lucinda Bell and 79% for both Charles maudsley and
tim Roberts. the share price used to determine the number of matching Shares awarded is the market value of the Company’s shares on the day
the proportion of annual incentive is deferred. the proportion of the award that vests, if any, is dependent on Company performance against the
mSp performance measures over the three years following grant. these are detailed on page 95.
Grant date
02.08.2013
02.08.2013
02.08.2013
02.08.2013
number of
matching Shares
granted1
127,096
54,720
59,428
59,428
Face value
£
719,999
309,989
336,660
336,660
End of
performance
period
Vesting date
31.03.2016
02.08.2016
31.03.2016
02.08.2016
31.03.2016
02.08.2016
31.03.2016
02.08.2016
percentage
vesting on
achievement
of minimum
performance
threshold
%
25
25
25
25
Matching shares
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
100
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 awards granted under the sharesave scheme
the following options were granted to Directors during the year under the all-employee Sharesave Scheme. the exercise price is set at a 20%
discount to the average market price of the Company’s shares over the three dealing days immediately preceding invitation to the scheme.
the cost of exercise is met entirely by the Director, and is accumulated by deductions from salary over the period between grant and vesting.
Options
Director
tim Roberts
total to be
deducted from
salary to cover
exercise cost
£
Grant date
19.06.2013
12,000
number
of options
granted
2,348
Face value
£
11,998
Exercise price
p
Earliest
exercise date
Expiry date
511
01.09.2018
28.02.2019
DiRectoRs’ Pension entitlements
total pension entitlements for each Director under the defined benefit scheme
the below table details the defined benefit pension accrued by participating Directors at 31 march 2014.
Director
lucinda bell
tim Roberts
1 the accrued pension is based on service to the year-end and final pensionable salary at that date.
Defined benefit
pension accrued
at 31 march 20141
90,361
70,377
normal
retirement
date
01.10.2024
01.08.2024
101
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 ltiP options
option
price
p
End of
period
performance
Vesting
Exercisable
date
until
number
Vesting
Exercisable
date
until
number
option
price
p
31.03.2014
28.06.2014
27.06.2021
1,908
473
01.09.2014
28.02.2015
31.03.2015
14.09.2015
13.09.2022
31.03.2015
14.09.2015
13.09.2022
2,295
392
01.09.2015
29.02.2016
31.03.2016
05.08.2016
04.08.2023
number
695,652
743,494
138,289
154,742
575
538
538
601
option
price
p
Exercisable
until
387
447
28.06.2019
10.06.2020
660
727
824
387
446
447
510
28.11.2014
30.05.2015
04.12.2015
28.06.2019
20.12.2019
10.06.2020
13.12.2020
1,033,591
1,073,825
25,326
14,036
11,557
50,387
36,434
67,952
11,764
295,652
575
31.03.2014
28.06.2014
27.06.2021
1,033
2,348
301
511
01.09.2014
28.02.2015
01.09.2018
28.02.2019
13,210
17,483
727
824
30.05.2015
04.12.2015
REmunERation impLEmEntation REpoRt
auDitED inFoRmation
ContinuED…
DiRectoRs’ shaReholDings anD shaRe inteRests
executive Directors’ interests in the company’s shares and total outstanding share scheme
interests at 31 march 2014
the table directly below summarises the Executive Directors’ British Land shareholdings and outstanding share and option awards under the
Company’s share schemes, as at 31 march 2014. the following tables detail the movements in these shareholdings and share scheme interests
during the year ended 31 march 2014.
unvested Performance shares subject to performance measures
unvested options subject to performance measures
unvested options not subject to performance measures
vested but unexercised options
msP matching shares
ltiP Performance shares
sharesave options
ltiP options
Director
chris grigg
Shares held by Director1
734,855
lucinda bell
113,898
charles maudsley
214,153
tim Roberts
193,314
number
133,222
144,000
127,096
26,968
61,332
54,720
56,618
61,332
59,428
56,618
67,332
59,428
End of
performance
period
31.03.2014
31.03.2015
31.03.2016
31.03.2014
31.03.2015
31.03.2016
Vesting
date
24.05.2014
05.09.2015
02.08.2016
24.05.2014
05.09.2015
02.08.2016
31.03.2014
31.03.2015
31.03.2016
31.03.2014
31.03.2015
31.03.2016
24.05.2014
05.09.2015
02.08.2016
24.05.2014
05.09.2015
02.08.2016
number
173,913
185,873
266,222
147,826
138,289
116,056
147,826
157,992
141,430
73,913
157,992
141,430
End of
performance
period
31.03.2014
31.03.2015
31.03.2016
31.03.2014
31.03.2015
31.03.2016
Vesting
date
28.06.2014
14.09.2015
05.08.2016
28.06.2014
14.09.2015
05.08.2016
31.03.2014
31.03.2015
31.03.2016
31.03.2014
31.03.2015
31.03.2016
28.06.2014
14.09.2015
05.08.2016
28.06.2014
14.09.2015
05.08.2016
1 includes shares held by connected persons, mSp Bonus Shares and shares held under the Company’s Share incentive plan. all interests are beneficial.
Movements in Executive Directors’ interests in the Company’s shares during the year ended 31 March 2014
Directors’ interests in fully paid ordinary shares, including shares held by connected persons, matching Share plan Bonus Shares and shares held
under the Company’s Share incentive plan. all interests are beneficial.
total at
31 march
2014
734,855
113,898
214,153
193,314
total at
1 april
2013
631,792
88,121
133,942
134,221
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
102
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 DiRectoRs’ shaReholDings anD shaRe inteRests
executive Directors’ interests in the company’s shares and total outstanding share scheme
interests at 31 march 2014
the table directly below summarises the Executive Directors’ British Land shareholdings and outstanding share and option awards under the
Company’s share schemes, as at 31 march 2014. the following tables detail the movements in these shareholdings and share scheme interests
during the year ended 31 march 2014.
msP matching shares
ltiP Performance shares
Director
chris grigg
Shares held by Director1
734,855
lucinda bell
113,898
charles maudsley
214,153
tim Roberts
193,314
number
133,222
144,000
127,096
26,968
61,332
54,720
56,618
61,332
59,428
56,618
67,332
59,428
End of
performance
period
31.03.2014
31.03.2015
31.03.2016
31.03.2014
31.03.2015
31.03.2016
Vesting
date
24.05.2014
05.09.2015
02.08.2016
24.05.2014
05.09.2015
02.08.2016
31.03.2014
31.03.2015
31.03.2016
31.03.2014
31.03.2015
31.03.2016
24.05.2014
05.09.2015
02.08.2016
24.05.2014
05.09.2015
02.08.2016
End of
performance
period
31.03.2014
31.03.2015
31.03.2016
31.03.2014
31.03.2015
31.03.2016
Vesting
date
28.06.2014
14.09.2015
05.08.2016
28.06.2014
14.09.2015
05.08.2016
31.03.2014
31.03.2015
31.03.2016
31.03.2014
31.03.2015
31.03.2016
28.06.2014
14.09.2015
05.08.2016
28.06.2014
14.09.2015
05.08.2016
1 includes shares held by connected persons, mSp Bonus Shares and shares held under the Company’s Share incentive plan. all interests are beneficial.
Movements in Executive Directors’ interests in the Company’s shares during the year ended 31 March 2014
Directors’ interests in fully paid ordinary shares, including shares held by connected persons, matching Share plan Bonus Shares and shares held
under the Company’s Share incentive plan. all interests are beneficial.
number
173,913
185,873
266,222
147,826
138,289
116,056
147,826
157,992
141,430
73,913
157,992
141,430
total at
31 march
2014
734,855
113,898
214,153
193,314
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
unvested Performance shares subject to performance measures
unvested options subject to performance measures
unvested options not subject to performance measures
vested but unexercised options
ltiP options
option
price
p
End of
performance
period
Vesting
date
Exercisable
until
31.03.2014
28.06.2014
27.06.2021
31.03.2015
14.09.2015
13.09.2022
sharesave options
ltiP options
number
1,908
option
price
p
Vesting
date
Exercisable
until
473
01.09.2014
28.02.2015
31.03.2015
14.09.2015
13.09.2022
2,295
392
01.09.2015
29.02.2016
31.03.2016
05.08.2016
04.08.2023
number
695,652
743,494
138,289
154,742
575
538
538
601
number
1,033,591
1,073,825
25,326
14,036
11,557
50,387
36,434
67,952
11,764
option
price
p
Exercisable
until
387
447
28.06.2019
10.06.2020
660
727
824
387
446
447
510
28.11.2014
30.05.2015
04.12.2015
28.06.2019
20.12.2019
10.06.2020
13.12.2020
295,652
575
31.03.2014
28.06.2014
27.06.2021
1,033
2,348
301
511
01.09.2014
28.02.2015
01.09.2018
28.02.2019
13,210
17,483
727
824
30.05.2015
04.12.2015
total at
1 april
2013
631,792
88,121
133,942
134,221
Beneficial interests of the Directors under the Sharesave Scheme
Director
chris grigg
lucinda bell
tim Roberts
number
of options
at 1 april
2013
1,908
2,295
1,033
Date of grant
01.07.2011
26.06.2012
30.06.2009
19.06.2013
number of
options
granted
during
the year
number
of options
vesting
during
the year
number
of options
exercised
during
the year
number
of options
lapsed
during
the year
number of
options at
31 march
2014
2,348
1,908
2,295
1,033
2,348
Exercise
price
p
Earliest
exercise
date
Expiry
date
473
01.09.2014
28.02.2015
392
01.09.2015
29.02.2016
301
511
01.09.2014
28.02.2015
01.09.2018
28.02.2019
103
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 REmunERation impLEmEntation REpoRt
auDitED inFoRmation
ContinuED…
Beneficial interests of the Directors under the Long-Term Incentive Plan – Options
Director
chris grigg
lucinda bell
tim Roberts
number of
options at
1 april
20131
number
of options
granted during
the year
number
of options
vesting
during
the year2
number
of options
exercised
during
the year
number
of options
lapsed
during
the year
Date of grant
number of
options at
31 march
2014
1,033,591
29.06.2009
1,033,591
11.06.2010
1,789,709
28.06.2011
14.09.2012
29.11.2004
31.05.2005
05.12.2005
29.06.2009
21.12.2009
695,652
743,494
25,326
14,036
11,557
50,387
36,434
11.06.2010
113,255
14.12.2010
19,607
14.09.2012
138,289
05.08.2013
29.11.2004
31.05.2005
05.12.2005
29.06.2009
11.06.2010
22,513
13,210
17,483
426,873
380,313
28.06.2011
295,652
1,073,8253
715,884
1,073,825
695,652
743,494
25,326
14,036
11,557
50,387
36,434
67,952
11,764
138,289
154,742
13,210
17,483
295,652
67,9523
11,7644
45,303
7,843
154,742
22,5135
228,1873
426,8736
228,1877
152,126
Exercise
price
p
Earliest
exercise
date
Expiry date
387
447
575
538
660
727
824
387
446
447
510
538
601
660
727
824
387
447
575
29.06.2012
28.06.2019
11.06.2013
10.06.2020
28.06.2014
27.06.2021
14.09.2015
13.09.2022
29.11.2007
28.11.2014
31.05.2008
30.05.2015
05.12.2008
04.12.2015
29.06.2012
28.06.2019
21.12.2012
20.12.2019
11.06.2013
10.06.2020
14.12.2013
13.12.2020
14.09.2015
13.09.2022
05.08.2016
04.08.2023
29.11.2007
28.11.2014
31.05.2008
30.05.2015
05.12.2008
04.12.2015
29.06.2012
28.06.2019
11.06.2013
10.06.2020
28.06.2014
27.06.2021
1 the numbers of options at 1 april 2013 are the maximum awards achievable under the Ltip on maximum outperformance of the plan’s performance conditions,
except options granted in 2004, 2005, 2009 and 2010 which have already vested.
2 Vesting options are included in the 2012/13 long-term incentives column of the single total figure of remuneration table on page 96.
3 these options vested at 60% on 24 July 2013, the remaining options lapsed. the relevant performance condition is detailed on page 98.
4 these options vested at 60% on 17 December 2013, the relevant performance condition is detailed on page 98.
5 Exercised on 25 February 2014. the market price on the day of exercise was 699p, realising a notional gain of 39p per share.
6 Exercised on 24 July 2013. the market price on the day of exercise was 611.5p, realising a notional gain of 224.5p per share.
7 Exercised on 25 February 2014. the market price on the day of exercise was 699p, realising a notional gain of 252p per share.
Beneficial interests of the Directors under the Long-Term Incentive Plan – Performance Shares
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
Date of grant
28.06.2011
14.09.2012
05.08.2013
11.06.2010
14.12.2010
28.06.2011
14.09.2012
05.08.2013
11.06.2010
28.06.2011
14.09.2012
05.08.2013
11.06.2010
28.06.2011
14.09.2012
05.08.2013
number of
shares at
1 april 20131
number of shares
granted during
the year2
number of shares
vesting during
the year3
number of shares
lapsed during
the year
number of
shares at
31 march 2014
173,913
185,873
28,313
4,901
147,826
138,289
190,156
147,826
157,992
95,078
73,913
157,992
266,222
116,056
141,430
141,430
16,9874
2,9405
11,326
1,961
114,0934
76,063
57,0464
38,032
173,913
185,873
266,222
147,826
138,289
116,056
147,826
157,992
141,430
73,913
157,992
141,430
Earliest
vesting date
28.06.2014
14.09.2015
05.08.2016
11.06.2013
14.12.2013
28.06.2014
14.09.2015
05.08.2016
11.06.2013
28.06.2014
14.09.2015
05.08.2016
11.06.2013
28.06.2014
14.09.2015
05.08.2016
1 the numbers of shares at 1 april 2013 are the maximum achievable under the Ltip on maximum outperformance of the plan’s performance conditions.
2 on 5 august 2013, the date of grant, the market price was 596p.
3 Vesting shares and accrued dividends are included in the 2012/13 long-term incentives column of the single total figure of remuneration table on page 96.
4 these shares vested at 60% on 24 July 2013, the remaining shares lapsed. the relevant performance condition is detailed on page 98.
5 these shares vested at 60% on 17 December 2013, the remaining shares lapsed. the relevant performance condition is detailed on page 98.
104
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014
Beneficial interests of the Directors under the Matching Share Plan – MSP Matching Shares
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
number
of matching
Shares
at 1 april
20131
133,028
133,222
144,000
26,968
61,332
7,360
56,618
61,332
55,428
56,618
67,332
Date of grant
02.09.2010
24.05.2011
05.09.2012
02.08.2013
24.05.2011
05.09.2012
02.08.2013
02.09.2010
24.05.2011
05.09.2012
02.08.2013
02.09.2010
24.05.2011
05.09.2012
02.08.2013
number
of matching
Shares
granted
during
the year2
number
of matching
Shares
vesting
during
the year3
133,028
number
of matching
Shares
lapsed
during
the year
127,096
54,720
59,428
59,428
7,360
55,428
number
of matching
Shares
at 31 march
2014
133,222
144,000
127,096
26,968
61,332
54,720
56,618
61,332
59,428
56,618
67,332
59,428
1 the numbers of shares at 1 april 2013 are the maximum achievable under the mSp on maximum outperformance of the plan’s performance conditions.
2 on 2 august 2013, the date of grant, the market price was 597.5p.
3 these shares vested at 100% on 6 September 2013 on satisfaction of the performance conditions. the relevant performance conditions are detailed on page 98.
Vesting shares and accrued dividends are included in the 2012/13 long-term incentives column of the single total figure of remuneration table on page 96.
executive Directors’ minimum shareholding guideline
the Executive Directors’ minimum Shareholding Guideline requires
approximately 200% of basic salary to be held in vested and exercised
shares by the Chief Executive and 125% for other Executive Directors.
there is no set timescale required to reach the target but it should be
achieved through the regular additions anticipated by matching Share
plan and Long-term incentive plan vestings. no purchases are required
either to reach the level or to respond to share price falls but Executive
Directors are expected to increase their holding of shares each year until
the target is attained. the number/value of shares required as the target
is fixed once a year. Shares included are those unfettered and beneficially
owned by the Director and by his or her connected persons.
Shown below are the guideline shareholdings fixed for the year
to 31 march 2015.
Director
chris grigg
lucinda bell
charles maudsley
tim Roberts
percentage
of basic salary
to be held in
vested shares
200%
125%
125%
125%
Guideline
holding
244,649
88,877
81,231
81,231
unfettered
holding at
31 march
20141
633,326
75,387
168,118
144,864
1 in accordance with guidelines issued by the aBi, the Directors’ unfettered holdings
do not include mSp Bonus Shares and locked-in Sip Shares.
although there is no guideline holding for non-Executive Directors, they
are encouraged to hold shares in British Land. the Company facilitates
this by offering non-Executive Directors the ability to purchase shares
using their post-tax quarterly fees. Dido Harding, William Jackson, Lord
turnbull and Richard pym received a proportion of their fees in the form
of shares during the year.
chairman and non-executive Directors’ interests in the
company’s shares
interests in fully paid ordinary shares, including shares held
by connected persons.
Director
John gildersleeve
aubrey adams
simon borrows
Dido harding
William Jackson
Richard Pym
tim score
lord turnbull
total at
31 march 2014
5,071
20,000
300,000
11,045
38,988
11,5001
0
16,884
1 on 5 September 2013, date of resignation.
2 on 20 march 2014, date of appointment.
Purchases after the year-end up to one month before the agm notice
on 14 april 2014, Lord turnbull, Dido Harding and William Jackson were
allotted 376, 542 and 1,304 shares respectively, at a price of 664.7016
pence per share, as part of their standing instructions to receive shares
as satisfaction of their Directors’ fees. also on 14 april 2014, Chris Grigg
purchased 20 shares and Lucinda Bell, Charles maudsley and tim
Roberts each purchased 19 shares, all at a price of 647.4379 pence per
share, under the ‘partnership’ element of the Share incentive plan (Sip).
accordingly, Chris Grigg was awarded 40 ‘matching’ shares and Lucinda
Bell, Charles maudsley and tim Roberts were each awarded 38
‘matching’ shares, all at a price of 647.4379 pence per share. on 2 may
2014, Chris Grigg, Lucinda Bell, Charles maudsley and tim Roberts
acquired 47, 127, 32, and 117 ‘Dividend’ shares respectively under the Sip,
all at a price of 689.5024 pence per share. on 2 may 2014, Lord turnbull
received 171 shares under the Company’s Scrip Dividend Scheme.
105
Earliest
vesting date
02.09.2013
24.05.2014
05.09.2015
02.08.2016
24.05.2014
05.09.2015
02.08.2016
02.09.2013
24.05.2014
05.09.2015
02.08.2016
02.09.2013
24.05.2014
05.09.2015
02.08.2016
total at
1 april 2013
5,071
20,000
300,000
8,094
34,144
9,722
02
14,520
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 REmunERation impLEmEntation REpoRt
ContinuED…
fuRtheR DisclosuRes RegaRDing imPlementation
of Policy DuRing the yeaR
total shaReholDeR RetuRn
Rebased to 100, april 2009
Rebased to 100, April 2009
five-year total shareholder return and chief executive’s remuneration
the graph to the right shows the Company’s total shareholder return for
the five years from 1 april 2009 to 31 march 2014 against that of the FtSE
Real Estate investment trusts (REit) total Return index for the same
period. the graph shows how the total return on a £100 investment in the
Company, made on 1 april 2009, would have changed over the five-year
period measured, compared with the total return on a £100 investment
in the FtSE REit total Return index. the FtSE REit total Return index
has been selected as a suitable comparator because it is the index in
which the Company’s shares are classified. the 2009 base point,
required by the regulations, was close to the bottom of the property cycle.
our share price had not fallen as much at that time as the average share
price of the FtSE REits Sector, thereby setting a higher base point for
subsequent growth. the table below details the total remuneration of
the person undertaking the role of Chief Executive over the same period,
calculated on the same basis as the single total figure of remuneration
table, and the annual incentive pay-outs and long-term incentive vesting
rates as a percentage of the maximum opportunity.
300
250
200
150
100
April
2009
April
2010
April
2011
April
2012
April
2013
March
2014
The British Land Company PLC
FTSE REITs Sector
Source: aon Hewitt
Chris Grigg was appointed as Chief Executive of the Company in January 2009. the rules of the Ltip and mSp schemes stipulate that awards are
subject to three-year performance periods before vesting. Hence, none of Chris Grigg’s Ltip and mSp matching Share awards were eligible to vest
in 2009/10 or 2010/11.
chief executive
Chris Grigg
Chris Grigg
Chris Grigg
Chris Grigg
chris grigg
chief executive’s single total figure of remuneration (£)
2,082,180
2,329,047
5,352,840
4,810,031
4,925,926
annual incentive payout against maximum opportunity (%)
long-term incentives vesting rate against maximum opportunity (%)
67
n/a
83
n/a
75
99
75
63
90
97
2009/10
2010/11
2011/12
2012/13
2013/14
chief executive’s remuneration compared to remuneration of british land employees
the below table shows the percentage changes in different elements of the Chief Executive’s remuneration, relative to the previous financial year,
and the average percentage changes in these elements of remuneration for British Land employees.
Value of
Chief Executive
remuneration
element
2013/14
£
800,000
20,253
1,080,000
Value of
Chief Executive
remuneration
element
2012/13
£
800,000
19,802
1,080,000
% Change in
Chief Executive
remuneration
element
%
0
2.28
0
average % change
in remuneration
element of
British Land
employees
%
3.66
8.02
5.75
Remuneration element
salary
taxable benefits
annual incentive
106
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Relative importance of spend on pay
the graph below shows the amount the Company spent on the
remuneration of all employees (including Executive Directors), relative
to the amount spent on distributions to shareholders, including ordinary
and scrip dividends, during the financial year. the split between property
income Distributions (piD) and non-property income Distributions
(non-piD) is shown. Equivalent amounts are provided for the previous
financial year, for comparison.
consideration by the Directors of matters relating
to Directors’ remuneration
throughout the year the Remuneration Committee was chaired by
Lord turnbull. Dido Harding and William Jackson were members
of the Committee during the year. the following persons assisted
the Committee during the year: Chris Grigg (Chief Executive),
Joff Sharpe (Human Resources Director), tony Braine (Group
Secretary) and alan Judes.
the Committee appointed alan Judes, of Strategic Remuneration, as
its independent advisor for the year. He also gave advice to the Company
on personnel and share plan matters. the Committee is satisfied there
is no conflict in him providing such services to the Company. Strategic
Remuneration is a member of the Remuneration Consultants Group
and adheres to the Remuneration Consultants Group’s Code of
Conduct. Strategic Remuneration was appointed by the Chairman
of the Remuneration Committee following a competitive tender process.
the Committee assesses the advice given by Strategic Remuneration
to satisfy itself that the advice received is objective and independent.
alan Judes has a private meeting with the Chairman of the Remuneration
Committee once a year in accordance with the Code of Conduct
of the Remuneration Consultants Group. Fees charged by Strategic
Remuneration for the year amounted to £118,200 excluding Vat
(£124,400 excluding Vat for 2012/13) and are charged on a time basis.
this Report was approved by the Board on 13 may 2014.
lord turnbull
Chairman of the Remuneration Committee
2013/14
2012/13
£69m
£65m
£266m
£234m
Remuneration of employees
including Directors
Distributions
to shareholders
Wages and salaries
Annual Incentives
Social security costs
Pension costs
Equity-settled
share-based payments
PID cash dividends paid to shareholders
PID tax withholding
Non-PID cash dividends paid to shareholders
Net cash equivalent of new shares issued
under Non-PID Scrip dividends
Net cash equivalent of new shares issued
under PID Scrip dividends
executive Directors’ external appointments
Executive Directors may take up one non-executive directorship at
another FtSE 100 Company, subject to British Land Board approval.
Chris Grigg was appointed a non-Executive Director of BaE Systems plc
on 1 July 2013. During the year to 31 march 2014, Chris Grigg received
a fee of £56,250 from BaE Systems plc, which he retained in full.
statement of voting at annual general meeting
the table below details the results of the shareholder votes on
resolutions relating to remuneration at the 2013 aGm. the Committee
was pleased to note the high levels of shareholder support for
both the 2013 Remuneration Report and the introduction of the new
Long-term incentive plan.
Resolutions
at 2013 agm
Votes for
%
for
Votes
against
%
against
total
votes cast
Votes
withheld
678,005,079 98.87
7,752,198
1.13 685,757,277 2,643,404
654,652,842 96.39 24,507,477
3.61 679,160,319 9,240,362
approval of
Directors’
Remuneration
Report
adoption
of new
long-term
incentive Plan
107
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
aDDitionaL DiSCLoSuRES
ReaPPointment of DiRectoRs
the Directors listed on the Board of Directors pages (66 and 67)
constituted the Board during the year, save that Richard pym resigned
from the Board on 5 September 2013 and tim Score was appointed
as a non-Executive Director on 20 march 2014. in accordance with best
practice under the uK Corporate Governance Code 2012, tim Score
will offer himself for election by shareholders at the aGm and all the
other Directors will retire at the aGm and will offer themselves for
annual re-election.
PuRchase of oWn shaRes
the Company was granted authority at the aGm in 2013 to purchase
its own shares up to a total aggregate value of 10% of the issued nominal
capital. that authority expires at this year’s aGm and a resolution will
be proposed for its renewal. During the year the Company made no
purchases of its own shares.
shaRe caPital
the Company has one class of ordinary share and all shares rank
equally and are fully paid (25p each). there are neither restrictions
on the transfer of shares nor on the size of a holding. there are no
significant agreements to which the Company is party that take
effect, alter or terminate upon a change of control of the Company.
the issued share capital has been increased during the year by fully
paid issues as follows:
number of ordinary
shares of 25p
9 april 2013 to
10 January 2014
Shares in lieu of Directors’ fees
11,302
18 april 2013 to
26 march 2014
on exercise of options under the
Long-term incentive plan (Ltip)
13 June 2013 to
4 February 2014
on vesting of shares under the
Long-term incentive plan (Ltip)
30 may 2013 to
13 September 2013
on vesting of shares under the Fund
managers’ performance plan
2 april 2013 to
3 march 2014
on exercise of options under the
Sharesave Scheme
2,592,250
494,836
612,743
53,067
Scrip dividend allotment
17,885,985
10 may 2013 to
14 February 2014
23 august 2013
Share incentive plan Free Share
award allotment
168,156
256,654
9 September 2013
on vesting of matching Shares under
the matching Share plan (mSp)
Payments Policy
We recognise the importance of good supplier relationships to the
overall success of our business. We manage dealings with suppliers
in a fair, consistent and transparent manner and have signed up to
the uK Government’s prompt payment Code. at the year-end there
were 32 (2012/13: 29) suppliers’ days outstanding.
events afteR the balance sheet Date
there were no reportable events after the balance sheet date.
DiRectoRs’ inteRests in contRacts
no contract existed during the year in relation to the Company’s
business in which any Director was materially interested.
108
DiRectoRs’ liability insuRance anD inDemnity
the Company has arranged insurance cover in respect of legal action
against its Directors. to the extent permitted by uK law, the Company
also indemnifies the Directors.
substantial inteRests
as at 13 may 2014, the Company had been notified of the following major
interests in its issued ordinary share capital.
norges Bank
Blackrock, inc.
apG algemene pensioen Groep nV
Government of Singapore investment
Corporation pte Ltd
number
of shares
% of issued
capital
62,598,618
52,861,598
44,622,274
39,473,304
6.19
5.23
4.41
3.90
auDitoR
the external audit for the financial year ending march 2015 was tendered
during the year, as detailed on page 75. Having not been invited to
tender, Deloitte LLp intends to resign as the Company’s auditor following
completion of the audit of this annual Report and accounts. Following
the tender, and on the recommendation of the audit Committee, the
Board intends to appoint pricewaterhouseCoopers LLp to fill the casual
vacancy created on Deloitte’s resignation. the audit Committee have
recommended resolutions to appoint pricewaterhouseCoopers as the
Company’s auditor and to authorise the Directors to agree the auditor’s
remuneration at the 2014 annual General meeting.
DisclosuRe of infoRmation to auDitoR
Each of the persons who is a Director at the date of approval of this
Report confirms that:
so far as the Director is aware, there is no relevant audit information
of which the Company’s auditor is unaware; and
the Director has taken all the steps that he/she ought to have taken
as a Director in order to make himself/herself aware of any relevant
audit information and to establish that the Company’s auditor is
aware of that information.
this confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies act 2006.
annual geneRal meeting
the aGm of the British Land Company pLC will be held at
the ocean Room, the Cumberland Hotel, Great Cumberland place,
London W1H 7DL on Friday 18 July 2014, at 11.00 am.
this Report was approved by the Board on 13 may 2014.
anthony braine
Group Secretary
13 may 2014
governance and remunerationThe British Land Company PLC Annual Report and Accounts 2014
FinanCiaL StatEmEntS
anD otHER inFoRmation
Directors’ responsibility statement
Report of the auditor
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
notes to the accounts
Company balance sheet
Supplementary disclosures
other information
ten year record
Shareholder information
Glossary of terms
110
111
114
115
116
117
118
119
153
159
165
175
176
178
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
2
–
4
2
P
e
r
f
o
r
m
a
n
c
e
r
e
v
i
e
w
4
3
–
5
8
G
o
v
e
r
n
a
n
c
e
a
n
d
r
e
m
u
n
e
r
a
t
i
o
n
5
9
–
1
0
8
i
f
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
1
0
9
–
1
8
0
Directors’ responsibility
statement
the Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulations.
Responsibility statement
We confirm that to the best of our knowledge:
company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors are required to prepare
the Group financial statements in accordance with international Financial
reporting standards (iFrss) as adopted by the european Union and
article 4 of the ias regulation and have elected to prepare the parent
company financial statements in accordance with United Kingdom
Generally accepted accounting practice (United Kingdom accounting
standards and applicable law). Under company law the Directors must
not approve the accounts unless they are satisfied that they give a true
and fair view of the state of affairs of the company and of the profit
or loss of the company for that period.
in preparing the parent company financial statements, the Directors
are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable
and prudent;
the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a whole;
the strategic report includes a fair review of the development and
performance of the business and the position of the company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face; and
the annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the company’s performance,
business model and strategy.
the process for preparing, reviewing and approving the annual
report and financial statements is set out in the Governance review
on page 71.
state whether applicable UK accounting standards have been
by order of the board.
lucinda bell
Finance Director
13 may 2014
followed, subject to any material departures disclosed and explained
in the financial statements; and
prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company will continue in
business.
in preparing the Group financial statements, international accounting
standard 1 requires that Directors:
properly select and apply accounting policies;
present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
provide additional disclosures when compliance with the specific
requirements in iFrss are insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity’s financial position and financial performance; and
make an assessment of the company’s ability to continue as a
going concern.
the Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the company’s transactions and
disclose with reasonable accuracy at any time the financial position
of the company and enable them to ensure that the financial statements
comply with the companies act 2006.
they are also responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
the Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s website.
legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
110
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
report oF the aUDitor
independent auditoR’s RepoRt to the membeRs of the
bRitish land Company plC
opinion on financial statements of the british land Company plC
in our opinion:
the financial statements give a true and fair view of the state of the
Group’s and of the parent company’s affairs as at 31 march 2014
and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in
accordance with international Financial reporting standards (iFrss)
as adopted by the european Union;
the parent company financial statements have been properly prepared
in accordance with United Kingdom Generally accepted accounting
practice; and
the financial statements have been prepared in accordance with
the requirements of the companies act 2006, as regards the Group
financial statements, article 4 of the ias regulation.
the financial statements comprise the consolidated income statement,
the consolidated statement of comprehensive income, the consolidated
and company balance sheets, the consolidated statement of changes
in equity, the consolidated cash Flow statement and the related notes
1 to 27 for the consolidated Financial statements and the related notes
a to K for the parent company financial statements.
the financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and iFrss
as adopted by the european Union. the financial reporting framework
that has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom accounting standards
(United Kingdom Generally accepted accounting practice).
Going concern
as required by the listing rules we have reviewed the Directors’
statement contained on page 110 that the Group is a going concern.
We confirm that:
we have concluded that the Directors’ use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate; and
we have not identified any material uncertainties that may
cast significant doubt on the Group’s ability to continue
as a going concern.
however, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the Group’s ability to continue
as a going concern.
our assessment of risks of material misstatement
the assessed risks of material misstatement described below are those
that had the greatest effect on our audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team:
risk
Valuation of investment
property
the valuation of the
Group’s investment
properties involves significant
judgements made by
management using the
advice of the external valuers,
particularly those around
current market conditions
and development property
milestones.
the valuation exercise
also relies on the accuracy
of the underlying lease
and financial information
provided to the valuers
by management.
accounting for complex
property transactions
the sale and purchase
agreements for property
acquisitions and disposals
may have complexity such
as deferred consideration
arrangements, rental top-up
payments or joint venture
contractual obligations,
which require judgement
from management to
consider the correct
application of the relevant
accounting standards.
how the scope of our audit
responded to the risk
We tested the key controls
implemented by management
to review and challenge the work
of the external valuers: Knight
Frank and cbre.
We met with Knight Frank and cbre
to challenge the valuation process,
the performance of the portfolio
and the significant assumptions and
critical judgement areas, including
future lease income and yields
and development appraisals.
We reviewed the yield assumptions
used by Knight Frank and cbre
in performing their valuations
to assess their reasonableness
in comparison to relevant market
evidence, benchmarking the yields
against specific property sales,
comparables and other external data.
We assessed the competence,
independence and integrity of
Knight Frank and cbre.
We performed audit procedures
to test the key controls in place
and the integrity of the information
provided to Knight Frank and cbre,
including agreement on a sample
basis back to underlying leases.
please see note 11 of the Financial
statements.
We challenged management’s
judgements by reviewing the sale
and purchase agreements and
other related documents and by
assessing each transaction against
the recognition, measurement
and classification criteria per the
Group’s accounting policies and
the applicable iFrss.
We tested the accuracy and
completeness of the disclosure
of the transactions in the financial
statements.
the audit committee’s consideration of these risks is set out on
page 77.
our audit procedures relating to these matters were designed in the
context of our audit of the financial statements as a whole, and not to
express an opinion on individual accounts or disclosures. our opinion
on the financial statements is not modified with respect to any of the
risks described above, and we do not express an opinion on these
individual matters.
111
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 report oF the aUDitor
continUeD…
our application of materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of
a reasonably knowledgeable person would be changed or influenced.
We use materiality both in planning the scope of our audit work and
in evaluating the results of our work.
We determined materiality for the Group to be £55m, which is below
1% of shareholders’ equity.
in addition to shareholders’ equity we recognise that underlying profit
before tax is an important measure in the Group’s income statement.
in order to suitably plan and evaluate our work for items affecting this
measure we have applied a lower threshold which equates to 6.7%
of underlying profit before tax.
We agreed with the audit committee that we would report to the
committee all audit differences in excess of £1 million, as well as
differences below that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the audit committee on
disclosure matters that we identified when assessing the overall
presentation of the financial statements.
an overview of the scope of our audit
our Group audit was scoped by obtaining an understanding of the Group
and its environment, including Group-wide control, and assessing the
risks of material misstatement at the Group level. audit work to respond
to the risks of material misstatement was performed directly by the audit
engagement team with the exception of three significant components,
where full audit procedures were performed by other Deloitte UK offices.
Full audit procedures have been performed on components representing
88% of the Group net assets.
as Group auditors we also included the component audit partners and
teams in our team briefings, discussed their risk assessment, and also
reviewed documentation of the findings from their work.
at the parent entity level we also tested the consolidation process and
carried out analytical procedures to confirm our conclusion that there
were no significant risks of material misstatement of the aggregated
financial information of the remaining components not subject to audit
or audit of specified account balances.
opinion on other matters prescribed by the companies act 2006
in our opinion:
the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the companies act 2006; and
the information given in the strategic report and the Directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements.
matteRs on whiCh we aRe RequiRed to RepoRt by exCeption
adequacy of explanations received and accounting records
Under the companies act 2006 we are required to report to you if,
in our opinion:
we have not received all the information and explanations we require
for our audit; or
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
the parent company financial statements are not in agreement
with the accounting records and returns.
We have nothing to report in respect of these matters.
directors’ remuneration
Under the companies act 2006 we are also required to report if in our
opinion certain disclosures of Directors’ remuneration have not been
made or the part of the Directors’ remuneration report to be audited
is not in agreement with the accounting records and returns. We have
nothing to report arising from these matters.
Corporate Governance statement
Under the listing rules we are also required to review the part of the
corporate Governance statement relating to the company’s compliance
with nine provisions of the UK corporate Governance code. We have
nothing to report arising from our review.
our duty to read other information in the annual Report
Under international standards on auditing (UK and ireland), we are
required to report to you if, in our opinion, information in the annual
report is:
materially inconsistent with the information in the audited financial
statements; or
apparently materially incorrect based on, or materially inconsistent
with, our knowledge of the Group acquired in the course of performing
our audit; or
otherwise misleading.
in particular, we are required to consider whether we have identified
any inconsistencies between our knowledge acquired during the audit
and the Directors’ statement that they consider the annual report
is fair, balanced and understandable and whether the annual report
appropriately discloses those matters that we communicated to the
audit committee which we consider should have been disclosed.
We confirm that we have not identified any such inconsistencies or
misleading statements.
112
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Respective responsibilities of directors and auditor
as explained more fully in the Directors’ responsibilities statement,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and international
standards on auditing (UK and ireland). those standards require
us to comply with the auditing practices board’s ethical standards
for auditors. We also comply with international standard on Quality
control 1 (UK and ireland). our audit methodology and tools aim to
ensure that our quality control procedures are effective, understood
and applied. our quality controls and systems include our dedicated
professional standards review team, strategically focused second
partner reviews and independent partner reviews.
this report is made solely to the company’s members, as a body,
in accordance with chapter 3 of part 16 of the companies act 2006.
our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. to the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body,
for our audit work, for this report, or for the opinions we have formed.
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that
the financial statements are free from material misstatement, whether
caused by fraud or error. this includes an assessment of: whether
the accounting policies are appropriate to the Group’s and the parent
company’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting
estimates made by the Directors; and the overall presentation
of the financial statements. in addition, we read all the financial and
non-financial information in the annual report to identify material
inconsistencies with the audited financial statements and to identify
any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. if we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Richard muschamp (senior statutory auditor)
for and on behalf of deloitte llp
chartered accountants and statutory auditor
london, United Kingdom
13 may 2014
113
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
consoliDateD income statement
For the year ended 31 march 2014
Gross rental and related income
net rental and related income
Fees and other income
Joint ventures and funds (see also below)
administrative expenses
net valuation movement (includes result on disposals)
Financing costs – financing income
– financing charges
profit (loss) on ordinary activities before taxation
taxation – current tax income
– deferred tax income
profit for the year after taxation
attributable to non-controlling interests
attributable to shareholders of the Company
earnings per share – basic
– diluted
1 as defined in note 2.
all results derive from continuing operations.
share of results of joint ventures and funds
Underlying profit before taxation
net valuation movement (includes result on disposals)
non-recurring items
current tax income (expense)
Deferred tax income
1 as defined in note 2.
2014
2013
underlying
pre-tax1
£m
Capital
and other
£m
note
384
313
15
124
(72)
–
9
(90)
(81)
299
2
297
–
–
–
253
–
615
3
(60)
(57)
811
3
3
6
8
809
3
3
4
6
7
7
8
8
2
2
Underlying
pre-tax1
£m
capital
and other
£m
329
281
15
130
(72)
–
21
(101)
(80)
274
–
274
–
–
–
(63)
–
88
2
(41)
(39)
(14)
8
16
24
–
10
total
£m
384
313
15
377
(72)
615
12
(150)
(138)
1,110
3
3
6
1,116
10
1,106
110.7p
110.2p
2014
2013
underlying
pre-tax1
£m
Capital
and other
£m
note
total
£m
Underlying
pre-tax1
£m
capital
and other
£m
124
–
–
–
–
124
–
258
–
(5)
–
253
124
258
–
(5)
–
377
130
–
–
–
–
130
–
(62)
(4)
2
1
(63)
12
total
£m
329
281
15
67
(72)
88
23
(142)
(119)
260
8
16
24
284
–
284
31.7p
31.5p
total
£m
130
(62)
(4)
2
1
67
114
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
consoliDateD statement
oF comprehensive income
For the year ended 31 march 2014
profit for the year after taxation
other comprehensive income:
items that will not be reclassified subsequently to profit or loss:
net actuarial loss on pension scheme
items that may be reclassified subsequently to profit or loss:
Gains (losses) on cash flow hedges
– Group
– Joint ventures and funds
transferred to the income statement (cash flow hedges)
– Foreign currency derivatives
– interest rate derivatives
exchange differences on translation of foreign operations
– hedging and translation
– other
Deferred tax taken to equity
2014
£m
1,116
2013
£m
284
(2)
(2)
(16)
(6)
(22)
(5)
26
21
(4)
(2)
(2)
14
48
62
8
15
23
2
1 6
3 2
5 –
5 –
other comprehensive profit (loss) for the year
total comprehensive income for the year attributable to shareholders of the Company
attributable to non-controlling interests
attributable to shareholders of the Company
91
1,207
10 –
1,197
(1)
283
283
115
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
consoliDateD balance sheet
at 31 march 2014
note
2014
£m
2013
£m
assets
non-current assets
investment and development properties
owner-occupied property
other non-current assets
investments in joint ventures and funds
other investments
interest rate derivative assets
Current assets
trading properties
Debtors
cash and short-term deposits
total assets
liabilities
Current liabilities
short-term borrowings and overdrafts
creditors
corporation tax
non-current liabilities
Debentures and loans
other non-current liabilities
Deferred tax liabilities
interest rate derivative liabilities
total liabilities
net assets
equity
share capital
share premium
merger reserve
other reserves
retained earnings
equity attributable to shareholders of the Company
non-controlling interests
total equity
epRa naV per share1
1 as defined in note 2.
John Gildersleeve
chairman
lucinda bell
Finance Director
approved by the board and authorised for issue on 13 may 2014.
company number 621920
116
11
11
12
13
18
11
14
18
18
15
18
16
17
18
22
7,272
47
7,319
2,712
262
32
10,325
271
41
142
454
5,488
42
5,530
2,336
76
92
8,034
40
60
135
235
10,779
8,269
(495)
(263)
(8)
(766)
(2,803)
(32)
(4)
(57)
(2,896)
(3,662)
7,117
255
1,257
213
(70)
5,091
6,746
371 –
7,117
(44)
(259)
(17)
(320)
(2,134)
(26)
(16)
(86)
(2,262)
(2,582)
5,687
249
1,242
213
(163)
4,146
5,687
5,687
596p
2
688p
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
consoliDateD statement
oF cash FloWs
For the year ended 31 march 2014
rental income received from tenants
Fees and other income received
operating expenses paid to suppliers and employees
Cash generated from operations
interest paid
interest received
UK corporation tax received
Distributions and other receivables from joint ventures and funds
net cash inflow from operating activities
Cash flows from investing activities
Development and other capital expenditure
purchase of investment properties
sale of investment properties
purchase of investments
sale of investments
Deferred consideration received
acquisition of hercules Unit trust
cash acquired on acquisition of subsidiary
purchase of joint ventures and funds
sale of joint ventures and funds
investment in and loans to joint ventures and funds
capital distributions and loan repayments from joint ventures and funds
indirect taxes (paid) received in respect of investing activities
net cash outflow from investing activities
Cash flows from financing activities
issue of ordinary shares
Dividends paid
closeout of interest rate derivative
movement in other financial liabilities
Disposal of liquid investments
Decrease in bank and other borrowings
Drawdowns on bank and other borrowings
proceeds on convertible bond issue
net cash inflow from financing activities
net increase (decrease) in cash and cash equivalents
cash and cash equivalents at 1 april
Cash and cash equivalents at 31 march
Cash and cash equivalents consists of:
cash and short-term deposits
note
21
21
20
18
2014
£m
312
19
(88)
243
(116)
29
– 1
63
219
(175)
(569)
352
(84) –
8 2
5
(145) –
18 –
(113) –
179 –
(162)
28
(2)
(660)
11
(159)
(16) 4
(8) 2
–
(49)
669 –
–
448
7
135
142
2013
£m
266
19
(88)
197
(113)
31
74
190
(230)
(442)
699
18
(318)
72
(3)
(202)
493
(203)
210
(889)
393
10
(2)
137
135
18
142
135
117
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
consoliDateD statement
oF chanGes in eQUity
For the year ended 31 march 2014
hedging and
share
capital 1
£m
share
premium
£m
translation Revaluation
reserve 1
£m
reserve1,2
£m
merger
reserve 1
£m
Retained
earnings
£m
non-
controlling
interest
£m
total
£m
balance at 1 april 2013
249
1,242
(71)
(92)
213
4,146
5,687
profit for the year after taxation
losses on cash flow hedges
revaluation through statement of changes
in equity
Joint ventures and funds revaluations
reclassification of gains (losses)
on cash flow hedges
– Foreign currency derivatives
– interest rate derivatives
exchange differences on translation
of foreign operations
net actuarial loss on pension schemes
Deferred tax taken to equity
other comprehensive income (loss)
total comprehensive income for the year
share issues
non-controlling interest on acquisition
of subsidiary
purchase of units from non-controlling interest
adjustment for share and share option awards
Dividends payable in year (26.7p per share)
transfer
adjustment for scrip dividend element
–
–
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15
–
–
–
–
–
–
–
14
–
–
8
15
2
–
–
39
39
–
–
–
–
–
–
–
–
–
–
48
–
–
1
–
5
54
54
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
total
equity
£m
5,687
1,116
14
1
48
8
15
2
(2)
5
91
–
10
–
–
–
–
–
–
–
–
–
1,106
–
1
1,106
14
1
–
48
–
–
(1)
(2)
–
(2)
8
15
2
(2)
5
91
1,104
1,197
10
1,207
(8)
–
–
10
(266)
–
105
13
–
–
10
(266)
–
105
–
374
(13)
–
–
–
–
13
374
(13)
10
(266)
–
105
balance at 31 march 2014
255
1,257
(32)
(38)
213
5,091
6,746
371
7,117
balance at 1 april 2012
225
1,237
profit for the year after taxation
losses on cash flow hedges
Joint ventures and funds revaluations
reclassification of gains (losses)
on cash flow hedges
– Foreign currency derivatives
– interest rate derivatives
exchange differences on translation
of foreign operations
net actuarial loss on pension schemes
other comprehensive income (loss)
total comprehensive income for the year
share issues
adjustment for share and share option awards
Dividends payable in year (26.3p per share)
transfer
adjustment for scrip dividend element
–
–
–
–
–
–
–
–
–
24
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
(72)
–
(16)
–
(5)
26
(4)
–
1
1
–
–
–
–
–
(92)
–
–
(6)
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
464
–
–
(251)
–
3,806
5,104
284
–
–
–
–
–
(2)
(2)
282
–
9
(234)
251
32
284
(16)
(6)
(5)
26
2
(2)
(1)
283
493
9
(234)
–
32
balance at 31 march 2013
249
1,242
(71)
(92)
213
4,146
5,687
1 refer to note 22.
2 the balance at the beginning of the period includes £2m relating to translation and (£73m) relating to hedging.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,104
284
(16)
(6)
(5)
26
2
(2)
(1)
283
493
9
(234)
–
32
5,687
118
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
notes to the accoUnts
1 Basis of preparation and significant accounting policies
the financial statements for the year ended 31 march 2014 have
been prepared on the historical cost basis, except for the revaluation
of properties, investments and derivatives. the financial statements
have also been prepared in accordance with international Financial
reporting standards (iFrss) as adopted by the european Union and
therefore comply with article 4 of the eU ias regulation.
in the current financial year the Group has adopted the amendments to
ias 1 ‘presentation of items of other comprehensive income’, iFrs 13
‘Fair value measurement’ and ias 19 (revised) ‘employee benefits’.
the amendments to ias 1 require items of other comprehensive
income to be grouped by those items that will be reclassified
subsequently to profit or loss and those that will be never be
reclassified, as well as their associated income tax. the amendments
have been applied retrospectively and hence the presentation of items
of comprehensive income has been regrouped accordingly.
iFrs 13 impacts the disclosure of investment and owner-occupied
properties, as set out in note 11.
ias 19 (revised) and the related consequential amendments have
impacted the accounting for the Group’s defined benefit pension
scheme, by replacing the interest cost and expected return on plan
assets with a net interest charge on the net defined benefit liability.
the impact of adopting ias 19 (revised) is not considered material.
otherwise the accounting policies used are consistent with those
contained in the Group’s last annual report and accounts for the year
ended 31 march 2013.
standards and interpretations issued but not effective for the current
accounting period were:
iFrs 9 – Financial instruments;
ias 32 (amended) – Financial instruments: presentation;
iFrs 10 – consolidated Financial statements;
iFrs 11 – Joint arrangements;
iFrs 12 – Disclosure of interests in other entities;
ias 12 (amended) – Deferred tax: recovery of underlying assets;
ias 27 (revised) – separate Financial statements;
ias 28 (revised) – investments in associates and Joint ventures; and
ias 36 – recoverable amount Disclosures for non-Financial assets.
the Directors do not expect that the adoption of the standards listed
above will have a material impact on the financial statements of the
Group in future periods except as follows:
iFrs 9 will impact both the measurement and disclosures of financial
instruments and is effective for the Group’s year ending 31 march 2018.
the Group has not yet completed its evaluation of the effect of
adoption.
critical accounting judgements are disclosed in the relevant section
of the annual report, see page 55. the key source of estimation
and uncertainty relates to the valuation of the property portfolio and
investments, where an external valuation is obtained. in accounting
for net rental income, the Group is required to judge the recoverability
of any income accrued and provides against the credit risk on these
amounts.
other less significant assumptions include the actuarial assumptions
used in calculating the Group’s retirement benefit obligations,
the valuation of fixed rate debt and interest rate derivatives, and the
share-based payment expense. the potential for management to make
judgements or estimates relating to those items which would have
a significant impact on the financial statements is considered, by the
nature of the Group’s business, to be limited.
GoinG ConCeRn
the financial statements are prepared on a going concern basis
as explained in the corporate Governance section on page 72.
subsidiaRies, Joint VentuRes and assoCiates
(inCludinG funds)
the consolidated accounts include the accounts of the british land
company plc and all subsidiaries (entities controlled by british land).
control is assumed where british land has the power to govern
the financial and operating policies of an investee entity so as to gain
benefits from its activities.
the results of subsidiaries, joint ventures or associates acquired
or disposed of during the year are included from the effective
date of acquisition or to the effective date of disposal. accounting
practices of subsidiaries, joint ventures or associates which differ
from Group accounting policies are adjusted on consolidation.
business combinations are accounted for under the acquisition
method. any excess of the purchase price of business combinations
over the fair value of the assets, liabilities and contingent liabilities acquired
and resulting deferred tax thereon is recognised as goodwill. any discount
received is credited to the income statement in the period of acquisition.
all intra-Group transactions, balances, income and expenses
are eliminated on consolidation.
Joint ventures and associates, including funds, are accounted for under
the equity method, whereby the consolidated balance sheet incorporates
the Group’s share (investor’s share) of the net assets of its joint ventures
and associates. the consolidated income statement incorporates the
Group’s share of joint venture and associate profits after tax upon
elimination of upstream and downstream transactions. their profits
include revaluation movements on investment properties. interest
income, management fees and performance fees are proportionately
eliminated.
pRopeRties
properties are externally valued on the basis of fair value at the balance
sheet date. investment and owner-occupied properties are recorded
at valuation whereas trading properties are stated at the lower of cost
and net realisable value.
any surplus or deficit arising on revaluing investment properties is
recognised in the income statement.
any surplus arising on revaluing owner-occupied properties above
cost is recognised in equity, and any deficit arising in revaluation
below cost for owner-occupied and trading properties is recognised
in the income statement.
the cost of properties in the course of development includes attributable
interest and other associated outgoings. interest is calculated on the
development expenditure by reference to specific borrowings where
relevant and otherwise on the average rate applicable to short-term
loans. interest is not capitalised where no development activity is taking
place. a property ceases to be treated as a development property on
practical completion.
119
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
1 Basis of preparation and significant accounting policies continued
pRopeRties continued
Disposals are recognised on completion: profits and losses arising
are recognised through the income statement, the profit on disposal
is determined as the difference between the sales proceeds and the
carrying amount of the asset at the commencement of the accounting
period plus capital expenditure in the period.
Where properties held for investment are appropriated to trading
stock, they are transferred at market value. if properties held for trading
are appropriated to investment, they are transferred at book value.
in determining whether leases and related properties represent
operating or finance leases, consideration is given to whether the tenant
or landlord bears the risks and rewards of ownership.
finanCial assets and liabilities
trade debtors and creditors are initially recognised at fair value
and subsequently measured at amortised cost and discounted
as appropriate.
other investments include loans and receivables held at amortised cost
and investments held for trading classified as fair value through profit
or loss. amortised cost of loans and receivables is measured using the
effective interest method, less any impairment. interest is recognised
by applying the effective interest rate. investments held for trading are
initially recorded at fair value and are subsequently externally valued
on the same basis at the balance sheet date. any surplus or deficit
arising on revaluing investments held for trading is recognised in the
income statement.
Where an investment property is held under a head lease, the head
lease is initially recognised as an asset as the sum of the premium paid
on acquisition and the present value of minimum ground rent payments.
the corresponding rent liability to the head leaseholder is included in
the balance sheet as a finance lease obligation.
Debt instruments are stated at their net proceeds on issue. Finance
charges including premiums payable on settlement or redemption
and direct issue costs are spread over the period to redemption,
using the effective interest method.
convertible bonds are designated as fair value through profit or loss
and so are presented on the balance sheet at fair value with all gains
and losses, including the write-off of issuance costs, recognised in the
income statement within the capital and other component of net financing
costs. the interest charge in respect of the coupon rate on the bonds
has been recognised within the underlying component of net financing
costs on an accruals basis.
as defined by ias 39, cash flow and fair value hedges are carried at fair
value in the balance sheet. changes in the fair value of derivatives that
are designated and qualify as effective cash flow hedges are recognised
directly in the hedging reserve. changes in the fair value of derivatives
that are designated and qualify as effective fair value hedges are recorded
in the income statement, along with any changes in the fair value of the
hedged item that is attributable to the hedged risk. any ineffective portion
of all derivatives is recognised in the income statement.
cash equivalents are limited to instruments with a maturity of less
than three months.
net Rental inCome
rental income is recognised on an accruals basis. a rent adjustment
based on open market estimated rental value is recognised from the rent
review date in relation to unsettled rent reviews. Where a rent-free period
is included in a lease, the rental income foregone is allocated evenly
over the period from the date of lease commencement to the earliest
termination date.
rental income from fixed and minimum guaranteed rent reviews
is recognised on a straight-line basis over the shorter of the entire lease
term or the period to the first break option. Where such rental income
is recognised ahead of the related cash flow, an adjustment is made
to ensure that the carrying value of the related property including the
accrued rent does not exceed the external valuation. initial direct costs
incurred in negotiating and arranging a new lease are amortised on a
straight-line basis over the period from the date of lease commencement
to the earliest termination date.
Where a lease incentive payment, including surrender premia paid,
does not enhance the value of a property, it is amortised on a straight-
line basis over the period from the date of lease commencement to the
earliest termination date. Upon receipt of a surrender premium for the
early determination of a lease, the profit, net of dilapidations and non-
recoverable outgoings relating to the lease concerned, is immediately
reflected in income.
manaGement and peRfoRmanCe fees
management and performance fees receivable are recognised in the
period to which they relate. performance fees are recognised at the
end of the performance period when the fee amount can be estimated
reliably and it is virtually certain that the fee will be received.
management and performance fees receivable from joint ventures
and funds are proportionately eliminated. performance fees are
discounted for any element subject to subsequent clawback, on
a case-by-case basis.
taxation
current tax is based on taxable profit for the year and is calculated
using tax rates that have been enacted or substantively enacted.
taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are not taxable
(or tax deductible).
Deferred tax is provided on items that may become taxable at a later date,
on the difference between the balance sheet value and tax base value,
on an undiscounted basis. on business combinations, the deferred tax
effect of fair value adjustments is incorporated in the consolidated
balance sheet.
employee Costs
the fair value of equity-settled share-based payments to employees
is determined at the date of grant and is expensed on a straight-line
basis over the vesting period, based on the Group’s estimate of shares
or options that will eventually vest. in the case of options granted, fair
value is measured by a black-scholes pricing model. compensation
linked to performance fees accrued by the Group is amortised over
the vesting period.
120
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 1 Basis of preparation and significant accounting policies continued
employee Costs continued
Defined benefit pension scheme assets are measured using fair values;
pension scheme liabilities are measured using the projected unit credit
method and discounted at the rate of return of a high-quality corporate
bond of equivalent term to the scheme liabilities. the net surplus
(where recoverable by the Group) or deficit is recognised in full in the
consolidated balance sheet. any asset resulting from the calculation is
limited to past service costs plus the present value of available refunds
and reductions in future contributions to the plan.
the current service cost and gains and losses on settlement and
curtailments are charged to operating profit. past service costs
are recognised in the income statement if the benefits have vested or,
if they have not vested, are amortised on a straight-line basis over the
period until vesting occurs. actuarial gains and losses are recognised
in full in the period in which they occur and are presented in the
consolidated statement of comprehensive income.
contributions to the Group’s defined contribution schemes are
expensed on the basis of the contracted annual contribution.
2 performance measures
earnings per share (diluted unless otherwise stated)
Underlying pre-tax profit attributable to shareholders of the company – income statement
tax charge relating to underlying profit
underlying earnings
mark-to-market on/profit on disposal of liquid investments (held for trading assets)
mark-to-market adjustment on convertible bond
non-recurring items1
epRa earnings – diluted
remove diluton of share options
epra earnings – basic
profit for the year after taxation
2014
2013
earnings
£m
pence per
share
earnings
£m
pence per
share
297
(2)
295
–
–
–
295
–
–
29.4
–
–
–
29.4
0.1
29.5
274
(1)
273
9
(7)
(7)
268
1,106
110.2
284
–
–
30.3
–
–
–
29.7
0.2
29.9
31.5
1 non-recurring items for the year ended 31 march 2013 of £7m relate to issue costs of the convertible bond.
the european public real estate association (epra) has issued best practices recommendations, the latest update of which was issued in January
2014, which give guidelines for performance measures. epRa earnings is the profit after tax excluding investment and development property
revaluations and gains or losses on disposals, changes in the fair value of financial instruments and associated close-out costs and their related
taxation. a summary of the epra performance measures is provided in table b within the supplementary Disclosures, see page 161.
underlying earnings consists of the epra earnings (diluted) measure, with additional company adjustments. adjustments include mark-to-market
adjustments on held-for-trading assets.
the weighted average number of shares in issue for the year was: basic: 999m (2012/13: 895m); diluted for the effect of share options: 1,004m
(2012/13: 901m). basic undiluted earnings per share for the year, calculated using profit for the year after taxation of £1,106m (2012/13: £284m),
was 110.7p (2012/13: 31.7p). earnings per share shown in the table above are diluted.
net asset value (naV) (diluted)
balance sheet net assets
less non-controlling interests
Deferred tax arising on revaluation movements
mark-to-market on effective cash flow hedges and related debt adjustments
surplus on trading properties
Dilution effect of share options
epRa naV
epRa naV per share
31 march
2014
£m
7,117
(371) –
6
173
63
39
7,027
688p
31 march
2013
£m
5,687
14
198
10
58
5,967
596p
the epRa naV per share excludes the mark-to-market on effective cash flow hedges, related debt adjustments and the convertible bond, deferred
taxation on revaluations and surplus on trading properties and is calculated on a fully diluted basis. the epra best practices recommendations
additional guidance, issued in January 2014, has adjusted the treatment of mark-to-market valuations on convertible bonds for the calculation of nav
per share. this update has provided a 1p increase in epra nav per share in the current year.
at 31 march 2014, the number of shares in issue was: basic: 1,008m (2012/13: 986m); diluted for the effect of share options: 1,021m (2012/13: 1,001m).
total accounting return per share for the year ended 31 march 2014 of 20.0% includes dividends of 27.0p (see note 20) in addition to the increase
in epra nav of 92.0p. total accounting return per share for the year ended 31 march 2013 was 4.6%.
121
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
3 gross and net rental and related income
rent receivable
spreading of tenant incentives and guaranteed rent increases
surrender premia
Gross rental income
service charge income
Gross rental and related income
service charge expenses
property operating expenses
net rental and related income
2014
£m
310
20
4 1
334
50
384
(50)
(21)
313
2013
£m
269
24
294
35
329
(35)
(13)
281
the cash element of net rental income recognised during the year ended 31 march 2014 from properties which were not subject to a security
interest was £189m (2012/13: £159m). property operating expenses relating to investment properties that did not generate any rental income were
£1m (2012/13: £1m). contingent rents of £1m (2012/13: £1m) were recognised in the year.
4 fees and other income
management and performance fees (from joint ventures and funds)
other fees and commissions
5 other income statement disclosures
(i) total revenue
Gross rental and related income
Fees and other income
Financing income
proceeds on property trading
total revenue in the year
(ii) auditor remuneration – Deloitte llp
audit fees
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor for the audit of the company’s subsidiaries, pursuant to legislation
total audit fees
audit-related assurance services
total audit and audit-related assurance services
other fees
tax advisory services
other services
total other fees
(iii) exchange gains recognised in the consolidated income statement total £3m (2012/13: £2m).
122
note
3
4
7
6
2014
£m
10
5 5
15
2014
£m
384
15
12
109 –
520
2014
£m
0.3
0.2
0.5
0.1
0.6
0.1
0.1
0.2
0.8
2013
£m
10
15
2013
£m
329
15
23
367
2013
£m
0.2
0.3
0.5
0.1
0.6
0.1
0.2
0.3
0.9
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
6 net revaluation gains on property and investments
Consolidated income statement
revaluation of properties
result on property and investment disposals
revaluation of investments
share of valuation movements of joint ventures and funds
net revaluation gains on property and investments
profit on trading property
sale proceeds
cost of sales
profit on trading property
7 net financing costs
interest payable on:
bank loans and overdrafts
other loans
obligations under finance leases
Development interest capitalised
interest receivable on:
Deposits, securities and liquid investments
loans to joint ventures
other finance (income) costs:
expected return on pension scheme assets
interest on pension scheme liabilities
valuation movements on translation of foreign currency debt
hedging reserve recycling
net financing costs – underlying
Capital and other:
valuation movements on fair value debt
valuation movements on fair value derivatives
net capital movement on convertible bond
recycling of fair value movement on close-out of derivatives
valuation movement on translation of foreign currency net assets
Fair value movement on non-hedge accounted derivatives
net financing costs – capital
net financing costs
total financing income
total financing charges
net financing costs
interest on development expenditure is capitalised at a rate of 3.80% (2012/13: 4.00%).
2014
£m
580
31 8
4 9
615
258
873
109 –
(95) –
14 –
2014
£m
29
77
1 1
107
(17)
90
(3)
(6)
(9)
–
– 5
(9) 5
9
81
(62)
62
50
10
(3)
– 3
57
138
(12)
150
138
2013
£m
71
88
(62)
26
2013
£m
37
75
113
(17)
96
(11)
(3)
(14)
(7)
(5)
80
18
(14)
14
20
(2)
39
119
(23)
142
119
123
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
8 taxation
tax expense (income)
Current tax
UK corporation tax: 23% (2012/13: 24%)
adjustments in respect of prior years
total current tax income
Deferred tax on revaluations
Group total taxation (net)
attributable to joint ventures and funds
total taxation income
tax reconciliation
profit on ordinary activities before taxation
less: profit attributable to joint ventures and funds1
Group profit on ordinary activities before taxation
tax on profit on ordinary activities at UK corporation tax rate of 23% (2012/13: 24%)
effects of:
reit exempt income and gains
tax losses
adjustments in respect of prior years
Group total taxation income
2014
£m
2013
£m
2 1
2 1
(5)
(3)
(3)
(6)
5
(1)
1,105
(382)
723
166
(160)
(4)
(8)
(6)
(9)
(8)
(16)
(24)
(3)
(27)
257
(64)
193
46
(41)
(6)
(23)
(24)
1
a current tax charge of £5m (2012/13: credit of £2m) and a deferred tax credit of £nil (2012/13: credit of £1m) arose on profits attributable to joint ventures and funds.
the low charges reflect the Group’s reit status.
tax expense attributable to underlying profits for the year ended 31 march 2014 was £2m (2012/13: £1m). the underlying tax rate for the year ended
31 march 2014 was 0.7% (2012/13: 0.5%).
corporation tax payable at 31 march 2014 was £8m (2012/13: £17m) as shown on the balance sheet.
9 staff costs
staff Costs (inCludinG diReCtoRs)
Wages and salaries
social security costs
pension costs
equity-settled share-based payments
2014
£m
46
5 5
6 5
12
69
2013
£m
43
12
65
the average monthly number of employees of the company during the year was 231 (2012/13: 217). the average monthly number of Group employees,
including those employed directly at the Group’s properties and their costs recharged to tenants, was 556 (2012/13: 514).
the executive Directors and non-executive Directors are the key management personnel. their emoluments are summarised below and further
detail is disclosed in the remuneration report on pages 82 to 107.
124
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
9 staff costs continued
diReCtoRs’ emoluments
short-term employee benefits
termination payments
service cost in relation to defined benefit pension schemes
share based payment
2014
£m
5.6
0.2 –
0.2
5.2
11.2
2013
£m
6.4
0.1
3.1
9.6
staff Costs
the Group’s equity-settled share-based payments comprise the long-term incentive plan (ltip), the matching share plan (msp), the Fund
managers performance plan (Fmpp), the share incentive plan (sip) and various savings related share option schemes.
the company expenses an estimate of how many shares are likely to vest based on the market price at the date of grant, taking account of expected
performance against the relevant performance targets and service periods.
lonG-teRm inCentiVe plan (ltip)
Under the ltip the company may award employees a combination of performance shares and options. both components have the same performance
targets based on total property return, total accounting return and a three-year service period. For both ltip components the company estimates
the number of shares or options likely to vest and expenses that estimate over the relevant period. performance shares are valued at the market value
at the date of the award. the options are valued using a black-scholes model adjusted for dividends, see table below. volatility has been estimated by
taking the historical volatility in the company’s share price over a four-year period and adjusting where there are known factors that may affect future
volatility. no other features of the option grant were incorporated into the measurement of fair value.
lonG-teRm inCentiVe plan: 2013 awaRds
share price and exercise price at grant date
expected option life in years
risk free rate
expected volatility
expected dividend yield
value per option
5 December
2013
5 august
2013
600p
7
2.3%
35%
5%
133p
601p
7
1.8%
35%
5%
132p
matChinG shaRe plan (msp)
the msp allows eligible employees to receive one third of their annual bonus in shares, held in trust, which, following performance targets based
on total shareholder return and like-for-like rental growth being achieved over a three year period, will be matched two-for-one by the company.
the company expenses the estimated number of shares likely to vest over the three-year period based on the market price at the date of grant.
fund manaGeRs peRfoRmanCe plan (fmpp)
Under the Fmpp the company may award employees a combination of cash (20% of the award) and shares based on a maximum of 30% of the annual
performance fee awarded by the Unit trusts and, as agreed by shareholders in 2008, in respect of a comparative notional pool for british land-owned
portfolios. the cash is awarded following the performance year under review with the shares released over the following three years subject to clawback
due to subsequent property underperformance. the company expenses an estimate of the fair value of the award over the period to full vesting.
otheR shaRe plans
Under the sip the company gives eligible employees free shares of up to £3,000 a year. they can also purchase partnership shares for up to £1,500
a year that are matched two-for-one by the company. the free and matching shares are either purchased at fair value in the market or allotted and
expensed at the time of allocation.
Under the savings related share option scheme eligible employees can save up to £250 a month over a three or five-year period and use the savings
to exercise an option granted at the outset at a 20% discount to the then prevailing share price. the fair value of the various options is expensed over
the service period, based on a black-scholes model.
movements in shares and options are given in note 22.
125
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
10 pensions
the british land Group of companies pension scheme (the scheme) is the principal pension scheme in the Group. it is a defined benefit scheme
which is externally funded and not contracted out of serps (state earnings-related pension scheme). the assets of the scheme are held in a trustee-
administered fund and kept separate from those of the company. it is not planned to admit new employees to the scheme. existing entitlements will
be retained by the members, with freedom to transfer to a new Defined contribution scheme. contributions to this scheme are at a flat rate of 15%
of salary and are paid by the company. in certain circumstances it may be necessary to pay higher contributions when recruiting senior executives.
the Group has three other small pension schemes. the total net pension cost charged for the year was £6m (2012/13: £5m), of which £3m (2012/13:
£3m) relates to defined contribution plans.
a full actuarial valuation of the scheme was carried out at 31 march 2012 by consulting actuaries, aon hewitt associates ltd. the employer’s
contributions will be paid in the future at the rate recommended by the actuary of 54.4% per annum of basic salaries. the best estimate of employer
contributions expected to be paid during the year to 31 march 2015 is £3m. the major assumptions used for the actuarial valuation were:
Discount rate
salary inflation
pensions increase
price inflation
2014
% pa
4.4
5.2
3.5
3.7
2013
% pa
4.1
4.7
3.1
3.2
2012
% pa
4.6
4.7
3.1
3.2
2011
% pa
5.5
5.2
3.7
3.7
2010
% pa
5.5
5.4
3.9
3.9
the mortality assumptions are based on standard mortality tables which allow for future mortality improvements. the assumptions are that a
member currently aged 60 will live on average for a further 29.7 years if they are male and for a further 30.9 years if they are female. For a member
who retires in 2034 at age 60 the assumptions are that they will live on average for a further 31.3 years after retirement if they are male and for a
further 32.6 years after retirement if they are female.
Composition of sCheme assets
equities
Diversified Growth Funds (DGF)
other assets
total scheme assets
2014
£m
51
77
3 2
2013
£m
48
70
131
120
the vast majority of the scheme assets are quoted in an active market.
the amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit scheme is as follows:
present value of defined scheme obligations
Fair value of scheme assets
irrecoverable surplus
asset (liability) recognised in the balance sheet
2014
£m
(125)
131
(6)
–
2013
£m
(119)
120
(1)
–
2012
£m
(107)
109
(2)
–
2011
£m
(99)
110
(11)
–
2010
£m
(95)
98
(3)
–
ias 19 (revised) and the related consequential amendments have impacted the accounting for the Group’s defined benefit scheme, by replacing the
interest cost and expected return on plan assets with a net interest charge on the net defined benefit liability. the impact of adopting ias 19 (revised)
is not considered material.
histoRy of expeRienCe Gains and losses
total actuarial loss recognised in the consolidated statement
of comprehensive income1
amount2
percentage of present value on scheme liabilities
pension scheme movement for the year1
1 movements stated after adjustment for irrecoverability of any surplus.
2 cumulative loss recognised in the statement of comprehensive income is £31m (2012/13: £29m).
2014
£m
2013
£m
2012
£m
2011
£m
2010
£m
(2)
1.6%
(2)
(4)
3.1%
(4)
(3)
2.7%
(3)
(2)
2.0%
(2)
(2)
1.5%
(2)
126
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
10 pensions continued
movements in the present value of defined benefit obligations were as follows:
at 1 april
current service cost
interest cost
actuarial gains (losses)
Gain (loss) from change in demographic assumptions
Gain (loss) from change in financial assumptions
Gain (loss) on scheme liabilities arising from experience
benefits paid
at 31 march
amounts recognised in the income statement in respect of the defined benefit scheme are:
administrative expenses: current service cost
interest on net defined benefit liability (asset)
the actual return on scheme assets was £9m (2012/13: £10m).
movements in the fair value of the scheme assets were as follows:
at 1 april
interest income on scheme assets
contributions by employer
actuarial gains (losses)
benefits paid
at 31 march
2013
£m
(107)
(2)
(5)
(3)
(6)
2014
£m
(119)
(3)
(5)
–
(3)
3 2
2 2
(125)
(119)
2014
£m
(3)
– 2
(3) –
2014
£m
120
5 7
4 4
4 3
(2)
131
2013
£m
(2)
2013
£m
108
(2)
120
through its defined benefit plans, the Group is exposed to a number of risks, the most significant of which are:
asset volatility
the liabilities are calculated using a discount rate set with a reference to corporate bond yields; if assets underperform
this yield, this will create a deficit. the scheme holds a significant portion of growth assets (equities and diversified
growth funds) which, though are expected to outperform corporate bonds in the long-term, create volatility and risk
in the short-term. the allocation to growth assets is monitored to ensure that it remains appropriate given the scheme’s
long-term objectives.
Changes in bond yields a decrease in corporate bond yields will increase the value placed on the scheme’s liabilities for accounting purposes,
although this will be partially offset by an increase in the value of the scheme’s bond holdings.
inflation risk
the majority of the scheme’s benefit obligations are linked to inflation and higher inflation will lead to higher liabilities
(although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation).
the majority of the assets are either unaffected by or only loosely correlated with inflation, meaning that an increase
in inflation will also increase the deficit.
life expectancy
the majority of the scheme’s obligations are to provide benefits for the life of the member, so increases in life expectancy
will result in an increase in the liabilities.
127
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
11 property
pRopeRty ReConCiliation 12 months to 31 maRCh 2014
Carrying value at 1 april 2013
additions – property purchases
– acquisition of hercules Unit trust
– development expenditure
– capitalised interest
– capital expenditure on asset
management initiatives
Depreciation
Disposals
reclassifications
revaluations included in income statement
revaluation included in socie
movement in tenant incentives and contracted
rent uplift balances
Carrying value at 31 march 2014
head lease liabilities (note 16)
surplus on trading properties
investment
offices and
UK retail residential Developments
level 3
level 3
£m
£m
level 3
£m
sub total
level 3
£m
trading
properties
£m
3,360
1,267
861
5,488
53
1,006
10
–
25
1,094
–
(234)
(5)
240
–
428
–
30
6
4
468
–
(11)
538
270
–
6
18
4,461
2,550
83
–
60
4
–
147
–
–
(816)
65
–
4
261
564
1,006
100
10
29
1,709
–
(245)
(283)
575
–
28
7,272
40
–
–
38
7
–
45
–
(97)
283
–
–
–
271
total Group property portfolio valuation at 31 march 2014
non-controlling interest
total Group property portfolio valuation at 31 march 2014 attributable to shareholders
owner-
occupied
level 3
£m
total
£m
42
5,570
–
–
–
–
–
–
(1)
–
– –
5
1 1
–
47
564
1,006
138
17
29
1,754
(1)
(342)
580
28
7,590
(32)
58
7,616
(422)
7,194
128
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
11 property continued
the different valuation method levels are defined below:
level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
these levels are specified in accordance with iFrs 13 ‘Fair value measurement’. on the following page of this note within the section ‘valuation’ our
property valuation approach and process is set out. as noted in ‘significant issues considered by the audit committee during the year’ on page 77,
property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer which may not prove to be accurate.
For these reasons, and consistent with epra’s guidance, we have classified the valuations of our property portfolio as level 3 as defined by iFrs 13.
some of the inputs to the valuations are defined as ‘unobservable’ by iFrs 13 and these are analysed in a table on the following page.
the Group’s policy is to recognise transfers between fair value hierarchy levels as of the date of the event or change in circumstances that
caused the transfer. there have been no transfers during the period.
at 31 march 2014, the Group book value of properties of £7,616m (2012/13: £5,554m) comprises freeholds of £4,855m (2012/13: £3,502m);
virtual freeholds of £695m (2012/13: £709m); and long leaseholds of £2,066m (2012/13: £1,343m). the historical cost of properties was
£5,574m (2012/13: £4,229m).
the property valuation does not include any investment properties held under operating leases (2012/13: £nil).
properties valued at £1,741m (2012/13: £1,724m) were subject to a security interest and other properties of non-recourse companies amounted
to £1,066m (2012/13: £40m).
During the year to 31 march 2014, a gross amount of £286m of investment properties were reclassified to trading properties, as since planning
consent has been granted it is the Group’s intention to redevelop and sell these properties. some of these trading properties were subsequently
sold in the period.
included within the property valuation is £100m (2012/13: £91m) in respect of accrued contracted rental uplift income, against which the Group
holds a provision of £5m (2012/13: £5m). the balance arises through the iFrs treatment of leases containing such arrangements, which requires
the recognition of rental income on a straight-line basis over the lease term, with the difference between this and the cash receipt changing the
carrying value of the property against which revaluations are measured.
cumulative interest capitalised against investment properties amounts to £73m (2012/13: £56m).
129
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 notes to the accoUnts
continUeD…
11 property continued
Valuation
the Group’s total property portfolio was valued by external valuers on the basis of fair value, in accordance with the rics valuation – professional
standards 2012, eighth edition, published by the royal institution of chartered surveyors.
the information provided to the valuers, and the assumptions and valuations models used by the valuers are reviewed by the property portfolio team,
the head of offices, the head of retail and the Finance Director. the valuers meet with the external auditors and also present directly to the audit
committee at the interim and year-end review of results. Further details of the audit committee’s responsibilities in relation to valuations can be
found in the report of the audit committee (page 78).
investment properties, excluding properties held for development, are valued by adopting the ‘investment method’ of valuation. this approach involves
applying capitalisation yields to current and estimated future rental streams net of income voids arising from vacancies or rent-free periods and
associated running costs. these capitalisation yields and rental values are based on comparable property and leasing transactions in the market,
using the valuers’ professional judgement and market observation. other factors taken into account in the valuations include the tenure of the
property, tenancy details and ground and structural conditions.
in the case of ongoing developments and properties held for development, the approach applied is the ‘residual method’ of valuation, which is the
investment method of valuation as described above, with a deduction for all costs necessary to complete the development including a notional finance
cost, together with a further allowance for remaining risk. properties held for development are generally valued by adopting the higher of the residual
method of valuation, allowing for all associated risks, or the investment method of valuation for the existing asset.
copies of the valuation certificates of Knight Frank llp and cbre can be found on the website at: www.britishland.com/investors/operational-
performance.aspx.
a breakdown of valuations split between the Group and its share of joint ventures and funds is shown below:
Knight Frank llp
cbre
total property portfolio valuation
non-controlling interest share of property
total property portfolio valuation attributable to shareholders
2014
Joint
ventures
and funds
£m
2,903
2,131
5,034
(188)
total
£m
8,939
3,711
12,650
(610)
4,846
12,040
Group
£m
6,036
1,580
7,616
(422)
7,194
2013
Joint
ventures
and funds
£m
2,680
2,265
4,945
–
4,945
Group
£m
5,084
470
5,554
–
5,554
total
£m
7,764
2,735
10,499
–
10,499
infoRmation about faiR Value measuRements usinG unobseRVable inputs (leVel 3)
investment
UK retail1
offices and residential2, 3
developments3
fair value at
31 march
2014
£m
4,535
2,593
251
eRV per sq ft
equivalent yield
Valuation
technique
minimum
£
maximum
£
weighted
average
£
minimum
%
maximum
%
weighted
average
%
investment
methodolgy
investment
methodolgy
investment
methodolgy
2
4
17
60
80
93
20
46
37
4.1
1.3
4.3
16.8
10.1
6.0
5.9
5.1
5.4
1 includes the underlying properties within the investment held for trading, as disclosed in note 13, discounted for the date of the freehold reversions.
2 including owner-occupied.
3 includes residential with an average capital value per sq ft of £877, including developments at end value and mixed-use.
all other factors being equal, a higher equivalent yield or discount rate would lead to a decrease in the valuation of an asset, and an increase in the
current or estimated future rental stream would have the effect of increasing the capital value, and vice versa. however, there are interrelationships
between the unobservable inputs which are partially determined by market conditions, which would impact on these changes.
130
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
investment
and
development
£m
5,346
453
201
15
28
697
–
(651)
72
24
5,488
trading
£m
owner-
occupied
£m
total
£m
47
–
5
1
–
6
–
(13)
–
–
40
41
5,434
–
–
–
–
–
(1)
–
2
–
453
206
16
28
703
(1)
(664)
74
24
42
5,570
11 property continued
the prior year movement is shown below:
Carrying value at 1 april 2012
additions – property purchases
– development expenditure
– capitalised interest
– capital expenditure on asset management initiatives
Depreciation
Disposals
revaluations included in income statement
movement in tenant incentives and contracted rent uplift balances
Carrying value at 31 march 2013
head lease liabilities (note 16)
surplus on trading properties
total Group property portfolio valuation 31 march 2013
12 Joint ventures and funds
(26)
10
5,554
total
£m
2,336
620
(635)
377
(1)
(102)
44
73
2,712
summaRy moVement foR the yeaR of the inVestments in Joint VentuRes and funds
at 1 april 2013
additions
Disposals
share of profit after taxation
Distributions and dividends: capital
revenue
reclassification of amounts owed from joint ventures
hedging and exchange movements
at 31 march 2014
Joint
ventures
£m
1,886
175
(199)
370
–
(71)
44
69
2,274
Funds
£m
450
445
(436)
7
(1)
(31)
–
4
438
total
£m
2,336
620
(635)
377
(1)
(102)
44
73
2,712
equity 1
£m
1,843
569
(481)
377
(1)
(102)
–
73
2,278
loans 1
£m
493
51
(154)
–
–
–
44
–
434
1 comparatives have been re-presented between equity and loans to better reflect the nature of historical investments.
preF, a fund owning a portfolio of retail property in europe (in which british land has a net investment of £54m), has its properties externally
valued by cbre. cbre have included a market uncertainty clause in the valuation report of the portuguese and spanish properties, due to the lack
of transactional evidence and uncertainty over the economic situation in those markets. in 2013 preF made partial early repayments of debt totalling
€18m. in march 2014, following the sale of its italian asset, €44m of debt was repaid. preF now has €37m of bank loans that are due to mature in
the calendar year 2015. in December 2013 a one-year extension of the fund to 26 march 2015 was approved.
Distributions in the year included the receipt of £6m from the broadgate joint venture, £2m from the meadowhall joint venture, £4m from the
sainsbury’s joint venture, £17m from tesco joint ventures and £23m from hUt.
at 31 march 2014, the valuation of the Group’s share of joint ventures and funds’ properties was £5,034m (2012/13: £4,945m); surplus on the Group’s
share of joint ventures and funds’ trading properties was £5m (2012/13: £nil); external net debt was £2,113m (2012/13: £2,427m) and the mark-to-
market adjustment for external debt was £123m liability (2012/13: £193m liability).
at 31 march 2014, the investment in joint ventures included within the total investment in joint ventures and funds was £2,658m (2012/13: £1,889m).
131
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
12 Joint ventures and funds continued
a detailed breakdown of the Group’s share of results of specific joint ventures and funds for the year ended 31 march 2014 is set out on this and
facing page, below and across. all disclosures have been restated to british land accounting policies under iFrs eliminating all profits and losses
resulting from upstream and downstream transactions with the Group.
in the prior year the detailed breakdown contained 100% of the results of the specific joint ventures and funds. it is considered that the change
in presentation, to our share, results in a more understandable disclosure.
Joint VentuRes’ and funds’ summaRy finanCial statements (bRitish land shaRe)
partners
property sector
Group share
summarised income statements
Gross rental and related income
net rental and related income
other income and expenditure
net interest payable
Underlying profit before taxation
surplus (deficit) on revaluation
Disposal of fixed assets
non-recurring items
profit (loss) on ordinary activities before taxation
current tax
Deferred tax
profit (loss) on ordinary activities after taxation (british land share)
summarised balance sheets
investment properties
current assets
Upstream loans to joint venture shareholders
cash and deposits
Gross assets
current liabilities
bank/other debt
securitised debt
obligations under finance leases
Deferred tax
Gross liabilities
net external assets (british land share)
represented by:
shareholder loans5
ordinary shareholders’ funds/partners’ capital5
total investment (british land share)
bluebutton
properties ltd
euro clover
private ltd
(Gic)
msc property
intermediate
holdings ltd
norges bank
investment
management
city offices shopping centres
meadowhall
broadgate
bl sainsbury
superstores ltd
tesco
Joint ventures1
hercules
Unit trust3
other
joint ventures
and funds4
Group share
total
2014
Group share
total
2013
the southgate
limited
partnership
Uss
Joint ventures2
Universities
superannuation
J sainsbury plc
tesco plc
aviva investors
scheme
superstores
superstores
shopping centres
shopping centres
50%
50%
50%
50%
£m
108
81
–
(45)
36
143
–
–
179
–
–
179
£m
1,712
4
–
135
1,851
(63)
(165)
(881)
–
5
(1,104)
747
52
695
747
£m
46
38
–
(19)
19
4
–
–
23
–
–
23
£m
770
1
–
16
787
(21)
–
(372)
(2)
–
(395)
392
105
287
392
£m
32
32
–
(15)
17
3
–
–
20
–
–
20
£m
604
–
–
10
614
(16)
–
(294)
–
1
(309)
305
4
301
305
£m
51
47
(1)
(28)
18
43
–
–
61
(1)
–
60
£m
898
1
–
16
915
(60)
(504)
–
–
(9)
(573)
342
52
290
342
leadenhall
holding co
(Jersey) ltd
oxford
properties
city offices
leadenhall
50%
£m
–
–
–
–
–
–
–
67
67
–
–
67
£m
265
267
(3)
1
–
1
–
–
–
–
(3)
264
157
107
264
50%
£m
5
4
–
–
4
–
–
10
14
–
–
14
£m
99
–
–
4
–
–
–
–
103
(2)
(2)
101
7
94
101
retail
parks
various
£m
40
34
(1)
(12)
21
6
(4)
–
23
–
–
23
£m
456
2
–
6
–
–
–
464
(5)
(75)
(80)
384
–
384
384
50%
£m
4
2
–
–
2
2
–
–
4
–
–
4
2
–
2
–
–
–
–
£m
103
107
(3)
(3)
104
–
104
104
£m
21
15
(4)
(4)
(16)
7
–
–
(9)
(4)
–
(13)
£m
124
20
4
9
157
(44)
(39)
–
(1)
–
(84)
73
57
16
73
£m
307
253
(6)
(123)
124
262
(4)
–
382
(5) 2
– 1
377
£m
5,031
31
4 4
199
5,265
(217)
(783)
(1,547)
(3)
(3)
(2,553)
2,712
434
2,278
2,712
£m
306
260
(4)
(126)
130
(61)
(1)
(4)
64
67
£m
4,949
62
215
5,230
(340)
(955)
(1,592)
(5)
(2)
(2,894)
2,336
493
1,843
2,336
1 tesco joint ventures include blt holdings (2010) limited, the tesco british land property partnership, tesco bl holdings limited, shopping centres limited and the tesco aqua
limited partnership.
2 Uss joint ventures include the eden Walk shopping centre limited partnership and the Fareham property partnership.
3 on 17 February 2014 hercules Unit trust (hUt) became a subsidiary of the Group (note 21). the income statement results for hUt includes the Group’s share of the results of the
hUt consolidated group up to and including 17 February 2014. thereafter, only the Group’s share of results from the hUt joint ventures and sub-fund are shown. this includes
50% of the results of Deepdale co-ownership trust, speke Unit trust, Gibraltar limited partnership and valentine co-ownership trust and 41.25% of birstall co-ownership
trust. the balance sheet shows our ownership of the assets of these joint ventures and sub-funds detailed above.
4 included in the column headed ‘other joint ventures and funds’ are contributions from the following: bl Goodman limited partnership, bl Gazeley limited, eurofund
investments Zaragoza s.l. (disposed of during the year), the scottish retail property limited partnership (disposed of during the year), the aldgate place limited partnership,
bluebutton property management UK limited, bl residential limited partnership, pillar retail europark Fund (preF) and city of london office Unit trust (cloUt). the Group’s
ownership share of preF is 65%, however as the Group does not exercise control over significant decisions of the fund, the Group equity accounts for its interest in preF.
132
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
12 Joint ventures and funds continued
a detailed breakdown of the Group’s share of results of specific joint ventures and funds for the year ended 31 march 2014 is set out on this and
facing page, below and across. all disclosures have been restated to british land accounting policies under iFrs eliminating all profits and losses
resulting from upstream and downstream transactions with the Group.
in the prior year the detailed breakdown contained 100% of the results of the specific joint ventures and funds. it is considered that the change
in presentation, to our share, results in a more understandable disclosure.
Joint VentuRes’ and funds’ summaRy finanCial statements (bRitish land shaRe)
partners
property sector
Group share
summarised income statements
Gross rental and related income
net rental and related income
other income and expenditure
net interest payable
Underlying profit before taxation
surplus (deficit) on revaluation
Disposal of fixed assets
non-recurring items
profit (loss) on ordinary activities before taxation
current tax
Deferred tax
profit (loss) on ordinary activities after taxation (british land share)
summarised balance sheets
investment properties
current assets
Upstream loans to joint venture shareholders
cash and deposits
Gross assets
current liabilities
bank/other debt
securitised debt
Deferred tax
Gross liabilities
represented by:
shareholder loans5
obligations under finance leases
net external assets (british land share)
ordinary shareholders’ funds/partners’ capital5
total investment (british land share)
50%
50%
50%
50%
£m
108
81
–
(45)
36
143
–
–
–
–
179
179
£m
1,712
4
–
135
1,851
(63)
(165)
(881)
–
5
(1,104)
747
52
695
747
£m
46
38
–
(19)
19
4
–
–
–
–
23
23
£m
770
1
–
16
787
(21)
–
(372)
(2)
–
(395)
392
105
287
392
£m
32
32
–
(15)
17
3
–
–
–
–
20
20
£m
604
–
–
10
614
(16)
(294)
–
–
1
(309)
305
4
301
305
£m
51
47
(1)
(28)
18
43
–
–
61
(1)
–
60
£m
898
1
–
16
915
(60)
(504)
–
–
(9)
(573)
342
52
290
342
bl sainsbury
superstores ltd
tesco
Joint ventures1
the southgate
limited
partnership
(Gic)
management
J sainsbury plc
tesco plc
aviva investors
bluebutton
properties ltd
euro clover
private ltd
msc property
intermediate
holdings ltd
norges bank
investment
city offices shopping centres
Uss
Joint ventures2
Universities
superannuation
scheme
broadgate
meadowhall
superstores
superstores
shopping centres
shopping centres
50%
£m
4
2
–
–
2
2
–
–
4
–
–
4
£m
103
2
–
2
107
(3)
–
–
–
–
(3)
104
–
104
104
50%
£m
5
4
–
–
4
10
–
–
14
–
–
14
£m
99
–
–
4
103
(2)
–
–
–
–
(2)
101
7
94
101
leadenhall
holding co
(Jersey) ltd
oxford
properties
city offices
leadenhall
50%
£m
–
–
–
–
–
67
–
–
67
–
–
67
£m
265
1
–
1
267
(3)
–
–
–
–
(3)
264
157
107
264
hercules
Unit trust3
other
joint ventures
and funds4
total
Group share
2014
total
Group share
2013
retail
parks
various
£m
40
34
(1)
(12)
21
6
(4)
–
23
–
–
23
£m
456
2
–
6
464
(5)
(75)
–
–
–
(80)
384
–
384
384
£m
21
15
(4)
(4)
7
(16)
–
–
(9)
(4)
–
(13)
£m
124
20
4
9
157
(44)
(39)
–
(1)
–
(84)
73
57
16
73
£m
307
253
(6)
(123)
124
262
(4)
–
382
(5) 2
– 1
377
£m
5,031
31
4 4
199
5,265
(217)
(783)
(1,547)
(3)
(3)
(2,553)
2,712
434
2,278
2,712
£m
306
260
(4)
(126)
130
(61)
(1)
(4)
64
67
£m
4,949
62
215
5,230
(340)
(955)
(1,592)
(5)
(2)
(2,894)
2,336
493
1,843
2,336
5 2013 comparatives have been re-presented to better reflect the nature of our historical investments.
these financial statements include the results and financial position of the Group’s interest in the tesco british land property partnership, the tesco aqua limited partnership,
the scottish retail property limited partnership, the Fareham property partnership, the aldgate place limited partnership, the bl Goodman limited partnership, auchinlea
partnership and the bl residential limited partnership. accordingly, advantage has been taken of the exemptions provided by regulation 7 of the partnerships and Unlimited
companies (accounts) regulations 1993, not to attach the partnership accounts to these financial statements.
the borrowings of joint ventures and funds and their subsidiaries are non-recourse to the Group. all joint ventures are incorporated in the United Kingdom, with the exception
of bluebutton properties limited, the eden Walk shopping centre Unit trust and leadenhall holding co (Jersey) limited which are domiciled in Jersey. of the funds, hercules
Unit trust (hUt) is domiciled in Jersey and preF in luxembourg.
133
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
12 Joint ventures and funds continued
opeRatinG Cash flows of Joint VentuRes and funds (GRoup shaRe)
rental income received from tenants
operating expenses paid to suppliers and employees
Cash generated from operations
interest paid
interest received
UK corporation tax paid
Foreign tax paid
Cash inflow from operating activities
Cash inflow from operating activities deployed as:
surplus cash retained within joint ventures and funds
Revenue distributions to british land
13 other investments
at 1 april
additions
Disposals
revaluation
Depreciation
at 31 march
2014
£m
274
(33)
241
(135)
1 –
(6)
(3) –
98
35
63
98
2014
2013
investment
held for
trading
£m
loans and
receivables
£m
–
83
–
9
–
92
76
104
(10)
–
–
170
investment
held for
trading
£m
loans and
receivables
£m
–
–
–
–
–
–
28
53
(4)
–
(1)
76
total
£m
76
187
(10)
9
–
262
2013
£m
264
(22)
242
(133)
(7)
102
28
74
102
total
£m
28
53
(4)
–
(1)
76
the investment held for trading comprises interests as a trust beneficiary. the trusts’ assets comprise freeheld reversions in a pool of commercial
properties, comprising sainsbury’s superstores.
the investment has been categorised as level 3 in the fair value hierarchy (see note 11). Fair value of the interest has been determined by the
Directors, supported by an external valuation from cbre. the superstore assets are subject to the same assumption ranges and sensitivities
disclosed in note 11.
included within addition to loans and receivables is £92m (2012/13: £53m) in relation to a loan to bluebutton properties limited (see note 25), a joint
venture company.
134
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
14 deBtors
trade and other debtors1
amounts owed by joint ventures
prepayments and accrued income
2014
£m
35
–
6
41
2013
£m
15
40
5
60
1 included within this balance is deferred consideration of £1m (2012/13: £4m) arising on the sale of investment properties for which the timing of the receipt is contingent
and therefore may fall due after one year.
trade and other debtors are shown after deducting a provision for bad and doubtful debts of £15m (2012/13: £11m). the charge to the income
statement was £nil (2012/13: £1m).
the Directors consider that the carrying amount of trade and other debtors is approximate to their fair value. there is no concentration of credit
risk with respect to trade debtors as the Group has a large number of customers who are paying their rent in advance.
as at 31 march, trade and other debtors outside their payment terms yet not provided for were as follows:
outside credit terms but not impaired
within credit
terms
£m
total
£m
0–1 month
£m
1–2 months
£m
more than
2 months
£m
2014
2013
15 creditors
trade creditors
amounts owed to joint ventures
other taxation and social security
accruals and deferred income
35
15
22
9
9
6
–
–
2014
£m
85
4 4
21
153
263
trade creditors are interest-free and have settlement dates within one year. the Directors consider that the carrying amount of trade and other
creditors is approximate to their fair value.
4
–
2013
£m
94
24
137
259
135
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
16 other non-current liaBilities
head leases
2014
£m
32
32
2013
£m
26
26
17 deferred tax liaBilities
Deferred tax is calculated on temporary differences under the liability method using a tax rate of 20% (2012/13: 23%).
the movement on deferred tax is as shown below:
property and investment revaluations
other timing differences
property and investment revaluations
other timing differences
1 april
2013
£m
Credited
to income
£m
transferred
to joint
ventures
£m
31 march
2014
£m
12
4
16
(3)
–
(3)
(9)
–
(9)
–
4
4
1 april
2012
£m
credited
to income
£m
transferred
to joint
ventures
£m
31 march
2013
£m
28
4
32
(16)
–
(16)
–
–
–
12
4
16
Under the reit regime development properties which are sold within three years of completion do not benefit from tax exemption. at 31 march 2014
the value of such properties is £455m (2012/13: £nil) and if these properties were to be sold and tax exemption was not available the tax arising would
be £34m (2012/13: £nil).
the deferred tax charge for the year ended 31 march 2014 includes a credit of £2m to reflect reduced deferred tax liabilities arising from the
forthcoming reduction in the UK corporation tax rate to 20% (effective from 1 april 2015).
Deferred tax assets of £39m (2012/13: £40m) arising on losses from previous years have not been recognised in the financial year.
136
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
18 net deBt
secured on the assets of the Group
9.125% first mortgage debenture stock 2020
6.125% first mortgage debenture stock 2014
5.264% first mortgage debenture bonds 2035
5.0055% first mortgage amortising debentures 2035
5.357% first mortgage debenture bonds 2028
6.75% first mortgage debenture bonds 2020
bank loans
loan notes
unsecured
5.50% senior notes 2027
6.30% senior Us dollar notes 2015
3.895% senior Us dollar notes 2018
4.635% senior Us dollar notes 2021
4.766% senior Us dollar notes 2023
5.003% senior Us dollar notes 2026
3.81% senior notes 2026
3.97% senior notes 2026
1.5% convertible bond 2017
bank loans and overdrafts
Gross debt
interest rate derivative liabilities
interest rate derivative assets
cash and short-term deposits
total net debt
Footnote
1.1
1.1
1.2
2
3
3
3
3
4
5, 6
net debt attributable to non-controlling interests
net debt attributable to shareholders of the Company
total borrowings where any instalments are due after five years are £102m (2012/13: £103m).
1 these are non-recourse borrowings with no recourse for repayment to other companies or assets in the Group:
1.1 blD property holdings ltd
1.2 hercules Unit trust
2 principal and interest on this borrowing was fully hedged into sterling at the time of issue.
3 principal and interest on this borrowing was fully hedged into sterling at a floating rate at the time of issue.
4 the principal amount of gross debt at 31 march 2014 was £3,209m (2012/13: £2,063m). included in this is the principal amount of secured
borrowings and other borrowings of non-recourse companies of £1,505m, of which the proportion of the borrowings of the partly-owned
subsidiary, hercules Unit trust, not beneficially owned by the Group, is £219m.
5 included within cash and short-term deposits is the cash and short-term deposits of hercules Unit trust, of which £14m is the proportion
not beneficially owned by the Group.
6 cash and deposits not subject to a security interest amount to £93m (2012/13: £106m).
2013
£m
37
45
345
101
334
181
2014
£m
36
44
344
100
327
176
523 –
2 5
1,552
1,048
98
92
25
136
83
52
99 –
101 –
458
602
1,746
3,298
57
(32)
3,323
(142)
3,181
(204) –
2,977
2014
£m
80
523 –
603
98
101
28
158
97
62
407
179
1,130
2,178
86
(92)
2,172
(135)
2,037
2,037
2013
£m
82
82
137
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
18 net deBt continued
matuRity analysis of net debt
repayable within one year and on demand
between: one and two years
two and five years
five and ten years
ten and fifteen years
fifteen and twenty years
twenty and twenty-five years
Gross debt
interest rate and currency derivatives
cash and short-term deposits
net debt
2014
£m
495
90
1,084
465
783
6 5
375
2,803
3,298
25
(142)
2013
£m
44
188
522
441
602
376
2,134
2,178
(6)
(135)
3,181
2,037
the amount due within one year reflects the use of our lower margin bank facilities which are now towards the end of their agreed terms.
these borrowings can be repaid using the £1,790m total undrawn committed facilities shown on the table on page 145, which do not include the
new £785m five-year syndicated facility signed on 2 april 2014 which will replace the maturing £620m facility.
bRitish land unseCuRed finanCial CoVenants
the two financial covenants applicable to the Group unsecured debt including convertible bonds are:
net boRRowinGs not to exCeed 175% of adJusted Capital and ReseRVes
at 31 march 2014, the ratio was 40%:
net borrowings were £2,896m, being the principal amount of gross debt of £3,209m, less the relevant proportion of borrowings of the partly-owned
subsidiary of £219m, plus amounts owed to joint ventures of £4m (see note 15), plus tpp investments ltd of £30m (see note 26), less the beneficially
owned cash and deposits of £128m (being £142m less the relevant proportion of cash and deposits of the partly-owned subsidiary of £14m); and
adjusted capital and reserves were £7,301m, being share capital and reserves of £6,746m (see balance sheet), adjusted for £6m of deferred tax
(see note 2), £63m trading property surpluses (see notes 11 and 12), £313m exceptional refinancing charges (see below) and £173m fair value
adjustments on financial assets and liabilities (being £115m mark-to-market on interest rate derivatives and £58m adjustment on the convertible bond).
net unseCuRed boRRowinGs not to exCeed 70% of unenCumbeRed assets
at 31 march 2014, the ratio was 31%:
net unsecured borrowings were £1,615m, being the principal amount of gross debt of £3,209m, plus amounts owed to joint ventures of £4m
(see note 15), less cash and deposits not subject to a security interest of £93m less the principal amount of secured and non-recourse borrowings
of £1,505m; and
unencumbered assets were £5,125m, being properties of £7,616m (see note 11) plus investments in joint ventures and funds of £2,712m (see balance
sheet) and other investments of £262m (see balance sheet) less investments in joint ventures of £2,658m (see note 12) and encumbered assets
of £2,807m (see note 11).
in calculating adjusted capital and reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of £313m to reflect
the cumulative net amortised exceptional items relating to the refinancings in the years ending 31 march 2005, 2006 and 2007.
138
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
18 net deBt continued
ConVeRtible bond
on 10 september 2012 british land (Jersey) limited (the issuer) issued £400m 1.5% guaranteed convertible bonds due 2017 (the bonds) at par.
the company has unconditionally and irrevocably guaranteed the due and punctual performance by the issuer of all of its obligations (including
payments) in respect of the bonds and the obligations of the company, as guarantor, constitute direct, unsubordinated, unconditional and unsecured
obligations of the company.
subject to their terms, the bonds are convertible into preference shares of the issuer which are automatically transferred to the company in exchange
for ordinary shares in the company or, at the company’s election, any combination of ordinary shares and cash. the bonds can be converted from
22 october 2012 up to and including 24 september 2015 if the share price has traded at a level exceeding 130% of the exchange price for a specified
period and from 25 september 2015 to (but excluding) the 20th dealing day before 10 september 2017 (the maturity date) at any time.
the initial exchange price was 693.07 pence per ordinary share. Under the terms of the bonds, the exchange price is adjusted on the happening
of certain events including the payment of dividends by the company above 26.4 pence in any year.
on or after 25 september 2015, the bonds may be redeemed at par at the company’s option subject to the company’s ordinary shares having traded
at a price exceeding 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the bonds originally issued
have been converted, redeemed or purchased and cancelled. if not previously converted, redeemed or purchased and cancelled, the bonds will
be redeemed at par on the maturity date.
ReConCiliation of moVement in GRoup net debt to Cash flow statement
per cash flow statement:
cash and short-term deposits
Cash and cash equivalents
term debt (excluding overdrafts)
Fair value of interest rate derivatives
net debt
2013
£m
Cash flow
£m
non-cash
£m
2014
£m
(135)
(135)
2,178
(6)
2,037
(7)
(7)
620
(16)
597
–
–
500
47
547
(142)
(142)
3,298
25
3,181
the Group loan to value (ltv) ratio at 31 march 2014 was 29%, being the principal value of gross debt of £3,209m, less the relevant portion of
borrowings of the partly-owned subsidiary of £219m, less cash and short-term deposits of £128m (being £142m less the relevant proportion of cash
and deposits of the partly-owned subsidiary of £14m), divided by total Group property of £7,616m (see note 11), plus investments in joint ventures
and funds of £2,712m (see balance sheet) and other investments of £262m (see balance sheet), less the relevant portion of property and investments
of the partly-owned subsidiary of £581m.
per cash flow statement:
cash and short-term deposits
Cash and cash equivalents
term debt (excluding overdrafts)
Fair value of interest rate derivatives
liquid investments
net debt
2012
£m
cash flow
£m
non-cash
£m
(137)
(137)
2,621
19
(200)
2,303
2
2
(496)
–
210
(284)
–
–
53
(25)
(10)
18
2013
£m
(135)
(135)
2,178
(6)
–
2,037
139
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
18 net deBt continued
CompaRison of maRket Values and book Values
Debentures and unsecured bonds
convertible bond
bank debt and other floating rate debt
cash and short-term deposits
other financial (assets) liabilities:
– interest rate derivative assets
– interest rate derivative liabilities
2014
book
value
£m
1,713
458
1,127
(142)
3,156
(32)
57
25
market
value
£m
1,722
458
1,138
(142)
3,176
(32)
57
25
level
2
1
2
1
2
2
total
3,201
3,181
short-term debtors and creditors have been excluded from the disclosures.
2013
book
value
£m
1,587
407
184
(135)
market
value
£m
1,622
407
189
(135)
2,083
2,043
(92)
86
(6)
(92)
86
(6)
2,077
2,037
Difference
£m
35
–
5
–
40
–
–
–
40
difference
£m
9
–
11
–
20
–
–
–
20
the fair values of debt, debentures and the convertible bond have been established by obtaining quoted market prices from brokers. the bank debt
and loan notes have been valued assuming they could be renegotiated at contracted margins. the derivatives have been valued by calculating the
present value of expected future cash flows, using appropriate market discount rates, by an independent treasury advisor.
faiR Value hieRaRChy
the table below analyses financial instruments carried at fair value, by the valuation method. the different levels are defined as follows:
level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
interest rate and currency
derivative assets
assets
interest rate and currency
derivative liabilities
convertible bond
liabilities
total
2014
2013
level 1
£m
level 2
£m
level 3
£m
–
–
–
458
458
458
(32)
(32)
57
–
57
25
–
–
–
–
–
–
total
£m
(32)
(32)
57
458
515
483
level 1
£m
level 2
£m
level 3
£m
–
–
–
407
407
407
(92)
(92)
86
–
86
(6)
–
–
–
–
–
–
total
£m
(92)
(92)
86
407
493
401
140
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
18 net deBt continued
CateGoRies of finanCial instRuments
financial assets
fair value through income statement
other investments – held for trading
derivatives in designated hedge accounting relationships
loans and receivables
trade and other debtors
amounts owed by joint ventures
cash and short-term deposits
other investments – loans and receivables
financial liabilities
fair value through income statement
convertible bond
held for trading – derivatives
derivatives in designated hedge accounting relationships
amortised cost
Gross debt
Finance lease payable
trade and other creditors
amounts owed to joint ventures
total
2014
£m
2013
£m
92 –
32
35
–
142
170
471
(458)
–
(57)
(2,840)
(32)
(85)
(4)
(3,476)
(3,005)
92
15
40
135
76
358
(407)
(7)
(79)
(1,771)
(26)
(94)
(4)
(2,388)
(2,030)
Gains and losses on financial instruments, as classed above, are disclosed in note 7 (net financing costs), note 14 (debtors), note 6 (net revaluation gains
on property and investments), the consolidated income statement and the consolidated statement of comprehensive income. the Directors consider that
the carrying amounts of other investments and finance lease payables are approximate to their fair value, and that the carrying amounts are recoverable.
141
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
18 net deBt continued
Capital Risk manaGement
the capital structure of the Group consists of net debt and equity attributable to the equity holders of the british land company plc, comprising
issued capital, reserves and retained earnings. risks relating to capital structure are addressed within managing risk on pages 36 to 41. the Group’s
objectives, policies and processes for managing debt are set out in the financial policies on pages 56 to 58.
inteRest Rate Risk manaGement
the Group uses interest rate swaps to hedge exposure to the variability in cash flows on floating rate debt, such as revolving bank facilities and floating
rate bonds caused by movements in market rates of interest. at 31 march 2014 the market value of these derivatives, which have been designated
as cash flow hedges under ias 39, is a net liability of £45m (2012/13: liability of £80m).
the cross currency swap of the 2015 Us private placement, which fully hedges the foreign exchange exposure of the issuance, has been designated
as a cash flow hedge. the market value of this is a liability of £5m (2012/13: asset of £5m).
the ineffectiveness recognised in the income statement on cash flow hedges in the year ended 31 march 2014 was £nil (2012/13: £nil).
the cash flows occur and enter into the determination of profit and loss until the maturity of the hedged debt. the table below summarises variable
rate debt and foreign currency denominated debt hedged at 31 march 2014.
Cash flow hedGed debt
outstanding: at one year
at two years
at five years
at ten years
2014
£m
1,293
1,225
350
250
2013
£m
874
874
250
250
the Group uses interest rate swaps to hedge exposure on fixed rate financial liabilities caused by movements in market rates of interest. at 31 march
2014 the market value of these derivatives, which have been designated as fair value hedges under ias 39, was a net asset of £25m (2012/13: £86m).
the cross currency swaps of the 2018/2021/2023/2026 Us private placements fully hedge the foreign exchange exposure at an average floating rate
of 146 basis points above libor. these have been designated as fair value hedges of the Us private placements.
inteRest Rate pRofile – inCludinG effeCt of deRiVatiVes
Fixed rate
variable rate (net of cash)
net debt
2014
£m
2,208
973
3,181
2013
£m
1,848
189
2,037
all the debt is effectively sterling denominated except for £68m (2012/13: £185m) of euro debt of which £68m is at a fixed rate (2012/13: £165m fixed).
at 31 march 2014 the weighted average interest rate of the sterling fixed rate debt was 5.17% (2012/13: 5.01%). the weighted average period for which
the rate is fixed is 8.5 years (2012/13: 11.6 years). the weighted average interest rate for the euro fixed rate debt is 5.20% (2012/13: 4.44%) and the
weighted average period for which the rate is fixed is 1.9 years (2012/13: 3.1 years). the floating rate debt is set for periods of the company’s choosing
at the relevant libor (or similar) rate.
the proportion of net debt at fixed or capped rates of interest was 69% at 31 march 2014. based on the Group’s interest rate profile at the balance
sheet date a 576 bps increase in interest rates would decrease annual profits by £56m (2012/13: £11m decrease). similarly, a 52 bps reduction would
increase profits by £5m (2012/13: £1m increase). the change in interest rates used for this sensitivity analysis is based on the largest annual change
in three month sterling libor over the last ten years. the impact assumes libor does not fall below 0%.
Upward movements in medium and long-term interest rates, associated with higher interest rate expectations, increase the value of the Group’s
interest rate swaps that provide protection against such moves. the converse is true for downward movements in the yield curve. the majority of the
Group’s interest rate swaps which provide such protection qualify as effective cash flow hedges under ias 39 therefore movements in their fair value
are recognised directly in equity rather than the income statement. a 204 bps shift represents the largest annual change in the seven-year sterling
swap rate over the last ten years. at 31 march 2014 a 204 bps parallel upward shift in swap rates would increase the value of these interest rate swaps
by £136m (2012/13: £117m). a 204 bps downward shift in swap rates would reduce the value of the interest rate swap portfolio by £164m (2012/13:
£138m). because the interest rate swaps are matched by floating rate debt, the overall effect on Group cash flows of such movements is minimal.
the 1.5% convertible bond is designated as fair value through profit or loss. principal components of the market value include british land’s share
price and its volatility, and market interest rates. the fair value at 31 march 2014 was £458m. at 31 march 2014 a 204 bps parallel upwards shift in
interest rates would reduce the fair value by £30.8m, and a 204 bps downward shift in interest rates would increase the value by £33.4m.
142
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
18 net deBt continued
foReiGn CuRRenCy Risk manaGement
the Group’s policy is to have no material unhedged net assets or liabilities denominated in foreign currencies. the currency risk on overseas
investments is hedged via foreign currency denominated borrowings and derivatives. the Group has adopted net investment hedging in accordance
with ias 39 and therefore the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly
in equity. the ineffective portion of the gain or loss on the hedging instrument is recognised immediately in the income statement.
the table below shows the carrying amounts of the Group’s foreign currency denominated assets and liabilities. provided contingent tax on overseas
investments is not expected to occur it will be ignored for hedging purposes, as will the requirement to fair value interest rate swaps. based on the
31 march 2014 position a 33% appreciation (largest annual change over the last ten years) in the euro relative to sterling would result in a £nil change
(2012/13: £nil) in reported profits.
euro denominated
assets
liabilities
2014
£m
69
2013
£m
203
2014
£m
68
2013
£m
203
CRedit Risk manaGement
the Group’s approach to credit risk management of counterparties is referred to in the financial policies on pages 56 to 58 and the risks addressed
within managing risk on pages 36 to 41. the carrying amount of financial assets recorded in the financial statements represents the Group’s maximum
exposure to credit risk without taking account of the value of any collateral obtained.
cash and short-term deposits at 31 march 2014 amounted to £142m (2012/13: £135m). Deposits and interest rate derivatives were placed with
financial institutions with a– or better credit ratings.
at 31 march 2014, the fair value of all interest rate derivative assets was £32m (2012/13: £92m).
at 31 march 2014, prior to taking into account any offset arrangements, the largest combined credit exposure to a single counterparty arising
from money market deposits, liquid investments and derivatives was £71m (2012/13: £64m). this represents 0.7% (2012/13: 0.8%) of gross assets.
the deposit exposures are with UK and international high street banks and branches.
the Group’s exposure to credit risk in respect of its trade receivables is analysed in note 14.
provisions are made taking account of historic credit losses and the creditworthiness of debtors.
liquidity Risk manaGement
the Group’s approach to liquidity risk management is discussed in the financial policies on pages 56 to 58, and the risks addressed within managing
risk on pages 36 to 41.
the following table presents a maturity profile of the contracted undiscounted cash flows of financial liabilities based on the earliest date on which
the Group can be required to pay. the table includes both interest and principal flows. Where the interest payable is not fixed, the amount disclosed
has been determined by reference to the projected interest rates implied by yield curves at the reporting date. For derivative financial instruments
that settle on a net basis (e.g. interest rate swaps) the undiscounted net cash flows are shown and for derivatives that require gross settlement
(e.g. cross currency swaps) the undiscounted gross cash flows are presented. Where payment obligations are in foreign currencies, the spot
exchange rate ruling at the balance sheet date is used. trade creditors and amounts owed to joint ventures, which are repayable within one year,
have been excluded from the analysis.
the Group expects to meet its financial liabilities through the various available liquidity sources, including a secure rental income profile, asset
sales, undrawn committed borrowing facilities and, in the longer-term, debt refinancings.
143
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
18 net deBt continued
liquidity Risk manaGement continued
the Group leases out all its investment properties under operating leases with a weighted average lease length of 10 years. this secure income
profile is generated from upward only rent reviews, long leases and high occupancy rates. the future aggregate minimum rentals receivable under
non-cancellable operating leases is also shown in the table below. income from joint ventures and funds is not included below. additional liquidity
will arise from letting space in properties under construction as well as from distributions received from joint ventures and funds.
Debt1
interest on debt
Derivative payments
Finance lease payments
total payments
Derivative receipts
net payment
operating leases with tenants (see note 19)
liquidity surplus (deficit)
Cumulative liquidity deficit
Debt1
interest on debt
Derivative payments
Finance lease payments
total payments
Derivative receipts
net payment
operating leases with tenants (see note 19)
liquidity surplus
Cumulative liquidity surplus
2014
within
one year
£m
following
year
£m
three to
five years
£m
over
five years
£m
495
114
25
2
636
(29)
607
351
(256)
(256)
93
113
119
2
327
(117)
210
342
132
(124)
1,024
279
67
5
1,375
(84)
1,291
947
(344)
(468)
1,579
676
380
195
2,830
(337)
2,493
2,549
56
(412)
Within
one year
£m
Following
year
£m
2013
three to
five years
£m
over
five years
£m
47
89
30
1
167
(27)
140
281
141
141
184
87
31
1
303
(25)
278
278
–
141
505
238
144
4
891
(163)
728
766
38
179
1,345
678
399
170
2,592
(407)
2,185
2,496
311
490
total
£m
3,191
1,182
591
204
5,168
(567)
4,601
4,189
(412)
total
£m
2,081
1,092
604
176
3,953
(622)
3,331
3,821
490
1 Gross debt of £3,298m (2012/13: £2,178m) represents the total shown, less unamortised issue costs of £21m (2012/13: £15m), plus fair value adjustments to debt of £128m
(2012/13: £112m).
any short-term liquidity gap between the net payments required and the rentals receivable can be met through other liquidity sources available
to the Group. the Group currently holds cash and short-term deposits of £142m, of which £93m is not subject to a security interest (see footnote 6
to net debt table on page 137). Further liquidity can be achieved through sales of property assets or investments and debt refinancings. the Group’s
property portfolio is valued externally at £7,616m and the share of joint ventures and funds’ property is valued at £5,034m (see note 11). the undrawn
committed borrowing facilities available to the Group are a further source of liquidity. the maturity profile of committed undrawn borrowing facilities
is shown overleaf.
144
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
18 net deBt continued
matuRity of Committed undRawn boRRowinG faCilities
maturity date: more than five years
between four and five years
between three and four years
total facilities available for more than three years
between two and three years
between one and two years
Within one year
total
2014
£m
160 –
310
140
610
942 –
–
410
2013
£m
108
870
978
757
369
1,962
2,104
the above facilities are comprised of british land undrawn facilities of £1,790m including the maturing £620m facility and excluding the april 2014
£785m facility, plus undrawn facilities of hercules Unit trust totalling £172m.
19 leasing
opeRatinG leases with tenants
the Group leases out all of its investment properties under operating leases with a weighted average lease length of 10 years (2012/13: 12 years)
and the average effective borrowing rate was 3.5% (2012/13: 4.4%). the future aggregate minimum rentals receivable under non-cancellable
operating leases are as follows:
less than one year
between one and two years
between three and five years
between six and ten years
between eleven and fifteen years
between sixteen and twenty years
after twenty years
total
2014
£m
351
342
947
1,130
650
433
336
4,189
2013
£m
281
278
766
1,002
597
452
445
3,821
the Group’s leasehold investment properties are typically under non-renewable leases without significant restrictions. Finance lease liabilities
are payable as follows, no contingent rents are payable in either period:
less than one year
between one and two years
between two and five years
more than five years
total
less future finance charges
present value of lease obligations
Within one year
Within two to five years
more than five years
2014
2013
minimum
lease
payments
£m
interest
£m
principal
£m
minimum
lease
payments
£m
interest
£m
principal
£m
1
1
4
145
151
–
–
–
26
26
2
2
5
163
172
2
2
5
195
204
(172)
32
–
–
32
–
–
–
32
32
–
–
1
1
4
171
177
(151)
26
26
145
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
20 dividends
the fourth quarter dividend of 6.75 pence per share, totalling £68m (2012/13: 6.6 pence per share, totalling £65m) was approved by the board on
13 may 2014 and is payable on 8 august 2014 to shareholders on the register at the close of business on 4 July 2014.
the board will announce the availability of the scrip Dividend alternative via the regulatory news service and on its website (www.britishland.com),
no later than four business days before the ex-dividend date of 2 July 2014. the board expects to announce the split between property income
Distribution (piD) and non-piD income at that time. any scrip Dividend alternative will not be enhanced. piD dividends are paid, as required by reit
legislation, after deduction of withholding tax at the basic rate (currently 20%), where appropriate. certain classes of shareholders may be able to
elect to receive dividends gross. please refer to our website (www.britishland.com) for details.
payment date
Dividend
piD
non-piD
pence
per share
2014
£m
2013
£m
Current year dividends
08.08.2014
02.05.2014
14.02.2014
08.11.2013
prior year dividends
09.08.2013
10.05.2013
15.02.2013
09.11.2012
10.08.2012
09.05.2012
2014 4th interim
2014 3rd interim
2014 2nd interim
2014 1st interim
2013 4th interim
2013 3rd interim
2013 2nd interim
2013 1st interim
2012 4th interim
2012 3rd interim
Dividends in consolidated statement of changes in equity
Dividends settled in shares
Dividends settled in cash
timing difference relating to payment of withholding tax
dividends in cash flow statement
1 scrip alternative treated as non-piD for this dividend.
6.75
6.751
6.75
6.75
6.601
6.601
6.601
6.601
3.30
6.50
6.75
6.75
6.75
6.75
27.00
6.60
6.60
6.60
6.60
26.40
6.60
6.50
3.30
68
67
65
66
266
(105)
161
(2) 1
159
59
59
58
58
234
(32)
202
203
21 acquisition of a suBsidiary (Business comBination)
on 17 February 2014, the Group acquired additional units of the hercules Unit trust, a Unit trust registered in Jersey which is engaged in property
investment, resulting in a cumulative ownership of 57.2% of the outstanding units and control of the underlying entity. management determined
that the acquisition of control should be accounted for as a business combination in accordance with iFrs 3 ‘business combinations’. Following this
transaction additional units were purchased bringing cumulative ownership to 58.6% at 31 march 2014.
subsequent to 31 march 2014 further purchases resulted in a cumulative ownership of 59.8%.
the fair value of the Group’s 49.2% equity interest in the hercules Unit trust held before the business combination amounted to £430m. no gain or
loss was recognised as a result of measuring the equity interest at fair value.
the acquired subsidiary has contributed net revenues of £12m and profit of £18m to the Group for the period from the date of acquisition to 31 march
2014. if the acquisition had occurred on 1 april 2013, with all other variables held constant, Group net revenue for 2014 would have increased by £49m,
and underlying profit for 2014 would have increased by £23m.
146
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
21 acquisition of a suBsidiary (Business comBination) continued
Details of the assets and bargain purchase arising are as follows:
investment property
investments in joint ventures and funds
other net current liabilities
cash and cash equivalents
Debenture and loans
fair value of acquired interest in net assets of subsidiary
bargain purchase (negative goodwill)
total purchase consideration
less: fair value of previously held interest
non-controlling interest
cash consideration
additional units purchased in the year
total acquisition of hercules unit trust
attributed fair value
£m
1,006
376
(4)
18
(522)
874
(3)
871
(430)
(374)
67
78
145
the purchase consideration disclosed above comprises cash and cash equivalents paid to the acquiree’s previous owner of £67m. the bargain purchase
is a result of unit acquisitions trading at a discount in the secondary market. the gain on bargain purchase is recognised in net valuation movement.
the non-controlling interest (42.8% ownership interest in hercules Unit trust) recognised at the acquisition date was measured by reference to
the present ownership interest’s proportionate share in the acquiree’s recognised amounts of the identifiable net assets and amounted to £374m.
the valuation of investment property at the acquisition date was performed by an external professional appraiser with experience of the relevant
market. the fair value of cash and cash equivalents was considered equal to the carrying value representing the entity’s bank deposits; fair value
of borrowings and trade and other payables was calculated based on discounted cash flow models. the acquired bank loans and overdrafts have
no recourse to other companies or assets in the Group.
22 share capital and reserves
number of ordinary shares in issue at 1 april
share issues
at 31 march
2014
2013
997,691,488
22,074,993
900,199,638
97,491,850
1,019,766,481
997,691,488
of the issued 25p ordinary shares, 169,990 shares were held in the esop trust (2012/13: 275,497), 11,266,245 shares were held as treasury shares
(2012/13: 11,266,245) and 1,008,330,246 shares were in free issue (2012/13: 986,149,746). no treasury shares were acquired by the esop trust during
the year. all issued shares are fully paid. the rights, preferences and restrictions of the share capital are detailed on page 108.
hedGinG and tRanslation ReseRVe
the hedging and translation reserve comprises the effective portion of the cumulative net change in the fair value of cash flow and foreign currency
hedging instruments, as well as all foreign exchange differences arising from the translation of the financial statements of foreign operations.
the foreign exchange differences also include the translation of the liabilities that hedge the company’s net investment in a foreign subsidiary.
ReValuation ReseRVe
the revaluation reserve relates to owner-occupied properties and investments in joint ventures and funds.
meRGeR ReseRVe
this comprises the premium on the share placing in march 2013. no share premium is recorded in the company’s financial statements, through
the operation of the merger relief provisions of the companies act 2006.
147
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
22 share capital and reserves continued
at 31 march 2014, options over 9,454,680 ordinary shares were outstanding under employee share option plans. these options had a weighted
average life of 6.25 years. Details of outstanding share options and shares awarded to employees including executive Directors are set out below
and on the following page:
vested
but not
exercised
exercised/
vested
at
31 march
2014
exercise
price
pence
exercise dates
From
to
date of grant
at
1 april
2013
share options sharesave scheme
30.06.08
30.06.09
30.06.09
28.06.10
28.06.10
01.07.11
01.07.11
26.06.12
26.06.12
24.06.13
24.06.13
6,794
602
135,963
44,200
38,994
18,572
13,693
110,895
66,264
–
–
Granted
–
–
–
–
–
–
–
–
–
58,350
17,550
435,977
75,900
lapsed
(1,258)
–
(1,667)
(4,278)
–
(4,081)
(1,121)
(7,030)
(10,176)
(4,472)
(1,174)
–
–
126,665
1,459
38,994
14,491
11,737
103,865
56,088
53,878
16,376
(5,536)
(602)
(7,631)
(38,463)
–
–
(835)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
long-term incentive plan – options vested, not exercised
25.09.03
25.11.03
28.05.04
29.11.04
31.05.05
05.12.05
29.06.09
25.11.09
21.12.09
11.06.10
14.12.10
28.06.11
19.12.11
14.09.12
20.12.12
–
–
–
–
–
–
–
–
–
2,083,806
326,251
21,225
24,654
4,102
6,222
119,455
15,358
314,409
392,288
351,352
198,632
2,239,533
23,431
467,500
117,496
–
405
–
–
–
–
–
(57,083)
–
–
–
–
–
–
–
–
–
–
–
–
(53,067)
(35,257)
423,553
(119,455)
(15,358)
(242,903)
(106,976)
–
–
(1,008,602)
(4,400)
(304,621)
(540,029)
(143,727)
(21,225)
(21,947)
(4,102)
(6,222)
–
–
–
(14,482)
(7,265)
(960)
–
–
–
–
–
(405)
–
–
–
–
–
14,423
270,830
344,087
197,672
1,230,931
19,031
162,879
1,661,273
182,524
–
2,707
–
–
4,239,859
2,466,260
(57,083)
(2,539,567)
(23,112)
4,086,357
long-term incentive plan – unvested options
11.06.10
14.12.10
28.06.11
19.12.11
14.09.12
20.12.12
05.08.13
05.12.13
3,473,085
559,933
1,640,660
531,510
1,732,576
577,940
–
–
–
–
–
–
–
–
834,903
537,788
(2,083,806)
(24,130)
(15,501)
(17,434)
(1,509)
–
–
–
–
(302,121)
(14,299)
(7,220)
(2,593)
(6,222)
–
–
(1,389,279)
(233,682)
(28,161)
(52,433)
(413,732)
(346,180)
(5,323)
–
–
–
1,582,699
454,423
1,314,742
225,538
829,580
537,788
8,515,704
1,372,691
(2,142,380)
(332,455)
(2,468,790)
4,944,770
total
13,191,540
3,914,851
(2,199,463)
(2,925,089)
(2,527,159)
9,454,680
weighted average exercise
price of options (pence)
492
508
451
452
487
521
148
517.03
301.00
301.00
370.00
370.00
473.00
473.00
392.00
392.00
511.00
511.00
415.95
457.38
549.35
659.55
726.66
823.60
387.00
475.00
446.00
447.00
510.00
575.00
451.00
538.00
563.00
447.00
510.00
575.00
451.00
538.00
563.00
601.00
600.00
01.09.13
01.09.12
01.09.14
01.09.13
01.09.15
01.09.14
01.09.16
01.09.15
01.09.17
01.09.16
01.09.18
25.09.06
25.11.06
28.05.07
29.11.07
31.05.08
05.12.08
01.07.11
25.11.12
21.12.12
01.07.11
07.10.11
28.06.14
19.12.14
14.09.15
20.12.15
11.06.13
14.12.13
28.06.14
19.12.14
14.09.15
20.12.15
05.08.16
05.12.16
31.03.14
28.02.13
28.02.15
28.02.14
29.02.16
28.02.15
28.02.17
29.02.16
28.02.18
28.02.17
28.02.19
24.09.13
24.11.13
27.05.14
28.11.14
30.05.15
04.12.15
28.06.19
24.11.19
20.12.19
10.06.20
27.04.12
11.04.13
11.04.13
14.9.22
20.12.22
11.06.20
14.12.20
28.06.21
19.12.21
14.09.22
20.12.22
05.08.23
05.12.23
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
22 share capital and reserves continued
date of grant
performance shares long-term incentive plan
11.06.10
14.12.10
28.06.11
19.12.11
14.09.12
20.12.12
05.08.13
05.12.13
at
1 april
2013
661,672
140,721
713,754
117,751
1,188,053
299,069
–
–
fund managers performance plan
28.05.10
21.06.11
21.06.11
12.09.12
12.09.12
12.09.12
02.08.13
02.08.13
02.08.13
matching share plan
01.09.10
24.05.11
05.09.12
02.08.13
total
weighted average exercise
price of shares (pence)
23 segment information
Granted
exercised/
vested
lapsed
at
31 march
2014
share
price at
grant date
pence
–
–
–
–
–
–
1,205,738
290,577
(396,982)
(82,070)
(4,353)
(6,620)
(3,632)
(1,795)
–
–
(264,690)
(58,651)
(7,117)
(14,551)
(244,034)
(178,295)
(2,328)
–
–
–
702,284
96,580
940,387
118,979
1,203,410
290,577
3,121,020
1,496,315
(495,452)
(769,666)
3,352,217
325,454
97,485
97,484
192,025
192,026
192,026
–
–
–
–
–
–
–
–
–
217,683
217,685
217,621
(325,454)
(97,485)
–
(189,811)
–
–
–
–
–
–
–
(1,827)
(2,214)
(3,952)
(4,004)
(2,784)
(2,784)
(2,787)
–
–
95,657
–
188,074
188,022
214,899
214,901
214,834
1,096,500
652,989
(612,750)
(20,352)
1,116,387
vesting
date
11.06.13
14.12.13
28.06.14
19.12.14
14.09.15
20.12.15
05.08.16
05.12.16
28.05.13
21.06.13
21.06.14
12.09.13
12.09.14
12.09.15
02.08.14
02.08.14
02.08.14
447.00
510.00
575.00
451.00
538.00
563.00
601.00
600.00
435.00
581.90
581.90
537.00
537.00
537.00
599.00
599.00
599.00
256,654
320,608
386,994
–
–
–
–
375,338
(256,654)
–
–
–
964,256
375,338
(256,654)
–
–
–
–
–
–
320,608
386,994
375,338
1,082,940
479.60
600.50
500.00
609.66
01.09.13
24.05.14
05.09.15
02.08.16
5,181,776
2,524,642
(1,364,856)
(790,018) 5,551,544
523
602
477
511
572
opeRatinG seGments
the Group allocates resources to investment and asset management according to the sectors it expects to perform over the medium-term.
its two principal sectors are currently offices and retail. the office sector includes residential, as this is often incorporated into office schemes,
and retail includes leisure, for a similar rationale. the prior year comparatives have been updated to reflect these changes.
the relevant revenue, net rental income, operating result, assets and capital expenditure, being the measures of segment revenue, segment result
and segment assets used by the management of the business, are set out below. revenue is derived from the rental of buildings. operating result
is the net of net rental income, fee income and administration expenses. no customer exceeded 10% of the Group’s revenues in either year.
149
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
23 segment information continued
seGment Result
offices
retail
other/unallocated
total
Revenue
british land Group
share of joint ventures and funds
total
net rental income
british land Group
share of joint ventures and funds
total
operating result
british land Group
share of joint ventures and funds
total
2014
£m
2013
£m
99
84
183
91
81
172
80
80
160
88
83
171
85
80
165
76
80
156
2014
£m
235
168
403
222
160
382
218
157
375
2013
£m
206
171
377
196
165
361
190
162
352
2014
£m
2013
£m
–
15
15
–
12
12
(42)
10
(32)
–
19
19
–
15
15
(42)
14
(28)
Reconciliation to underlying profit before taxation
british land Group
total operating result
british land Group net financing costs
share of joint ventures and funds net financing costs
capital and other
total profit on ordinary activities before tax
of the total revenues above, £15m (2012/13: £19m) was derived from outside the UK.
2014
£m
334
267
601
313
253
566
256
247
503
503
(81)
(123)
811
1,110
2013
£m
294
273
567
281
260
541
224
256
480
480
(80)
(126)
(14)
260
seGment assets
property assets
british land Group
share of joint ventures and funds
total
segment assets
british land Group
share of joint ventures and funds
total
other assets
british land Group
share of joint ventures and funds
total
Capital expenditure
british land Group
share of joint ventures and funds
total
150
offices
retail
other/unallocated
total
2014
£m
2013
£m
2014
£m
2013
£m
2014
£m
3,082
2,017
5,099
3,036
2,153
5,189
–
141
141
607
86
693
2,179
1,684
3,863
2,175
1,839
4,014
–
155
155
391
109
500
4,534
2,928
7,462
4,554
2,997
7,551
–
67
67
1,140
13
1,153
3,373
3,005
6,378
3,393
3,116
6,509
–
107
107
315
26
341
–
89
89
477
98
575
477
9
486
–
29
29
2013
£m
2
256
258
365
263
628
363
7
370
47
–
47
2014
£m
2013
£m
7,616
5,034
5,554
4,945
12,650
10,499
8,067
5,248
5,933
5,218
13,315
11,151
477
217
694
1,747
128
1,875
363
269
632
753
135
888
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
23 segment information continued
ReConCiliation to net assets
british land Group
segment assets
british land Group
share of joint ventures and funds
total
share of funds and joint ventures liabilities
current liabilities
non-current liabilities
net assets
2014
£m
2013
£m
8,067
5,248
5,933
5,218
13,315
11,151
(2,536)
(766)
(2,896)
(2,882)
(320)
(2,262)
7,117
5,687
other assets include other investments of £262m (2012/13: £76m), debtors of £41m (2012/13: £60m), liquid investments of £nil (2012/13: £nil), cash
and short-term deposits of £142m (2012/13: £135m) and derivatives of £32m (2012/13: £92m).
24 capital commitments
the aggregate capital commitments to purchase, construct or develop investment property, for repairs, maintenance or enhancements, or for the
purchase of investments which are contracted for but not provided, are set out below:
british land (includes share of development loan facility see note 25)
share of joint ventures
share of funds
2014
£m
119
113
5 1
237
2013
£m
221
176
398
25 related party transactions
the company is providing a development loan facility of up to £320m to the broadgate joint venture, secured against the development, 5 broadgate.
the loan, which is assignable and on commercial terms, includes an interest cost of 3% per annum above libor and market based fees. as at
31 march 2014, £145m (2012/13: £53m) has been drawn by the joint venture.
Details of transactions with joint ventures and funds are given in notes 4, 7 and 24. During the year the Group recognised management and
performance fees receivable from funds of £3m (2012/13: £4m) and joint venture management fees of £7m (2012/13: £6m). interest and commitment
fees earned on the commercial loan to bluebutton properties ltd was £5m (2012/13: £4m).
Details of Directors’ remuneration are given in the remuneration report on pages 82 to 107. Details of transactions with key management
personnel are provided in note 9.
Details of transactions with the british land Group of companies pension scheme, and other smaller pension schemes, are given in note 10.
During the year, the company entered into transactions, in the normal course of business, with other related parties as follows:
John Gildersleeve is Deputy chairman of carphone Warehouse Group plc. rental income of £2m (2012/13: £2m) was earned from carphone
Warehouse Group plc and there is an associated debtor balance at 31 march 2014 of £nil (2012/13: £0.2m).
lord turnbull is a non-executive Director of prudential plc. rental income of £1.5m (2012/13: £nil) was earned from prudential plc.
aubrey adams is head of property in royal bank of scotland’s Global restructuring Group. royal bank of scotland are british land’s principal
bankers. rental income of £7.2m (2012/13: £7.2m) was earned from royal bank of scotland.
William Jackson is the managing partner of bridgepoint and serves on a number of bridgepoint portfolio boards. a number of bridgepoint’s
investments are tenants. rental income of £2.5m (2012/13: £1.9m) was earned from these companies.
151
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
notes to the accoUnts
continUeD…
26 contingent liaBilities
the Group has contingent liabilities in respect of legal claims, guarantees and warranties arising in the ordinary course of business. it is not
anticipated that any material liabilities will arise from contingent liabilities.
tpp investments limited, a wholly-owned, ring-fenced, special purpose subsidiary, is a partner in the tesco british land property partnership
and, in that capacity, has entered into a secured bank loan under which its liability is limited to £30m (2012/13: £30m) and recourse is only to the
partnership assets.
27 audit exemptions taken for suBsidiaries
the following subsidiaries are exempt from the requirements of the companies act 2006 relating to the audit of individual accounts by virtue
of section 479a of that act.
current company name
bF propco (no 19) limited
the liverpool exchange company limited
meadowbank retail park edinburgh limited
pillar (beckton) limited
broadgate (phc 8) limited
blaxmill (twenty-nine) limited
blaxmill (thirty) limited
Frp Group limited
pillar hercules no.2 limited
bl european holdings limited
british land hercules no.4 limited
ivorydell limited
Finsbury avenue estates limited
broadgate court investments limited
blssp (Funding) plc
Wates city property management limited
pillar retail parks limited
pillar speke limited
pillarstore no.3 limited
Wates city of london properties limited
caymall limited
Dinwell limited
cavendish Geared limited
pillar auchinlea limited
hyfleet limited
companies house
registered number
current company name
companies house
registered number
5270113
490255
5489809
2783376
3707220
5279010
5282747
2844685
2839069
3044033
3108851
3264791
1526447
2048475
4104074
1085036
2725163
3074360
3589118
1788526
5189368
5035303
2779045
2661047
2835919
regis property holdings limited
tweed premier 1 limited
tweed premier 2 limited
london and henley (UK) limited
cavendish Geared ii limited
london and henley limited
ivorydell subsidiary limited
United Kingdom property company limited
pillar nugent limited
pillar Developments limited
35 basinghall street First limited
british land hercules no.1 limited
british land hercules no.3 limited
british land hiF limited
renash (Unlimited)
ritesol (Unlimited)
number 80 cheapside limited
broadgate square limited
six broadgate limited
WK holdings limited
pillar estates limited
pillarstore limited
vintners’ place limited
Wates city point limited
bl West (Watling house) limited
891470
2847978
2847985
3576158
2847571
3074917
5520010
266486
2567031
2850421
3902915
3527580
2967308
2774183
5489776
5489811
634498
1797326
1881641
2487591
3044028
2850422
2149495
2973114
4067234
152
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 company balance sheet
prepared in accordance with UK Gaap as at 31 march 2014
non-current assets
investments and loans to subsidiaries
investments in joint ventures
intangible assets
other investments
interest rate derivative assets
Current assets
Debtors
cash and short-term deposits
Current liabilities
short-term borrowings and overdrafts
creditors
amounts due to subsidiaries
net current liabilities
total assets less current liabilities
non-current liabilities
Debentures and loans
interest rate derivative liabilities
net assets
equity
called up share capital
share premium
other reserves
merger reserves
retained earnings
equity shareholders’ funds
John Gildersleeve
chairman
lucinda bell
Finance Director
approved by the board and authorised for issue on 13 may 2014.
company number 621920
note
2014
£m
2013
£m
D
D
D
D
e
G
e
e
h
e
e
i
J
J
J
J
25,477
802
24,459
816
– 3
159
32
119
92
26,470
25,489
48
61
109
(420)
(89)
(18,786)
(19,295)
(19,186)
273
108
381
(45)
(98)
(19,270)
(19,413)
(19,032)
7,284
6,457
(1,895)
(54)
(1,949)
5,335
255
1,260
(24)
213
3,631
5,335
(1,681)
(86)
(1,767)
4,690
249
1,245
(61)
213
3,044
4,690
153
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
company balance sheet
continUeD…
prepared in accordance with UK Gaap as at 31 march 2014
(a) accounting policies
(B) dividends
Details of dividends paid and proposed are included in note 20 of the
consolidated financial statements.
(c) company profit for the financial year
after tax
the company has not presented its own profit and loss account as
permitted by section 408 of the companies act 2006. the profit after
tax for the year was £749m (2012/13: profit £257m).
the average monthly number of employees of the company during
the year was 231 (2012/13: 217).
employee costs include wages and salaries of £30m (2012/13: £29m),
social security costs of £4m (2012/13: £4m) and pension costs of £5m
(2012/13: £4m). Details of the executive Directors’ remuneration are
disclosed in the remuneration report.
audit fees in relation to the parent company only were £0.3m
(2012/13: £0.2m).
aCCountinG basis
the financial statements are prepared in accordance with applicable
United Kingdom law and accounting standards (UK Gaap) and under
the historical cost convention as modified by the revaluation of
investment properties and fixed asset investments and liquid
investments (not in accordance with international Financial reporting
standards (iFrs) which are applied by the Group).
the major accounting policies of the company are set out below and have
been applied consistently throughout the current and the previous year.
the policies that differ from those applied by the Group (as stated in
note 1 of the consolidated financial statements) are for investments and
deferred taxation:
Going concern
the financial statements are prepared on the going concern basis
as explained in the corporate governance section on page 72.
intangible assets
intangible assets, such as fund management contracts, acquired
through business combinations, are measured initially at fair value
and are amortised on a straight-line basis over their estimated useful
lives, and are subject to regular reviews for impairment.
investments
investments in joint ventures are stated at cost less provision for
impairment. investments in subsidiaries are stated at cost or
Directors’ valuation less provision for impairment.
deferred taxation
Deferred tax is not recognised when fixed assets are revalued unless
by the balance sheet date there is a binding agreement to sell the
revalued assets and the gain or loss expected to arise on the sale has
been recognised in the financial statements. a deferred tax asset is
regarded as recoverable and therefore recognised only when, on the
basis of all available evidence, it can be regarded as more likely than
not that there will be suitable taxable profits from which the future
reversal of the underlying timing differences can be deducted.
154
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 (d) investments and loans to suBsidiaries
at 1 april 2013
additions
Disposals
reallocations
Write back of (provision for) impairment
at 31 march 2014
shares in
subsidiaries
£m
loans to
subsidiaries
£m
investments
in joint
ventures
£m
intangible
assets
£m
other
investments
£m
18,078
–
(576)
–
797
18,299
6,381
2,276
(1,479)
–
–
7,178
816
11
(87)
51
11
802
3
–
(3)
–
–
–
119
93
(1)
(51)
(1)
159
total
£m
25,397
2,380
(2,146)
–
807
26,438
shares in subsidiaries are included at cost or Directors’ valuation in 1977, 1995, 1997 and 1999 to 2010 inclusive; their historical cost is £19,563m
(2012/13: £22,089m). the amount of £802m (2012/13: £816m) includes £250m (2012/13: £227m) of loans to joint ventures by the company. the
company has a 50% interest in bluebutton properties limited (Jersey), msc property intermediate holdings limited and shopping centres limited,
which are registered and operate in england and Wales. results of the joint ventures are set out in note 12 of the consolidated financial statements.
the historical cost of other investments is £155m (2012/13: £128m).
the Group comprises a large number of companies so has taken advantage of the exemption under section 410(2) of the companies act 2006 in
providing information only in relation to subsidiary undertakings whose results or financial position, in the opinion of Directors, principally affect
the financial statements. the principal subsidiaries, wholly-owned and, except where stated, registered and operating in england and Wales, are:
executive property
the british land corporation limited
finance, investment and management
british land property management limited
blD property holdings limited
bl european Fund management llp
british land (Joint ventures) limited
linestair limited
british land investment netherlands holdings bv (netherlands)
property
20 triton street limited
1 & 4 & 7 triton limited
10 brock street limited
10 portman square Unit trust (Jersey)
stockton retail park limited
Drake circus limited partnership (United states)
euston tower limited
bF propco (no 10) limited
british land ealing bv (netherlands)
paddington central iv Unit trust
bl piccadilly residential limited
york house W1 limited
british land retail Warehouses limited
the mary street estate limited
155
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
company balance sheet
continUeD…
prepared in accordance with UK Gaap as at 31 march 2014
(e) net deBt
secured on the assets of the Company
5.264% first mortgage debenture bonds 2035
5.0055% first mortgage amortising debentures 2035
5.357% first mortgage debenture bonds 2028
6.75% first mortgage debenture bonds 2020
unsecured
5.50% senior notes 2027
6.30% senior Us dollar notes 20151
series a 3.895% senior Us dollar notes 20182
series b 4.635% senior Us dollar notes 20212
series c 4.766% senior Us dollar notes 20232
series D 5.003% senior Us dollar notes 20262
Fair value of options to issue under 1.5% convertible bond 2017
bank loans and overdrafts
3.81% senior notes 2026
3.97% senior notes 2026
Gross debt
interest rate derivatives: liabilities
interest rate derivatives: assets
cash and short-term deposits
net debt
2014
£m
344
100
327
185
956
98
92
25
136
83
52
72
601
99 –
101 –
1,359
2,315
54
(32)
2,337
(61)
2,276
2013
£m
345
101
334
194
974
98
101
28
158
98
62
28
179
752
1,726
86
(92)
1,720
(108)
1,612
1 principal and interest on this borrowing was fully hedged into sterling at the time of issue.
2 principal and interest on these borrowings were fully hedged into sterling at a floating rate at the time of issue.
on 10 september 2012 british land (Jersey) limited (the issuer) – a wholly-owned subsidiary of the company – issued £400m 1.5% guaranteed
convertible bonds due 2017 (the bonds) at par. the proceeds have been loaned to the company and the company has unconditionally and irrevocably
guaranteed the due and punctual performance by the issuer of all of its obligations (including payments) in respect of the bonds and the obligations
of the company, as guarantor, constitute direct, unsubordinated, unconditional and unsecured obligations of the company.
subject to their terms, the bonds are convertible into preference shares of the issuer which are automatically transferred to the company in exchange
for ordinary shares in the company or, at the company’s election, any combination of ordinary shares and cash.
the inter-company loan between the issuer and the company arising from the transfer of the loan proceeds was initially recognised at fair value,
net of capitalised issue costs and is accounted for using the amortised cost method.
in addition to the inter-company loan, the company has entered into a derivative contract relating to its guarantee of the obligations of the issuer in
respect of the bonds and the commitment to provide shares or a combination of shares and cash on conversion of the bonds. this derivative contract
is included within the balance sheet as a liability carried at fair value through profit and loss.
see note 18 in the consolidated financial statements for further details about the convertible bond.
156
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
(e) net deBt continued
matuRity analysis of net debt
repayable within one year and on demand
between: one and two years
two and five years
five and ten years
ten and fifteen years
fifteen and twenty years
twenty and twenty-five years
Gross debt
interest rate derivatives
cash and short-term deposits
net debt
(f) pension
6
2014
£m
420
92
174
465
783
5
375
1,895
2,315
22
(61)
2,276
2013
£m
45
145
145
407
603
376
1,681
1,726
(6)
(108)
1,612
the company’s pension scheme is the principal pension scheme of the Group and details are set out in note 10 of the consolidated financial statements.
(g) deBtors
trade and other debtors1
amounts owed by subsidiaries
amounts due from joint ventures
corporation tax
prepayments and accrued income
2014
£m
45 4
–
–
–
3 3
48
2013
£m
216
40
10
273
1 included within this balance is deferred consideration of £nil (2012/13: £4m) arising on the sale of investment properties. the timing of the receipt is uncertain and may fall due
after one year.
(h) creditors
trade creditors
amounts due to joint ventures
corporation tax
other taxation and social security
accruals and deferred income
interest rate derivative liabilities are presented on the face of the balance sheet in 2014.
2014
£m
14
– –
19 2
21
35
89
2013
£m
29
17
50
98
157
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
company balance sheet
continUeD…
prepared in accordance with UK Gaap as at 31 march 2014
(i) share capital
issued, called up and fully paid
at 1 april 2013
issued
at 31 march 2014
£m
249
6
255
ordinary shares
of 25p each
997,691,488
22,074,993
1,019,766,481
in march 2014, the company issued ordinary shares. refer to note 22 of the consolidated financial statements.
(J) share capital and reserves
at 1 april 2013
share issues
transfer to retained earnings
adjustment for scrip dividend element
Dividend paid
adjustment for share and share option award
pension scheme movements
retained profit (loss)
Derivative valuation movement
exchange movements on net investments
at 31 march 2014
share
capital
£m
share
premium
£m
other
reserves
£m
merger
reserve
£m
profit and
loss account
£m
249
6
–
–
–
–
–
–
–
–
255
1,245
15
–
–
–
–
–
–
–
–
1,260
(61)
–
–
–
–
–
–
–
37
–
(24)
213
–
–
–
–
–
–
–
–
–
213
3,044
–
–
105
(266)
1
(2)
749
–
–
3,631
total
£m
4,690
21
–
105
(266)
1
(2)
749
37
–
5,335
the value of distributable reserves within the profit and loss account is £2,299m (2012/13: £1,751m).
(k) contingent liaBilities, capital commitments and related party transactions
the company has contingent liabilities in respect of legal claims, guarantees and warranties arising in the ordinary course of business. it is not
anticipated that any material liabilities will arise from the contingent liabilities.
at 31 march 2014, the company had £93m of capital commitments (2012/13: £172m).
the company has chosen to provide a development loan facility of up to £320m to the broadgate joint venture secured against the development,
5 broadgate. the loan, which is assignable and on commercial terms, includes an interest cost of 3% per annum above libor and market based
fees. as at 31 march 2014, £145m had been drawn by the joint venture (2012/13: £53m).
related party transactions are the same for the company as for the Group. For details refer to note 25 of the consolidated financial statements.
the company has used the exemption under Frs 8 where disclosure is not required of transactions with fellow subsidiary undertakings 100%
of whose voting rights are controlled within the Group. the company has utilised the exemptions provided by Frs 1 (revised) and has not presented
a cash flow statement. a consolidated cash flow statement has been presented in the Group financial statements.
158
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
sUpplementary DisclosUres
UnaUDiteD
taBle a: summary income statement and Balance sheet
summaRy inCome statement based on pRopoRtional Consolidation foR the yeaR ended 31 maRCh 2014
the following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. it presents the
results of the Group, with its share of the results of joint ventures and funds included on a line-by-line, i.e. proportional, basis. the underlying profit
before taxation and underlying profit after taxation are the same as presented in the consolidated income statement.
year ended 31 march 2014
year ended 31 march 2013
Joint
ventures
and funds
£m
less non-
controlling proportionally
consolidated
£m
interests
£m
Group
£m
Joint
ventures proportionally
consolidated
and funds
£m
£m
Group
£m
Gross rental income
property operating expenses
net rental income
administrative expenses
Fees and other income
ungeared income return
net interest
underlying profit before taxation
Underlying tax
underlying profit after taxation
underlying earnings per share – diluted basis
valuation movement
other capital and tax (net)1
Capital and other
total return
334
(21)
313
(72)
15
256
(81)
175
(2)
173
267
(14)
253
(6)
–
247
(123)
124
–
124
(4)
–
(4)
–
–
(4)
2
(2)
–
(2)
294
(13)
281
(72)
15
224
(80)
144
(1)
143
273
(13)
260
(4)
–
256
(126)
130
–
130
597
(35)
562
(78)
15
499
(202)
297
(2)
295
29.4p
873
53
926
1,221
the underlying earnings per share is calculated on underlying profit before taxation of £297m, tax attributable to underlying profits of £2m and
1,004m shares on a diluted basis, for the year ended 31 march 2014.
1 includes other comprehensive income, movement in dilution of share options and the movement in items excluded for epra nav.
567
(26)
541
(76)
15
480
(206)
274
(1)
273
30.3p
26
(4)
22
295
159
i
s
t
r
a
t
e
g
c
r
e
p
o
r
t
2
–
4
2
p
e
r
f
o
r
m
a
n
c
e
r
e
v
i
e
w
4
3
–
5
8
G
o
v
e
r
n
a
n
c
e
a
n
d
r
e
m
u
n
e
r
a
t
i
o
n
5
9
–
1
0
8
i
i
F
n
a
n
c
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
1
0
9
–
1
8
0
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
sUpplementary DisclosUres
UnaUDiteD
continUeD…
taBle a continued
summaRy balanCe sheet based on pRopoRtional Consolidation as at 31 maRCh 2014
the following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. it presents
the composition of the epra net assets of the Group, with its share of the net assets of the joint venture and fund assets and liabilities included
on a line-by-line, i.e. proportional, basis and assuming full dilution.
share of
joint
ventures
and funds
£m
less non-
controlling
interests
£m
share
options
£m
Deferred
tax
£m
2,930
2,012
89
5,031
(2,712)
(68)
(138)
(2,113)
(610)
–
–
(610)
–
–
8
231
–
(371)
–
–
–
–
–
–
39
–
39
–
–
–
–
–
–
6
–
6
Group
£m
4,554
3,036
–
7,590
2,712
262
(266)
(3,181)
7,117
mark-to-
market on
effective
cash flow
hedges and
related debt
adjustments
£m
valuation
surplus on
trading
properties
£m
head
leases
£m
–
–
–
–
–
–
–
173
173
(22)
(12)
–
(34)
–
–
34
–
–
–
63
–
63
–
–
–
–
63
epRa
net assets
2014
£m
epra
net assets
2013
£m
6,852
5,099
89
6,378
3,863
258
12,040
10,499
– –
194
(317)
(4,890)
7,027
688p
53
(319)
(4,266)
5,967
596p
retail properties
office properties
other properties
total properties
investments in joint
ventures and funds
other investments
other net (liabilities) assets
net debt
net assets
epRa naV per share (note 2)
property segments have been re-presented in line with note 23.
epRa net assets moVement
year ended 31 march 2014
year ended 31 march 2013
£m
5,967
295
926
(161)
–
7,027
pence
per share
596
29
90
(27)
–
688
£m
5,381
273
22
(202)
493
5,967
pence
per share
595
30
2
(27)
(4)
596
opening epra nav
income return
capital return
Dividend paid in cash
Dilution due to issues of shares
Closing epRa naV
160
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
taBle B: epra performance measures
epRa peRfoRmanCe measuRes summaRy table
epra earnings – basic
– diluted
epra nav
epra nnnav
epra net initial yield
epra ‘topped-up’ net initial yield
epra vacancy rate
CalCulation of epRa eaRninGs and epRa eaRninGs peR shaRe
profit for the year after taxation
exclude:
Group – non-underlying current tax
Group – deferred tax
Joint ventures and funds – non-underlying current tax
Joint ventures and funds – deferred tax
Group – net valuation movement (including result on disposals)
Joint ventures and funds – net valuation movement (including result on disposals)
amortisation of intangible assets
changes in fair value of financial instruments and associated close-out costs
non-controlling interest in respect of the above
epRa earnings1
mark-to-market on/profit on disposal of liquid investments (held for trading assets)
mark-to-market on convertible bond
non-recurring items2
underlying earnings after taxation
Weighted average number of shares
adjustment for treasury shares
adjustment for esop shares
weighted average number of shares (basic)
Dilutive effect of share options
Dilutive effect of esop shares
weighted average number of shares (diluted)
earnings per share (basic)
earnings per share (diluted)
Underlying earnings per share (diluted)
epRa earnings per share – basic
– diluted
1 comparatives have been re-presented in line with updated epra guidance.
2 non-recurring items for the year ended 31 march 2013 relate to £7m of issue costs for the convertible bond.
2014
2013
£m
295
295
7,027
6,700
pence per
share
29.5
29.4
688
656
4.8%
5.3%
5.2%
£m
268
268
5,967
5,522
pence per
share
29.9
29.7
596
552
5.5%
5.7%
3.4%
2013
£m
284
(9)
(16)
(2)
(1)
(79)
62
28
268
(9)
2014
£m
1,106
(5)
(3)
5
–
(615)
(258)
– 1
57
8 –
295
–
– 7
– 7
295
273
2014
number
million
2013
number
million
907
(11)
(1)
895
1,010
(11)
–
999
2 2
3 4
1,004
901
2014
pence
110.7
110.2
29.4
29.5
29.4
2013
pence
31.7
31.5
30.3
29.9
29.7
161
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
sUpplementary DisclosUres
UnaUDiteD
continUeD…
taBle B continued
net assets peR shaRe
balance sheet net assets
Deferred tax arising on revaluation movements
mark-to-market on effective cash flow hedges and related debt adjustments
Dilution effect of share options
surplus on trading properties
less non-controlling interests
epRa naV
Deferred tax arising on revaluation movements
mark-to-market on effective cash flow hedges and related debt adjustments
mark-to-market on debt
2014
2013
pence per
share
£m
pence per
share
£m
7,117
6
173
39
63
(371)
7,027
688
(6)
(173)
(148)
5,687
14
198
58
10
–
5,967
(14)
(198)
(233)
596
epRa nnnaV
6,700
656
5,522
552
epRa nnnaV is the epra nav adjusted to reflect the fair value of the debt and derivatives and to include the deferred taxation on revaluations.
epRa net initial yield and ‘topped-up’ net initial yield
investment property – wholly-owned
investment property – share of joint ventures and funds
less developments, residential and land
Completed property portfolio
allowance for estimated purchasers’ costs
Gross up completed property portfolio valuation
annualised cash passing rental income
property outgoings
annualised net rents
rent expiration of rent-free periods and fixed uplifts1
‘topped-up’ net annualised rent
epRa net initial yield
epRa ‘topped-up’ net initial yield
including fixed/minimum uplifts received in lieu of rental growth
total ‘topped-up’ net rents
overall ‘topped-up’ net initial yield
‘topped-up’ net annualised rent
erv vacant space
reversions
total eRV
net reversionary yield
1 the period over which rent-free periods expire is 2 years (2012/13: 2 years).
the current period above is stated for the UK portfolio only.
162
2014
£m
7,194
4,757
(1,192)
10,759
639
11,398
554
(8)
546
53
599
4.8%
5.3%
26
625
5.5%
599
33
(9)
623
5.5%
2013
£m
5,554
4,945
(1,340)
9,159
552
9,711
541
(11)
530
27
557
5.5%
5.7%
26
583
6.0%
557
19
(13)
563
5.8%
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
taBle B continued
epRa net initial yield (niy) basis of CalCulation
epra niy is calculated as the annualised net rent (on a cash flow basis), divided by the gross value of the completed property portfolio. the valuation
of our completed property portfolio was determined by our external valuers as at 31 march 2014, plus an allowance for estimated purchaser’s costs.
estimated purchaser’s costs are determined by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional
acquisition. the net rent deduction allowed for property outgoings is based on our valuers’ assumptions on future recurring non-recoverable revenue
expenditure.
in calculating the epra ‘topped-up’ niy, the annualised net rent is increased by the total contracted rent from expiry of rent-free periods and future
contracted rental uplifts where defined as not in lieu of growth. overall ‘topped-up’ niy is calculated by adding any other contracted future uplift
to the ‘topped-up’ net annualised rent.
the net reversionary yield is calculated by dividing the total estimated rental value (erv) for the completed property portfolio, as determined
by our external valuers, by the gross completed property portfolio valuation.
the epra vacancy rate is calculated as the erv of the un-rented, lettable space as a proportion of the total rental value of the completed property
portfolio.
epRa VaCanCy Rate
annualised potential rental value of vacant premises
annualised potential rental value for the completed property portfolio
epRa vacancy rate
the current period above is stated for the UK portfolio only.
epRa Cost Ratios
property outgoings
administrative expenses
share of joint ventures and funds expenses
less: management and performance fees (from joint ventures and funds)
other fees and commission
ground rent costs
epRa costs (including direct vacancy costs) (a)
Direct vacancy costs
epRa costs (excluding direct vacancy costs) (b)
Gross rental income less ground rent costs
share of joint ventures and funds (Gri less ground rent costs)
total gross rental income (C)
epRa cost ratio (including direct vacancy costs) (a/C)
epRa cost ratio (excluding direct vacancy costs) (b/C)
2014
£m
33
626
5.2%
2013
£m
19
563
3.4%
2014
£m
2013
£m
21
72
20
(10)
(5)
(2)
96
(13)
83
330
265
595
13
72
17
(10)
(5)
(1)
86
(14)
72
294
273
567
16.2%
13.9%
15.3%
12.8%
overhead and operating expenses capitalised (including share of joint ventures and funds)
– –
no overhead or operating expenses, including employee costs, are capitalised.
163
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
sUpplementary DisclosUres
UnaUDiteD
continUeD…
taBle c: gross rental income and accounting return
CalCulation of GRoss Rental inCome
rent receivable
spreading of tenant incentives and guaranteed rent increases
surrender premia
Gross rental income
total aCCountinG RetuRn
total accounting return
y
y
%
ear ended
31 march
2014
£m
year ended
31 march
2013
£m
574
23
4 1
601
538
28
567
ear ended
31 march
2014
year ended
31 march
2013
%
20.0
4.6
164
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
other inFormation
UnaUDiteD
portfolio valuation
portfolio yield and erv movements
total property return
portfolio net yields
annualised rent and estimated rental value (erv)
Gross rental income
annualised rent and estimated rental value (erv)
rent subject to lease break or expiry
rent subject to open market rent review
major holdings
occupiers representing over 0.5% of total contracted rent
investment activity:
acquisitions
Disposals
Development:
near-time pipeline
medium-time pipeline
recently completed and committed developments
environmental performance measures
ten year record
shareholder information
Glossary of terms
166
166
167
167
168
168
169
169
170
170
171
171
172
172
172
173
174
175
176
178
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
2
–
4
2
P
e
r
f
o
r
m
a
n
c
e
r
e
v
i
e
w
4
3
–
5
8
G
o
v
e
r
n
a
n
c
e
a
n
d
r
e
m
u
n
e
r
a
t
i
o
n
5
9
–
1
0
8
i
f
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
o
t
h
e
r
i
n
f
o
r
m
a
t
i
o
n
1
0
9
–
1
8
0
other inFormation
UnaUDiteD
poRtfolio Valuation
at 31 march 2014
Retail3:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices3:
city
West end
provincial
all offices
residential4
all offices and Residential
total
total1
£m
2,767
1,321
1,862
564
338
6,852
2,038
2,720
96
4,854
245
5,099
11,951
change2
h2
%
2.7
0.7
1.8
11.1
8.4
2.9
8.1
10.0
6.6
9.1
13.2
9.3
5.5
h1
%
1.1
2.0
0.3
6.5
2.0
1.5
3.6
6.0
4.0
5.0
2.6
4.9
2.8
Fy
%
3.7
2.8
2.1
18.3
10.5
4.4
11.8
16.6
10.9
14.4
15.4
14.5
8.3
table shows UK total, excluding assets held in europe. total portfolio valuation including europe of £12.0bn at year-end, +8.0% valuation movement.
1 including Group’s share of properties in joint ventures and funds.
2 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.
3 including developments.
4 stand-alone residential.
poRtfolio yield and eRV moVements
at 31 march 2014
Retail:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices:
city
West end
provincial
all offices
total
erv
£m
165
70
112
24
21
392
98
137
5
240
632
ney
%
5.7
5.1
5.5
5.4
7.7
5.6
5.3
5.1
6.1
5.2
5.5
erv growth1
ney yield compression2
h1
%
1.0
0.5
0.0
0.1
2.0
0.6
1.2
2.3
0.0
1.7
0.9
h2
%
0.0
0.2
2.3
0.1
2.6
0.9
6.6
2.3
0.0
4.1
2.0
Fy
%
1.0
0.7
2.4
0.2
4.6
1.5
7.93
4.6
0.0
5.8
3.0
h1
bps
h2
bps
Fy
bps
7
5
5
38
6
8
9
16
23
13
10
18
3
6
58
65
18
30
28
24
29
22
25
9
11
94
71
26
39
41
47
40
31
table shows UK total, excluding assets held in europe.
1 like-for-like (as calculated by ipD).
2 including notional purchaser’s costs.
3 city up 4.0% on a like-for-like basis.
166
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
total pRopeRty RetuRn (as CalCulated by ipd exCludinG euRope)
full-year to 31 march 2014
capital return
– erv growth
– yield compression1
income return
total property return
1 net equivalent yield movement.
poRtfolio weiGhtinG
at 31 march
Retail:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices:
city
West end
provincial
all offices
residential2
all offices and Residential
total
retail
offices
total
british land
%
ipD
%
british land
%
ipD
%
british land
%
4.6
1.5
26 bps
5.9
4.2
0.0
33 bps
5.7
15.3
5.8
40 bps
3.5
12.9
4.9
52 bps
5.0
8.9
3.0
31 bps
4.9
ipD
%
7.5
1.7
45 bps
5.7
10.7
10.1
19.3
18.5
14.2
13.6
2013
%
24.5
12.6
17.6
4.6
3.0
62.3
17.1
18.4
0.8
36.3
1.4
37.7
2014
(current)
%
2014
(current)
£m
2014
(pro forma1)
%
23.1
11.1
15.6
4.7
2.8
57.3
17.1
22.7
0.8
40.6
2.1
42.7
2,767
1,321
1,862
564
338
6,852
2,038
2,720
96
4,854
245
5,099
21.5
10.1
14.4
4.3
2.6
52.9
16.9
25.3
1.7
43.9
3.2
47.1
100.0
100.0
11,951
100.0
table shows UK total, excluding assets held in europe.
1 pro forma for developments to date at estimated end value (as determined by the Group’s external valuers).
2 stand-alone residential.
poRtfolio net yields1
at 31 march (excluding developments)
Retail:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices:
city
West end
provincial
all offices
total
table shows UK total, excluding assets held in europe.
1 including notional purchaser’s costs.
2 including rent contracted from expiry of rent-free periods and fixed uplifts not in lieu of rental growth.
3 including fixed/minimum uplifts (excluded from epra definition).
epra
net initial
yield
%
epra
topped-up
net initial
yield2
%
overall
topped-up
net initial
yield3
%
net
reversionary
yield
%
net
equivalent
yield
%
5.3
4.9
5.3
5.0
7.1
5.3
5.5
2.9
6.9
4.0
4.8
5.6
5.1
5.4
5.0
7.1
5.5
5.8
4.3
6.9
4.9
5.3
5.7
5.1
5.4
7.1
8.9
5.8
5.9
4.4
6.9
5.0
5.5
5.6
5.0
5.6
4.0
5.6
5.4
6.2
5.3
5.6
5.6
5.5
5.7
5.1
5.5
5.4
7.7
5.6
5.3
5.1
6.1
5.2
5.5
167
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
other inFormation
UnaUDiteD
continUeD…
annualised Rent and estimated Rental Value (eRV)
at 31 march 2014 (excluding developments)
Retail:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices:
city
West end
provincial
all offices
residential3
all offices and Residential
total
annualised rent
(valuation basis)
total
£m1
erv
average rent
total
£m
contracted2
£ psf
erv2
£ psf
157
68
104
30
25
384
88
76
6
170
3
173
557
24.5
21.8
30.2
13.6
14.1
22.7
47.5
48.4
27.1
46.9
24.6
21.6
31.9
10.9
11.6
22.4
48.7
52.0
21.9
49.2
165
70
112
24
21
392
98
137
5
240
–
240
632
26.6
27.7
table shows UK total, excluding assets held in europe.
1 Gross rents plus, where rent reviews are outstanding, any increases to erv (as determined by the Group’s external valuers), less any grounds rents payable under head leases,
excludes contracted rent subject to rent free and future uplift.
2 office average rent and erv £ psf is based on office space only.
3 stand-alone residential.
GRoss Rental inCome1
(accounting basis)
Retail:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices:
city
West end
provincial
all offices
residential2
all offices and Residential
total
12 months to
31 march 2014
total
£m
annualised as at
31 march 2014
total
£m
150
72
115
33
29
399
89
84
6
179
3
182
581
159
71
103
33
29
395
87
93
6
186
3
189
584
table shows UK total, excluding assets held in europe.
1 Gross rental income will differ from annualised rents due to accounting adjustments for fixed and minimum contracted rental uplifts and lease incentives.
2 stand-alone residential.
168
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
lease lenGth and oCCupanCy
at 31 march 2014 (excluding developments)
Retail:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices:
city
West end
provincial
all offices
total
table shows UK total, excluding assets held in europe.
1 including accommodation under offer or subject to asset management.
Rent subJeCt to lease bReak oR expiRy
at 31 march
Retail:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices:
city
West end
provincial
all offices
total
average lease length
occupancy rate
to expiry
years
to break
years
occupancy
%
occupancy
(underlying)1
%
9.1
15.0
9.1
26.6
20.7
12.3
9.1
11.2
8.3
10.2
11.5
8.2
14.8
8.1
23.3
20.7
11.3
7.3
9.4
8.0
8.4
10.3
96.8
100.0
95.6
100.0
100.0
97.4
96.8
85.7
100.0
90.5
94.8
98.3
100.0
97.3
100.0
100.0
98.5
96.9
88.4
100.0
92.1
96.1
2015
£m
2016
£m
2017
£m
2018
£m
2019
£m
2015–17
£m
2015–19
£m
7
–
8
–
–
15
1
1
–
2
17
8
–
7
–
–
15
1
4
–
5
20
6
–
9
–
–
15
19
7
–
26
41
12
–
9
1
–
22
4
8
–
12
34
13
–
5
–
–
18
17
10
–
27
45
21
–
24
–
–
45
21
12
–
33
78
% of contracted rent
potential uplift at current eRV
2.7%
2
3.1%
2
6.5%
4
5.4%
(2)
7.3%
1
12.4%
7
table shows UK total, excluding assets held in europe.
46
–
38
1
–
85
42
30
–
72
157
25.1%
6
169
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
2015
£m
2016
£m
2017
£m
2018
£m
2019
£m
2015–17
£m
2015–19
£m
22
4
15
–
–
41
15
13
–
28
69
–
sq ft
’000
3,963
1,589
1,448
2,864
2,808
608
422
414
363
134
25
8
10
–
–
43
14
20
–
34
77
–
53
40
37
7
–
137
27
36
6
69
206
4
100
52
62
7
–
221
56
69
6
131
352
4
rent
per annum1
£m
occupancy
rate2
%
lease
length
years3
177
70
81
68
63
23
15
16
11
5
96.8
98.3
98.0
100.0
100.0
94.2
98.6
99.2
100.0
68.2
7.2
9.4
8.1
15.1
14.7
10.1
7.0
6.3
25.0
12.0
other inFormation
UnaUDiteD
continUeD…
Rent subJeCt to open maRket Rent ReView
12 months to 31 march
Retail:
retail parks
superstores
shopping centres
Department stores
leisure
all Retail
offices:
city
West end
provincial
all offices
total
potential uplift at current eRV
table shows UK total, excluding assets held in europe.
maJoR holdinGs
19
15
9
2
–
45
11
6
-
17
62
2
18
20
14
5
–
57
14
17
6
37
94
2
16
5
14
–
–
35
2
13
–
15
50
–
at 31 march 2014 (excluding developments under construction)
broadgate, london ec2
regent’s place, london nW1
meadowhall shopping centre, sheffield
sainsbury’s superstores
tesco superstores
paddington central
teesside shopping park, stockton-on-tees
Drake circus shopping centre, plymouth
Debenhams, oxford street
10 portman square, W1
1 annualised contracted rent including 100% of joint ventures and funds.
2
includes accommodation under offer or subject to asset management.
3 Weighted average to first break.
british land
share
%
50
100
50
52
51
100
100
100
100
100
170
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
oCCupieRs RepResentinG oVeR 0.5% of total ContRaCted Rent
at 31 march 2014
tesco plc
sainsbury Group
Debenhams
Ubs aG
home retail Group
Kingfisher (b&Q)
hm Government
next plc
virgin active
arcadia Group
spirit Group
alliance boots
herbert smith
DsG international
marks & spencer plc
royal bank of scotland plc
hutchison Whampoa
aegis Group
house of Fraser
new look
sportsDirect
tJX cos inc (tK maxx)
inVestment aCtiVity
acquisitions
full-year to 31 march 2014
Completed
paddington central
aldgate place
the shoreditch estate1
hercules Unit trust unit purchase2
sainsbury’s superstore portfolio4
southGate, bath (50%)
hilden block, ealing broadway shopping centre
tesco extra, craigavon
1–5 baker street
harmsworth Quays, canada Water
other
total
% of contracted rent
% of contracted rent
7.7
6.0
5.8
3.2
2.7
2.7
2.5
2.4
2.0
2.0
1.6
1.6
1.4
1.3
1.3
1.2
1.1
1.1
1.0
1.0
0.9
0.9
Facebook
asda Group
Jpmorgan
reed smith
c&W plc (cable & Wireless plc)
JD sports
Gazprom
Deutsche bank aG
mayer brown
hennes
mothercare
icap plc
pets at home
credit agricole
carlson (tGi Friday’s)
astraZeneca
nokia
henderson
steinhoff
lewis trust (river island)
aramco
lend lease
0.9
0.9
0.8
0.8
0.8
0.8
0.7
0.7
0.7
0.7
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.5
0.5
0.5
0.5
0.5
price
(gross)
£m
area
british
land
share
£m
annual
passing
rent
£m3
offices
residential
mixed-use
retail
retail
retail
retail
retail
offices
residential
london
london
london
various
various
south West
london
n ireland
london
london
470
40
6
262
83
202
29
23
22
11
6
470
20
6
262
83
101
29
23
22
11
6
1,154
1,033
1 entered into an option agreement with the city of london corporation to draw down a development agreement subject to securing revised planning consent on the sites.
2 Units purchased over the course of the financial year.
3 british land share of net rent topped-up for rent frees.
4 26% equity interest.
21
–
–
16
–
5
2
1
1
–
–
46
171
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
other inFormation
UnaUDiteD
continUeD…
inVestment aCtiVity
disposals
full-year to 31 march 2014
Completed
puerto venecia, Zaragoza
bon accord and st nicholas, aberdeen
the triton building (neQ) residential
eastgate shopping centre, basildon
st James retail park, northampton
st James retail park, Dumbarton
preF, Udine
West cornwall shopping park, hayle
marble arch house residential
6 and 7–9 eldon street (princes trust house)
marsh mills retail park, plymouth
new century park land
other
exchanged
cwmbran retail park
residential sales
total
1 british land share of net rent topped-up for rent frees.
deVelopment
near-term pipeline
at 31 march 2014
blossom street, shoreditch
5 Kingdom street2
4 Kingdom street
Glasgow Fort (restaurant and car park)
total near-term
1 total cost including site value.
2 210,000 sq ft of which is consented.
medium-term pipeline
at 31 march 2014
100 liverpool street
power court, luton
aldgate place, phase 2
Drake circus leisure
Fort Kinnaird, edinburgh (Debenhams)
Glasgow Fort (additional retail Unit)
lancaster
eden Walk shopping centre, Kingston
surrey Quays
harmsworth Quays
total medium-term
172
price
(gross)
£m
area
british
land
share
£m
annual
passing
rent
£m1
retail
retail
residential
retail
retail
retail
retail
retail
residential
offices
retail
offices
spain
scotland
london
south east
midlands
scotland
italy
south West
london
london
south West
midlands
retail
residential
Wales
london
242
189
96
89
53
46
40
26
17
17
13
13
60
32
29
962
121
94
96
89
53
46
26
11
17
17
13
13
53
32
29
710
7
6
–
7
3
3
2
1
–
1
1
–
3
2
–
36
sector
mixed-use
offices
offices
retail
british land
share
%
100
100
100
59
sq ft
’000
322
240
147
10
719
total cost
£m1
164
162
99
5
430
sector
offices
retail
residential
retail
retail
retail
retail
mixed-use
mixed-use
mixed-use
british land
share
%
50
100
50
100
29
59
100
50
100
100
sq ft
’000
512
149
145
105
30
30
300
500–600
1,500–2,000
1,000–1,500
4,271–5,371
status
pre-submission
consented
consented
consented
status
pre-submission
pre-submission
consented
pre-submission
pre-submission
consented
pre-submission
pre-submission
pre-submission
pre-submission
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
deVelopment
Recently completed and committed developments
at 31 march 2014
sector
british
land
share
%
practical
completion
calendar
year
sq ft
’000
current
value
£m
cost to
complete
£m1
erv
£m2
pre-let
£m
residential
end
value3
£m
2010 programme:
10–30 brock street,
regent’s place4
10 portman square
marble arch house5
39 victoria street
199 bishopsgate
Whiteley shopping,
Fareham
bedford street
Glasgow Fort (leisure)
the leadenhall building
5 broadgate
total 2010 programme:
mixed-use
offices
mixed-use
offices
offices
retail
residential
retail
offices
offices
Recently committed:
milton Keynes,
retail
Kingston centre
old market, hereford7
retail
residential
craven hill Gardens
retail
Fort Kinnaird, edinburgh
offices
broadgate circle
retail
broughton park, chester
Whiteley leisure, Fareham
retail
meadowhall surrounding land retail
Glasgow Fort, m&s and
retail terrace
Deepdale, preston
yalding house
the hempel
aldgate place, phase 16
clarges mayfair8
retail
retail
offices
residential
residential
mixed-use
total recently committed
total committed under construction
100
100
100
100
50
50
100
59
50
50
50
100
100
29
50
59
50
50
59
29
100
100
50
100
505 completed
134 completed
87 completed
93 completed
144 completed
321 completed
24 completed
46 completed
2014
605
2015
710
402
183
70
82
60
55
34
11
265
251
2,669
1,413
21 completed
2014
2014
2014
2014
2014
2014
2015
305
25
55
45
54
58
22
2015
2015
2015
2016
2016
2017
112
71
29
40
221
195
1,253
2,547
5
66
47
3
10
3
1
1
1
1
11
44
16
213
422
933
3
4
4
3
1
0
1
3
29
63
111
–
15
4
3
8
6
6
3
20
4
12
26
45
183
335
427
20.5
9.8
4.4
5.4
3.5
2.6
0.0
0.7
18.9
19.2
85.0
0.3
4.8
–
0.4
1.2
0.6
0.6
0.4
1.6
0.4
1.5
–
–
5.7
17.5
55.3
19.1
4.9
–
0.0
2.0
2.4
0.0
0.7
9.0
19.2
57.3
0.3
3.9
–
0.3
-
0.6
0.4
0.4
0.7
0.4
–
–
–
–
7.0
34.9
Data includes Group’s share of properties in joint ventures and funds (except area which is shown at 100%).
1 From 1 april 2014 to practical completion.
2 estimated headline rental value net of rent payable under head leases (excluding tenant incentives).
3 residential development of which £148m completed or exchanged and a further £16m under offer.
4
5
includes 126,000 sq ft of residential of which £102m has now sold and completed.
includes 10,000 sq ft of residential of which £17m has now sold and completed during the year.
6 end value excludes sale of hotel site, receipts of £6m (british land share) estimated.
7 completed post year-end.
8
includes 104,000 sq ft of residential.
118
–
19
–
–
–
28
–
–
–
165
–
–
58
–
–
–
–
–
–
–
–
92
65
449
664
664
173
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
other inFormation
UnaUDiteD
continUeD…
environmental performance measures
the data below follows epra best practice recommendations on sustainability reporting for managed properties. it also includes additional
developments data and scope 3 carbon emissions to provide a comprehensive picture of resource use across our business. it covers 66% of our total
investment portfolio, as we focus on our managed properties and developments, where we can influence performance.
epRa best practice recommendations across our managed portfolio1
3.1: energy consumption from electricity (mWh)
3.2: energy consumption from district heating and cooling (mWh)
3.3: energy consumption from fuels (mWh)
3.4: building energy intensity (kWh per m²)
3.4: building energy intensity
(kWh per workstation or 10,000 visitors)
offices
shopping centres
retail parks
offices
shopping centres
retail parks
3.5: Direct (scope 1) greenhouse gas emissions (tonnes co2e)
3.6: indirect (scope 2) greenhouse gas emissions (tonnes co2e)
offices
3.7: Greenhouse gas intensity from building energy
shopping centres
retail parks
(tonnes co2e per m²)
3.8: Water withdrawal by source (m³)
3.9: building water intensity (m³ per m²)
3.9: building water intensity
(m³ per workstation or 10,000 visitors)
3.10 and 3.11: Waste by disposal route (tonnes and %)
offices
shopping centres
retail parks
offices
shopping centres
retail parks
recycled
incinerated
landfilled
additional developments data
site energy use (mWh)
site water use (m³)
2013/14
2012/13
2011/12
scope
(number
of assets)
163,406
174,246
191,188
466/781
289
28,826
256.75
49.12
8.86
6,160
1,564
297
6,953
89,993
0.13
0.03
0.005
349
30,084
274.89
57.75
10.15
6,324
2,197
431
6,694
97,420
0.14
0.03
0.005
135
25,918
307.41
58.36
10.68
6,744
2,678
352
5,581
1/1
56/63
27/27
9/9
42/42
23/23
9/9
41/41
63/63
105,610
466/781
0.16
0.03
0.005
27/27
9/9
42/42
680,349
664,960
699,222
215/738
0.68
0.26
0.08
14.51
8.25
2.49
0.66
0.20
0.27
14.86
7.61
11.33
0.74
0.19
0.31
15.75
8.88
13.69
13,052 (65%)
5,435 (27%)
1,475 (7%)
10,407 (60%)
5,162 (30%)
1,739 (10%)
10,313 (57%)
5,588 (31%)
2,297 (13%)
4,107
148,564
5,295
54,302
6,620
27,369
27/27
9/9
12/12
24/24
9/9
12/12
83/83
83/83
83/83
33/34
33/34
33/34
Waste diverted from landfill on developments (tonnes and %)
50,290 (83%)
272,667 (92%)
196.053 (98%)
absolute scope 3 emissions (tonnes Co2e)2
occupier energy use – offices
managed portfolio electricity and gas use
occupier energy use – Retail
managed portfolio electricity and gas use
Vacant space energy use – offices and Retail
managed portfolio electricity and gas use
lifecycle emissions – offices, Retail and Residential
managed portfolio and head office
water use managed portfolio
embodied carbon and construction site activities Developments
business travel by british land staff head office
total
42,684
50,042
51,839
468/781
1,292
1,268
10,159
227
184,100
298
240,028
1,653
1,461
468/781
248
9,846
217
547
468/781
10,586
468/781
232
468/781
205,500
134,500
35/37
271
267,777
205
1/1
199,370
504/819
1 as per epra best practice recommendations, total energy and water data covers energy and water procured by british land. energy, water and carbon intensity data covers
whole building usage for offices and common parts usage for shopping centres and retail parks.
2 energy data covers energy procured by british land. the majority of retail energy use is procured directly by retail occupiers. For scope 1 and 2 carbon data, please see
page 22.
For more detailed data on all these indicators and additional indicators, please see our Full Data report 2014: www.britishland.com/crdata.
174
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014
ten year recorD
UnaUDiteD
the table below summarises the last ten years’ results, cash flows and balance sheets. Figures for 2005 onwards are prepared under iFrs.
Figures for 2004 are the UK Gaap comparatives adjusted to show gross rental income on a proportional basis. Frs 21 became effective in 2006
under UK Gaap and has been applied retrospectively to 2004 and earlier years. this standard requires proposed dividends not approved by the
balance sheet date to be excluded from the balance sheet.
income
Gross rental income1
net rental income
Fees and other income
interest expense (net)
administrative expense
minority interest
underlying profit
exceptional costs (not included
in underlying profit)4
Dividends declared
summarised balance sheets
total properties at valuation1,3
net debt
other assets and liabilities
2014
£m
2013
£m
2012
£m
2011
£m
2010
£m
2009
£m
2008
£m5
2007
£m
2006
£m
2005
£m
ifRs
601
566
15
(204)
(78)
(2)
297
–
266
567
572
541
561
650
709
706
751
630
541
15
(206)
(76)
–
546
17
(218)
(76)
–
518
18
(212)
(68)
–
545
15
(246)
(65)
–
274
269
256
249
–
–
–
–
598
20
(292)
(58)
–
268
(119)
667
40
(350)
(73)
–
661
50
(370)
(84)
–
701
50
(436)
(87)
–
585
9
(360)
(53)
–
284
257
228
181
–
(305)
(122)
(180)
234
231
231
225
198
179
107
88
84
12,040
(4,890)
(123)
10,499
(4,266)
(266)
10,337
(4,690)
(266)
9,572
(4,173)
(298)
8,539
(4,081)
(51)
8,625
(4,941)
(297)
13,471
(6,413)
(122)
16,903
(7,741)
(300)
14,414
(6,684)
72
12,507
(6,538)
(56)
epra nav/fully diluted adjusted net assets
7,027
5,967
5,381
5,101
4,407
3,387
6,936
8,862
7,802
5,913
Cash flow movement – Group only
cash generated from operations
cash outflow from operations
net cash inflow from operating activities
cash (outflow) inflow from capital
expenditure, investments,
acquisitions and disposals
equity dividends paid
cash (outflow) inflow from management
of liquid resources and financing
243
(24)
219
(660)
197
(7)
190
(202)
211
(5)
206
(547)
182
28
210
(240)
248
(112)
136
(39)
406
(201)
205
418
477
(295)
182
857
494
(275)
219
(54)
455
(351)
104
986
464
(338)
126
(527)
(159)
607
(203)
213
(212)
630
(139)
157
(154)
(485)
(188)
(58)
(161)
(830)
(91)
(11)
(84)
(1,025)
(77)
459
increase (decrease) in cash6
7
(2)
77
(12)
(542)
377
48
63
(19)
(19)
Capital returns
Growth in net assets2
total return4
total return – pre-exceptional
per share information8
net asset value per share
memorandum:
Dividends declared in the year
Dividends paid in the year
Diluted earnings:
Underlying earnings per share
iFrs earnings (loss) per share4,7
17.8%
20.0%
20.0%
10.9%
4.5%
4.5%
5.5%
9.5%
9.5%
15.7%
17.7%
17.7%
30.1%
33.5%
33.5%
(51.1%)
(61.6%)
(60.3%)
(21.6%)
(18.1%)
(18.1%)
13.6%
14.3%
21.3%
31.9%
33.2%
34.6%
15.5%
17.2%
20.8%
688p
596p
595p
567p
504p
398p
1,114p
1,394p
1,231p
935p
27.0p
26.7p
26.4p
26.3p
26.1p
26.0p
26.0p
26.0p
26.0p
27.3p
29.8p
30.0p
29.0p
26.7p
16.9p
14.4p
14.1p
13.3p
13.0p
12.3p
29.4p
110.2p
30.3p
31.5p
29.7p
53.8p
28.5p
95.2p
28.4p
132.6p
41.0p
(614.1p)
44.3p
(251.0p)
35.9p
389.4p
29.4p
188.3p
22.2p
104.3p
1 including share of joint ventures and funds.
2 represents movement in diluted epra nav from 2006 onwards and adjusted diluted net assets for 2005 and before.
3 including surplus over book value of trading and development properties.
4 including exceptional finance costs in 2005: £180m, 2006: £122m, 2007: £305m and 2009: £119m.
5 restated for iFrs. the UK Gaap accounts shows gross rental income of £620m and underlying profit of £175m.
6 represents movement in cash and cash equivalents under iFrs and movements in cash under UK Gaap.
7 Under UK Gaap the revaluation of investment properties is not included in earnings per share.
8 adjusted for the rights issue of 341m shares in march 2009.
175
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180
shareholDer inFormation
financial calendar
2013/14
Fourth quarter ex-dividend date
Fourth quarter dividend paid
2014/15
First quarter interim management statement announced
First quarter ex-dividend date
First quarter dividend paid
half-year results announced
second quarter ex-dividend date
second quarter dividend paid
third quarter interim management statement
third quarter ex-dividend date
third quarter dividend paid
Full-year results announced
Fourth quarter ex-dividend date
Fourth quarter dividend paid
02 July 2014
08 august 2014
16 July 2014
october 2014
november 2014
18 november 2014
January 2015
February 2015
January 2015
april 2015
may 2015
may 2015
July 2015
august 2015
the board will announce the availability of a scrip alternative for each dividend via the regulatory news service and on the Group’s website
(www.britishland.com), no later than four business days before each ex-dividend date. For the fourth quarter dividend of 2013/14, the board expects
to announce the split between piD and non-piD income at the same time. any scrip alternative will not be enhanced.
analysis of shareholders – 31 march 2014
range
1–1,000
1,001–5,000
5,001–20,000
20,001–50,000
50,001–highest
total
number of holdings
%
balance as at 31 march 20141 %
7,623
4,992
903
245
617
14,380
53.01
34.72
6.28
1.70
4.29
100
3,600,516
10,837,022
8,619,782
7,939,495
988,769,666
1,019,766,481
0.35
1.06
0.85
0.78
96.96
100
holder name
number of holdings
%
balance as at 31 march 20141 %
individuals
nominee and institutional investors
total
1 excluding 11,266,245 shares held in treasury.
7,285
7,095
14,380
50.66
49.34
100
12,543,540
1,007,222,941
1,019,766,481
1.23
98.77
100
176
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 ReGistRaRs
british land’s share registrars are equiniti, who can be contacted at:
aspect house, spencer road, lancing, West sussex bn99 6Da.
equiniti’s shareholder enquiry line is: 0871 384 2143.
calls cost 8p per minute plus network extras.
lines are open from 8.30am to 5.30pm, monday to Friday.
the general enquiries number for overseas callers is:
+44 (0)121 415 7047.
the registrar’s website is: www.shareview.co.uk. registering
on this site will enable you, amongst other features, to view your
british land shareholding online, to update your details and to
opt to receive shareholder mailings electronically.
in addition to being our share registrar, equiniti are also
registrars for the blD property holdings limited stock.
bank of new york (operating through capita) are registrars of
british land’s Debentures. they can be contacted at: the registry,
34 beckenham road, beckenham, Kent br3 4tU.
the bondholder enquiry line is: 0871 664 0300. calls cost 10p per
minute plus network extras. lines are open from 9.00am to 5.30pm,
monday to Friday.
shaRe dealinG seRViCe
equiniti offer shareview dealing, a service which allows you to buy
or sell british land shares if you are a UK resident.
you can deal in your shares on the internet or by phone. log on
to www.shareview.co.uk/dealing or call 0845 603 7037 between
8.30am and 4.30pm, monday to Friday, for more information about this
service and for details of the rates. if you are an existing shareholder,
you will need your account/shareholder reference number which
appears on your share certificate.
honoRaRy pResident
sir John ritblat became managing Director of british land in 1970 and
chairman in 1971. he retired from the board in December 2006 and
was appointed honorary president, in recognition of his work building
british land into the industry leading company it is today.
website
the british land corporate website contains a wealth of material
for shareholders, including the current share price, press releases
and the investors section which contains detailed information on,
among other things, reits and dividends. the website can be accessed
at www.britishland.com.
website deliVeRy of shaReholdeR CommuniCations
if you currently receive paper copies of shareholder communications,
you may prefer to receive electronic copies via the british land website
instead. When a document is produced for shareholders you will receive
an email containing a link directly to the new document. if you would
like further information, or would like to elect for website delivery
of shareholder communications, please visit www.shareview.co.uk
or telephone equiniti’s shareholder enquiry line on 0871 384 2143.
calls cost 8p per minute plus network extras. lines are open from
8.30am to 5.30pm, monday to Friday.
annual GeneRal meetinG
the aGm of the british land company plc will be held at
the ocean room, the cumberland hotel, Great cumberland place,
london W1h 7Dl on 18 July 2014, at 11.00am.
shaReGift
shareholders with a small number of shares, the value of which makes
it uneconomic to sell them, may wish to consider donating them to the
charity shareGift (registered charity 1052686), which specialises in using
such holdings for charitable benefit.
diVidends
as a reit, british land pays property income Distribution (piD)
and non-property income Distribution (non-piD) dividends.
more information on reits and property income distributions can
be found in the glossary on page 179, or in the investors section
of our website at www.britishland.com/investors/dividends.
a shareGift transfer form can be obtained from:
equiniti
aspect house
spencer road
lancing
West sussex bn99 6Da
payment of diVidends
british land dividends can be directly mandated into your bank or
building society account instead of being despatched to you in paper
cheque form. more information about the benefits of having dividends
paid directly into your bank or building society account, and the mandate
form to set this up, can be found in the investors section of our website
at www.britishland.com/investors/dividends.
sCRip diVidend sCheme
british land offers shareholders the opportunity to participate in the
scrip Dividend scheme. this enables participating shareholders to
receive shares instead of cash, when a scrip alternative is offered for a
particular dividend. For more information and for details of how to sign
up to the scrip Dividend scheme, please visit the investors section of our
website at www.britishland.com/investors/dividends/scrip-dividend.
For further information, contact:
shareGift
17 carlton house terrace
london sW1y 5ah
telephone: +44 (0)20 7930 3737
Website: www.sharegift.org
unsoliCited mail
on request, british land is legally required to make its share register
available to other organisations. the mailing preference service
is an independent organisation offering free services to help reduce
the amount of unsolicited mail you receive. For more information, or
to register, visit: www.mpsonline.org.uk, telephone 0845 703 4599
or write to:
the mailing preference service
Freepost 29
lon 20771
london W1e 0Zt
ReGisteRed offiCe
the address of british land’s head office and registered office is:
york house
45 seymour street
london W1h 7lX
telephone: +44 (0)20 7486 4466
Fax: +44 (0)20 7935 5552
177
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 Glossary oF terms
annualised rent is the gross property rent receivable on a cash
basis as at the reporting date. additionally, it includes the external
valuers’ estimate of additional rent in respect of unsettled rent review,
turnover rent and sundry income such as that from car parks and
commercialisation, less any ground rents payable under head leases.
assets under management is the full value of all assets managed
by british land and includes 100% of the value of all joint ventures
and funds.
bReeam (building research establishment environmental
assessment method) assesses the sustainability of buildings
against a range of criteria.
Capital return is calculated as the change in capital value of the UK
portfolio, less any capital expenditure incurred, expressed as a
percentage of capital employed over the period, as calculated by ipD.
capital returns are calculated monthly and indexed to provide a return
over the relevant period.
Capped rents are subject to a maximum level of uplift at the specified
rent reviews as agreed at the time of letting.
Collar rents are subject to a minimum level of uplift at the specified
rent reviews as agreed at the time of letting.
epRa net assets (epRa naV) are the balance sheet net assets excluding
the mark-to-market on effective cash flow hedges and related debt
adjustments and deferred taxation on revaluations.
epRa net initial yield is the annualised rents generated by the portfolio,
after the deduction of an estimate of annual recurring irrecoverable
property outgoings, expressed as a percentage of the portfolio valuation
(adding notional purchaser’s costs), excluding development and
residential properties.
epRa nnnaV is the epra nav adjusted to reflect the fair value of
debt and derivatives and to include deferred taxation on revaluations.
epRa topped-up net initial yield is the current annualised rent, net
of costs, topped-up for contracted uplifts, where these are not in lieu
of rental growth, expressed as a percentage of capital value, after
allowing for notional purchaser’s costs.
epRa vacancy rate is the estimated market rental value (erv) of vacant
space divided by erv of the whole portfolio, excluding developments
and residential property. this is the inverse of the occupancy rate.
estimated Rental Value (eRV) is the external valuers’ opinion as to the
open market rent which, on the date of valuation, could reasonably
be expected to be obtained on a new letting or rent review of a property.
Contracted rent is the annualised rent adjusting for the inclusion
of rent subject to rent free periods.
fair value movement is accounting adjustment to change the book
value of an asset or liability to its market value.
developer’s profit is the profit on cost estimated by the valuers. the
developer’s profit is typically calculated by the valuers to be a percentage
of the estimated total development costs, including land and notional
finance costs.
development uplift is the total increase in the value (after taking account
of capital expenditure and capitalised interest) of properties held for
development during the period. it also includes any developer’s profit
recognised by valuers in the period.
development construction cost is the total cost of construction of a
project to completion, excluding site values and finance costs (finance
costs are assumed by the valuers at a notional rate of 5.75% per annum).
epRa is the european public real estate association, the industry
body for european reits.
epRa Cost Ratio (including direct vacancy costs) is the ratio of net
overheads and operating expenses against gross rental income (with
both amounts excluding ground rents payable). net overheads and
operating expenses relate to all administrative and operating expenses
including the share of joint ventures’ overheads and operating expenses,
net of any service fees, recharges or other income specifically intended
to cover overhead and property expenses.
epRa Cost Ratio (excluding direct vacancy costs) is the ratio calculated
above, but with direct vacancy costs removed from net overheads and
operating expenses balance.
epRa earnings is the profit after taxation excluding investment and
development property revaluations and gains/losses on disposals,
changes in the fair value of financial instruments and associated
close-out costs and their related taxation.
epRa naV per share is epra nav divided by the diluted number
of shares at the period end.
Gearing see loan to value (ltv).
Gross investment activity as measured by our share of acquisitions,
sales and investment in committed development.
Gross rental income is the gross accounting rent receivable (quoted
either for the period or on an annualised basis) prepared under iFrs
which requires that rental income from fixed/minimum guaranteed
rent reviews and tenant incentives is spread on a straight-line basis
over the entire lease to first break. this can result in income being
recognised ahead of cash flow.
Gross Value added (GVa) provides a snapshot of a company’s overall
contribution to the UK economy, both directly through activities and
indirectly through spending.
Group is the british land company plc and its subsidiaries and
excludes its share of joint ventures and funds (where not treated as a
subsidiary) on a line-by-line basis (i.e. not proportionally consolidated).
headline rent is the contracted gross rent receivable which becomes
payable after all the tenant incentives in the letting have expired.
ifRs are the international Financial reporting standards as adopted
by the european Union.
income return is calculated as net income expressed as a percentage
of capital employed over the period, as calculated by ipD. income
returns are calculated monthly and indexed to provide a return over
the relevant period.
interest cover is the number of times net interest payable is covered
by underlying profit before net interest payable and taxation.
ipd is investment property Databank ltd which produces an
independent benchmark of property returns and british land UK
portfolio returns.
178
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 lettings and lease renewals are divided between short-term
(less than two years’ lease length) and long-term (more than two
years’ lease length). lettings and renewals are compared both
to the previous passing rent as at the start of the financial year and
the erv immediately prior to letting. both comparisons are made
on a net effective basis.
like-for-like eRV growth is the change in erv over a period on the
standing investment properties expressed as a percentage of the
erv at the start of the period. like-for-like erv growth is calculated
monthly and compounded for the period subject to measurement,
as calculated by ipD.
like-for-like rental income growth is the growth in net rental income
on properties owned throughout the current and previous periods
under review. this growth rate includes revenue recognition and lease
accounting adjustments but excludes properties held for development
in either period and properties with guaranteed rent reviews.
loan to value (ltV) is the ratio of principal value of gross debt less
cash, short-term deposits and liquid investments to the aggregate
value of properties and investments.
mark-to-market is the difference between the book value of an asset
or liability and its market value.
multi-channel retailing is the use of a variety of channels in a customer’s
shopping experience, including research, before a purchase. such
channels include: retail stores, online stores, mobile stores, mobile
app stores, telephone sales and any other method of transacting with
a customer. transacting includes browsing, buying, returning as well
as pre- and post-sale service.
net development Value is the estimated end value of a development
project as determined by the external valuers for when the building
is completed and fully let (taking into account tenant incentives and
notional purchaser’s costs). it is based on the valuers view on ervs,
yields, letting voids and rent-frees.
net reversionary yield is the anticipated yield to which the initial yield
will rise (or fall) once the rent reaches the estimated rental value.
occupancy rate is the estimated rental value of let units as a percentage
of the total estimated rental value of the portfolio, excluding development
properties. it includes accommodation under offer or subject to asset
management (where they have been taken back for refurbishment and
are not available to let as at the balance sheet date).
omni-channel retailing is the evolution of multi-channel retailing,
but is concentrated more on a seamless approach to the consumer
experience through all available shopping channels i.e. mobile internet
devices, computers, bricks and mortar, television, radio, direct mail,
catalogue, etc.
over rented is the term used to describe when the contracted rent
is above the estimated rental value (erv).
overall ‘topped-up’ net initial yield is the epra net ‘topped-up’
initial yield, adding all contracted uplifts to the annualised rents.
passing rent is the gross rent, less any ground rent payable under
head leases.
portfolio valuation movement is the increase in value of the portfolio
of properties held at the balance sheet date and net sales receipts
of those sold during the period, expressed as a percentage of the
capital value at the start of the period plus net capital expenditure,
capitalised interest and transaction costs.
property income distributions (pids) are profits distributed to
shareholders which are subject to tax in the hands of the shareholders
as property income. piDs are normally paid net of withholding tax
currently at 20% which the reit pays to the tax authorities on behalf
of the shareholder. certain types of shareholder (i.e. pension funds)
are tax exempt and receive piDs without withholding tax. property
companies also pay out normal dividends, called non-piDs, which
are treated as normal dividends and are not subject to withholding tax.
net effective rent is the contracted gross rent receivable taking into
account any rent-free period or other tenant incentives. the incentives
are treated as a cost-to-rent and spread over the lease to the earliest
termination date.
property valuation is reported by the Group’s external valuers.
in accordance with usual practice, they report valuations net, after
the deduction of the notional purchaser’s costs, including stamp
duty land tax, agent and legal fees.
net equivalent yield is the weighted average income return (after
allowing for notional purchaser’s costs) a property will produce based
upon the timing of the income received. in accordance with usual
practice, the equivalent yields (as determined by the external valuers)
assume rent is received annually in arrears.
net initial yield is the current annualised rent, net of costs,
expressed as a percentage of capital value, after allowing for notional
purchaser’s costs.
net rental income is the rental income receivable in the period after
payment of direct property outgoings which typically comprise ground
rents payable under head leases, void costs, net service charge expenses
and other direct irrecoverable property expenses. net rental income
is quoted on an accounting basis. net rental income will differ from
annualised net cash rents and passing rent due to the effects of income
from rent reviews, net property outgoings and accounting adjustments
for fixed and minimum contracted rent reviews and lease incentives.
Rack rented is the term used to describe when the contracted rent
is in line with the estimated rental value (erv), implying a nil reversion.
Rent-free period see tenant (or lease) incentives.
Rent reviews take place at intervals agreed in the lease (typically every
five years) and their purpose is usually to adjust the rent to the current
market level at the review date. For upwards-only rent reviews, the
rent will either remain at the same level or increase (if market rents
have increased) at the review date.
Rents with fixed and minimum uplifts are either where rents are
subject to contracted uplifts at a level agreed at the time of letting;
or where the rent is subject to an agreed minimum level of uplift
at the specified rent review.
179
Financial statements and other inFormationThe British Land Company PLC Annual Report and Accounts 2014 Strategic Report 2–42 Performance review 43–58 Governance and remuneration 59–108 Financial statements and other information 109–180 Financial statements anD other inFormation
Glossary oF terms
continUeD…
Retail planning consents are separated between a1, a2 and a3 – as
set out in the town and country planning (Use classes) order 2005.
Within the a1 consent category, open a1 consent grants planning for
any type of retail, while restricted a1 consent places limits on the types
of retail that can operate (this is typically a restriction that only bulky
goods operators are allowed to trade at that site).
total property return is calculated as the change in capital value,
less any capital expenditure incurred, plus net income, expressed as
a percentage of capital employed over the period, as calculated by ipD.
total property returns are calculated monthly and indexed to provide
a return over the relevant period.
class
Description
Use for all/any of the following purposes
a1
shops
retail sale of goods other than hot food; post
office; sale of tickets or as a travel agency;
sale of sandwiches or other cold food off
the premises; hairdressing; direction of
funerals; display of goods for sale; hiring
out of domestic or personal goods/articles;
the reception of goods to be washed, cleaned
or repaired; a retail warehouse club being
a retail club where goods are sold, or
displayed for sale, only to persons who are
members of that club; or as a night club.
Financial and
professional
services
Financial services; professional services
(other than health or medical); or other
services (including betting) appropriate
for a shopping area.
D2
assembly
and leisure
cinemas, music and concert halls,
bingo and dance halls (but not night clubs),
swimming baths, skating rinks, gymnasiums
or areas for indoor or outdoor sports and
recreations.
Reversion is the increase in rent estimated by the external valuers,
where the passing rent is below the estimated rental value.
the increases to rent arise on rent reviews and lettings.
scrip dividend british land offers its shareholders the opportunity
to receive dividends in the form of shares instead of cash. this is
known as a scrip dividend.
standing investments are assets which are directly held and not
in the course of development.
tenant (or lease) incentives are incentives offered to occupiers to enter
into a lease. typically this will be an initial rent-free period, or a cash
contribution to fit-out. Under accounting rules the value of lease
incentives is amortised through the income statement on a straight-
line basis to the earliest lease termination date.
tmt stands for technology, media and telecommunications.
the residual site value of a development is calculated as the estimated
(net) development value, less development profit, all development
construction costs, finance costs (assumed at a notional rate) of a
project to completion and notional site acquisition costs. the residual
is determined to be the current site value.
topping out is a traditional construction ceremony to mark the
occasion when the structure of the building reaches the highest point.
total return (total accounting return) is the growth in epra nav
plus dividends paid, and this can be expressed as a percentage of
epra nav per share at the beginning of the period.
total shareholder Return is the growth in value of a shareholding
over a specified period, assuming dividends are reinvested to purchase
additional units of stock.
total tax contribution is a more comprehensive view of tax contributions
than the accountancy-defined tax figure quoted in most financial
statements. it comprises taxes and levies paid directly, as well as
taxes collected from others which we administered.
turnover rents is where all or a portion of the rent is linked to the
sales or turnover of the occupier.
under rented is the term used to describe when the contracted rent
is below the estimated rental value (erv), implying a positive reversion.
underlying earnings per share (eps) consists of underlying profit
after tax divided by the diluted weighted average number of shares
in issue during the period.
underlying profit before tax is the pre-tax epra earnings measure with
additional company adjustments. adjustments include mark-to-market
adjustments on, or profits on disposal of, held for trading assets, mark-
to-market adjustments on the convertible bond and issue costs of the
convertible bond.
Virtual freehold represents a long leasehold tenure for a period
of up to 999 years. a ‘peppercorn’, or nominal, rent is paid annually.
weighted average debt maturity – each tranche of Group debt
is multiplied by the remaining period to its maturity and the result
is divided by total Group debt in issue at the period end.
weighted average interest rate is the Group loan interest and derivative
costs per annum at the period end, divided by total Group debt in issue
at the period end.
weighted average unexpired lease term is the average lease term
remaining to first break, or expiry, across the portfolio weighted
by contracted rental income (including rent-frees). the calculation
excludes residential leases and properties allocated as developments.
yield compression occurs when the net equivalent yield of a property
decreases, measured in basis points.
yield on cost is the estimated annual rent of the completed development
divided by the total cost of development including site value and finance
costs, accruing at a rate of 4% per annum to the point of assumed rent
commencement, expressed as a percentage return.
yield shift is a movement (usually expressed in bps) in the yield of
a property asset, or like-for-like portfolio, over a given period. yield
compression is a commonly-used term for a reduction in yields.
180
The British Land Company PLC Annual Report and Accounts 2014 head office and registered office
york house
45 seymour street
london
W1h 7lX
telephone +44 (0)20 7486 4466
Fax +44 (0)20 7935 5552
www.britishland.com
info@britishland.com
@britishlandplC
design and production
bostock and pollitt limited, london
board photography barry Willis
print cpi colour
printed on heaven 42, from Forest
stewardship council (Fsc) certified
sustainable mixed sources. produced
using vegetable based inks and printed
by cpi colour, a carbonneutral®
company, certified to iso 14001
environmental management standard.
foRwaRd-lookinG statements
this report contains certain ‘forward-looking’ statements. such statements reflect current
views on, among other things, our markets, activities, projections, objectives and prospects.
such ‘forward-looking’ statements can sometimes, but not always, be identified by their
reference to a date or point in the future or the use of ‘forward looking’ terminology, including
terms such as ‘believes’, ‘estimates’, ‘anticipates’, ‘expects’, ‘forecasts’, ‘intends’, ‘due’,
‘plans’, ‘projects’, ‘goal’, ‘target’, ‘aim’, ‘may’, ‘will’, ‘would’, ‘could’, ‘should’ or similar
expressions or in each case their negative or other variations or comparable terminology.
by their nature, forward-looking statements involve inherent risks, assumptions and
uncertainties because they relate to future events and depend on circumstances which may
or may not occur and may be beyond our ability to control or predict. therefore they should
be regarded with caution.
important factors that could cause actual results, performance or achievements of british
land to differ materially from any outcomes or results expressed or implied by such
forward-looking statements include, among other things: (a) general business and political,
social and economic conditions globally, (b) industry and market trends (including demand
in the property investment market and property price volatility), (c) competition, (d) changes
in government and other regulation, including in relation to the environment, health
and safety and taxation (in particular, in respect of british land’s status as a real estate
investment trust), (e) inflation, (f) labour relations and work stoppages, (g) natural
disasters, (h) british land’s overall business strategy and investment choices in its portfolio
management, (i) legal or other proceedings against or affecting british land, (j) reliable
and secure it infrastructure, (k) changes in occupier demand and tenant default,
(l) changes in financial and equity markets including interest and exchange rate fluctuations,
(m) changes in accounting practices and the interpretation of accounting standards and
(n) the availability and cost of finance. the company’s principal risks are described in
greater detail in the section of this report headed ‘principal risks’. Forward-looking
statements should therefore be construed in light of all such factors.
information contained in this report relating to british land or its share price or the yield
on its shares are not guarantees of, and should not be relied upon as an indicator of, future
performance. any forward-looking statements made by or on behalf of british land speak
only as of the date they are made. such forward looking statements are expressly qualified
in their entirety by the factors referred to above and no representation, assurance, guarantee
or warranty is given in relation to them (whether by british land or any of its associates,
directors, officers, employees or advisers), including as to their completeness, accuracy
or the basis on which they were prepared.
other than in accordance with our legal and regulatory obligations (including under the UK
Financial conduct authority’s listing rules and Disclosure rules and transparency rules),
british land does not intend or undertake to update or revise forward looking statements
to reflect any changes in british land’s expectations with regard thereto or any changes
in information, events, conditions or circumstances on which any such statement is based.
Head Office and registered Office
York House
45 Seymour Street
London
W1H 7LX
Telephone +44 (0)20 7486 4466
Fax +44 (0)20 7935 5552
www.britishland.com
info@britishland.com
@BritishLandPLC
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
4