Half Yearly Report - Part 1

RNS Number : 0837S

British Land Co PLC

15 November 2011

THE BRITISH LAND COMPANY PLC HALF YEAR RESULTS

High Quality Portfolio Driving Continued Outperformance

Resilient first half results; continued outperformance vs IPD

· First half underlying PBT² 3.9% ahead at £132 million; IFRS PBT +0.9% to £331 million

· Portfolio valuation up 2.2% to £10.2 billion; Offices valuation +5.3% and Retail +0.7%

· Continued outperformance vs IPD benchmarks: +150 bps on capital returns

· EPRA NAV¹ per share up 4.2% at 591 pence; quarterly dividend maintained at 6.5 pence

· Total accounting return for the first half of 6.5%

Continued rental value growth and lettings ahead of ERV in retail and offices

· Total portfolio ERV +1.3% over 6 months ahead of IPD at +0.3%

· 2.2 million sq ft of income initiatives adding £13.1 million of new annual rent

· First half Retail ERV +0.5% (IPD -0.3%); UK occupancy strong at 98.3%; 527,300 sq ft new lettings and renewals 5.4% ahead of ERV

· First half Offices ERV +3.0% (IPD +1.9%); occupancy strong at 97.7%; 192,800 sq ft of new lettings/pre-lets; lettings agreed 6.0% ahead of ERV

Further significant progress on London developments; programme now over 50% pre-let

· On site at all 6 major office development sites; office development values up 15.2%

· Full planning permission at 5 Broadgate; demolition of existing buildings underway

· Pre-let exchanged with Debenhams on 145,000 sq ft offices at Regent's Place for 25 years at £50psf rising to a minimum of £53.50psf at first rent review

· Post half year, pre-let signed with Aon for one third of The Leadenhall Building (191,000 sq ft) for initial rent averaging £56.60psf for 19 years

Investment activity driving future income and capital growth

· £332 million of acquisitions since the start of the financial year; £21 million pa long-term income, a 6.8% yield on income generating assets

· £1.9 billion committed investment in last 18 months with nearly 90% in Central London and retail; estimated £128 million pa of new income

Chris Grigg, Chief Executive said: "In the current challenging economic environment, our results demonstrate the quality of our portfolio underlined by the actions we've taken to focus on growing both income and capital. We are well positioned for today but also have the capacity to capture upside when the economy improves."

	H1 2011	H1 2010	change
Net Asset Value¹ per share	591p	525p	+12.6%
IFRS net assets	£5,064m	£4,433m
Underlying profit before tax²	£132m	£127m	+3.9%
IFRS profit before tax (PBT)	£331m	£328m
Underlying EPS²	14.6p	14.2p	+2.8%
Diluted EPS	37.2p	38.7p
Dividends per share	13.0p	13.0p

¹ EPRA (European Public Real Estate Association) basis - see Note 1 to the condensed set of financial statements

² See Note 1 to the condensed set of financial statements

Investor Conference Call

A presentation of the results will take place 9.30am today, 15 November 2011, and will be broadcast live via webcast (www.britishland.com) and conference call. The details for the conference call are as follows:

UK Toll Free Number: 0800 279 4841

UK Number: +44 (0) 203 140 8286

Passcode: 7307549

A dial in replay will be available later in the day and the details are:

Replay number: 0800 358 7735

Passcode: 7307549#

For Information Contact

Investor Relations

Sally Jones, British Land 020 7467 2942

Media

Pip Wood, British Land 020 7467 2838

Gordon Simpson, Finsbury Group/ 020 7251 3801

Guy Lamming, Finsbury Group

Forward-Looking Statements

This document contains certain "forward-looking" statements reflecting, amongst other things, current views on our markets, activities and prospects. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may or may not occur and which may be beyond British Land's ability to control or predict (such as changing political, economic or market circumstances). Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Except to the extent required by law, British Land does not 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.

Notes to Editors:

About British Land

British Land is one of Europe's largest Real Estate Investment Trusts (REITs) with total assets, owned or managed, of £15.6 billion (British Land share £10.2 billion), as valued at 30 September 2011. Through our property and finance expertise we attract experienced partners to create properties and environments which are home to over 1,000 different organisations and visited byover 250 million people each year. Our property portfolio is focused on prime retail locations and Central London offices which attract high quality occupiers committed to long leases. Our occupancy rate of 98% and average lease length to first break of 12 years are among the highest of the major UK REITs.

Retail assets account for 62% of our portfolio, over 80% of which are located at prime out-of-town sites. Comprising around 27 million sq ft of retail space across 91 retail warehouse properties, 99 superstores, 12 shopping centres and 10 department stores, the retail portfolio is generally modern, flexible and adaptable to a wide range of formats. Active asset management delivers attractive space to both retailers and consumers.

London offices, located in the City and West End, comprise 33% of the portfolio (rising to an estimated 37% on completion of current developments) with 7 million sq ft of office space including Broadgate, the premier City office campus (50% share) and Regent's Place in the West End. We are investing £1.1 billion to create Central London's largest committed office development programme which will deliver 2.2 million sq ft of high quality space by 2014, including a 700,000 sq ft building at 5 Broadgate, the 610,000 sq ft Leadenhall Building in London's insurance district and a 500,000 sq ft mixed office and residential scheme at Regent's Place in the West End.

Our size and substance demands a responsible approach to business and we focus on five areas which matter most to us and our key stakeholders: managing buildings efficiently; developing sustainable buildings; enhancing biodiversity; exceeding customers' expectations and focusing on local communities. We believe leadership on issues such as sustainability helps drive our performance and is core to our corporate aim of building the best REIT in Europe.

Further details can be found on the British Land website at www.britishland.com

CHIEF EXECUTIVE'S REVIEW

British Land has a clear strategy to deliver superior total shareholder returns by focusing on: generating sustainable rental income growth; protecting and growing the value of our capital; adding incremental value through development, repositioning assets and exploiting market anomalies; controlling our costs to maximise our profits; and exploiting our scale and financial strength.

Over the last two years, our portfolio strategy has been based on a conviction of polarisation in our core UK retail and office markets, and our potential to enhance our income and returns by increasing our exposure to Central London development and through selective acquisitions. At a time of weak economic growth, we have intensified our focus on strengthening and growing our rental income flows. We have taken a measured approach to risk, by managing our development exposure through joint ventures and pre-lets, and by securing our funding requirements for the next two years at attractive rates through well-timed and executed refinancings.

Over the course of the last six months, the economic and financial markets have become more challenging. This is accelerating the polarisation in our markets including financing which is increasingly available only to the strongest operators. Against this background, our business has performed well. This is a reflection of our clear strategic focus and the actions we have taken to deliver against our objectives. We have a high quality portfolio which is defensive in today's difficult market but also strongly positioned to benefit from the long-term secular changes in our core retail and office markets.

Net rental income and underlying profits at the half year were ahead by 5.5% and 3.9% respectively versus prior year, with performance benefiting from income generated from our asset management activities and a first time contribution from acquisitions. We outperformed the IPD benchmark on total property returns, capital returns and rental value growth.

Delivering superior total shareholder returns

We measure performance in terms of the returns generated by dividends combined with the growth in our net asset value and how our total property returns, as measured by IPD, compare to the market over time.

Our total accounting returns were 6.5% for the half, comprising the dividend, which was maintained, as previously announced, at 6.5 pence for each quarter (2.3% return) and a 4.2% growth in Net Asset Value per share to 591 pence. At a property level, our total returns were 5.1% in the half, outperforming the IPD benchmark by 120 bps. This outperformance was driven by a combination of our portfolio and asset mix, the strength of our asset management activities and our decision to invest early in the cyclical upturn in the London market where we have captured value in the half through further successful pre-lets.

In pursuit of our objective of delivering superior total shareholder returns, we focus on five strategic priorities.

1. Creating sustainable and growing rental income

Focus on high-quality assets capable of generating secure and growing rental income which enable us to pay a significant proportion of our income as dividends and fund the business and its growth.

Net rental and related income (on a proportionally consolidated basis) was £269 million for the half, 5.5% ahead of last year. Organic like-for-like rental growth was 1.1%, 0.7% in Retail and 1.8% in Offices. The balance of the increase in income was driven principally by acquisitions. Estimated rental values for the portfolio rose by 1.3% over the half, significantly ahead of the market at 0.3%, reflecting our focus on better performing sectors and assets, as well as our successful asset management initiatives. In total, we agreed 2.2 million sq ft of income initiatives (including a pre-let to Debenhams), adding £13.1 million of gross rental income.

Our Retail business continued to outperform a more challenging retail market. Demand for space across our UK portfolio remained robust throughout, with occupancy remaining strong at 98.3%. Our rental trends remained positive with ERV up by 0.5% and we agreed 527,300 sq ft of new lettings and renewals 5.4% ahead of ERV. In a market where overall rental values have generally been falling, we have now had five consecutive quarters of ERV growth and four consecutive quarters of lettings ahead of the previous quarter's ERV on a net effective basis. The rise in retail administrations had a limited impact on our portfolio with retailers in administration at 0.4% of total rent. We have successfully re-let or assigned most of the space released from administrations at rents overall higher than previous rents.

In Offices, our business had another good half. The Central London market continued to perform well overall, although in the City occupational demand was subdued with signs of weakening investor sentiment for secondary assets. As our portfolio benefits from high occupancy levels, our letting activity has concentrated on securing lettings to improve ERV growth and consequently ERV growth was 3.0%, ahead of the market which rose by 1.9%. We agreed 192,800 sq ft of new lettings and pre-lets, with new lettings 6.0% ahead of ERV. We also focused on extending leases and securing certainty of income over 159,000 sq ft of space, mainly at Broadgate and Regent's Place. Along with the leasing activity last year, this has maintained the average lease length of our office portfolio at over 9 years to first break and reduced the rent subject to break or expiry over the next three years from 11.8% to 9.9% and 4.9% including the 755,000 sq ft of extensions on UBS existing leases agreed as part of its pre-let of 5 Broadgate.

2. Protecting and growing capital value

Continually renew and upgrade the assets within our portfolio to ensure that it retains its quality, security of income and attraction to investors.

The value of the portfolio rose to £10.2 billion at 30 September 2011, an increase of 2.2% over the six months and 0.8% over the last three months. Our Office portfolio was the main driver of valuation growth, increasing by 5.3% in the half, with our Retail portfolio ahead by 0.7%. Our capital returns outperformed the IPD benchmark by 150 bps.

The uplift was driven by a combination of asset management initiatives, expiry of rent frees in Offices, profits on our office development programme and yield shift. Asset management initiatives, which contributed around a quarter of the uplift, included office lease regears at Broadgate and Regent's Place which extended the term certain on 159,000 sq ft of leases, and successful lettings at Meadowhall. Our development portfolio contributed over a quarter of the Group's total valuation increase, driven mainly by our de-risking of the programme but also by continued strength of the London market.

3. Creating incremental value through developing, repositioning assets and exploiting market anomalies

Over time, we aim to create incremental value and enhance our returns through investing in assets where we believe we can generate above average returns.

We made further excellent progress on our London development programme with the value of our committed projects up 15.2% to £502 million. Notable achievements included the granting of full planning permission for the new UBS building at 5 Broadgate; significant pre-let agreements in the City and West End; starting the main construction at The Leadenhall Building; and the completion of the purchase of Marble Arch House. As a result, we are now on site at all of our six major office developments and have pre-let agreements on over 50% of our London developments. Our pre-lets are on an average term of nearly 20 years to first break and add £32.4 million of future annual rental income. To date, we have agreed £94 million of pre-sales on residential units within our development schemes.

Over the last 2 months, we have announced pre-let agreements on 336,000 sq ft of office space. In the West End, we exchanged an agreement with Debenhams in September to take 145,000 sq ft of office space at our Regent's Place development on a 25 year term with no breaks. In the City, we announced today that Aon, the global insurance giant, has signed a binding agreement to pre-let 191,000 sq ft at The Leadenhall Building, for its UK headquarters with options on a further 85,000 sq ft. Main construction started in September with practical completion brought forward to Q2 2014.

In Retail, we have started demolition at our Whiteley Village scheme and continue to make good progress with pre-lets to major occupiers. At Glasgow Fort, we secured planning to start building a 48,000 sq ft leisure scheme which we expect to start before the end of the year. Construction of the new shopping centre in Zaragoza is on plan with 50% of the space now pre-let or under offer.

We continued to make selective acquisitions both to create growing and sustainable rental income streams, backed by high quality assets, and generate incremental value. We acquired £332 million of properties, at an average net initial yield of 6.8% on the income producing assets. The largest purchase, 17 Virgin Active racquet clubs, acquired for £179 million, a net equivalent yield of 8.4%, is highly income generative with good quality asset backing and opportunities to add value over time.

4. Controlling our costs

Controlling our costs so that we maximise the profit generation from our rental activities and retain our cost competitiveness is a key focus for the business.

Our cost base remains the most competitive among the major REITs. Our cost to income ratio in the half was higher at 15.5% primarily due to lower employee share incentive costs in the prior year. We have successfully fixed 66% of our development costs at 2005 levels, in line or slightly better than our original expectations.

5. Exploiting our scale and financial strength

Scale is increasingly important in the sector, both to secure long-term competitive funding and commit to large projects. The strength and quality of our properties and their rental income continue to underpin our ability to finance our business expansion on competitive terms.

The quality of our assets, combined with our scale and capital structure, means we are able to access a wide range of financing markets, even in today's difficult market. We have been proactively refinancing debt and facilities maturing over the next 18 months, taking advantage of market opportunities to continue to diversify our sources of finance, extend our maturities and maintain liquidity. Since the beginning of the financial year we have arranged more than £1.2 billion of new financings in three separate transactions at attractive terms: a £560 million unsecured syndicated banking facility; a $480 million US private placement; and a £350 million refinancing of Hercules Unit Trust.

Sustainability

Sustainability is a key part of our business. We have five areas of specific focus; managing buildings efficiently, developing sustainable buildings, enhancing biodiversity, exceeding customer expectations and focusing on local communities.

During the last six months we have continued to make progress against each area. We made energy savings of £410,000 for our occupiers due to 11% like-for-like reductions across our office portfolio and 9% across our retail portfolio. We achieved more BREEAM Excellent ratings within our development programme and all our new office buildings and two of our retail developments are on track to achieve this high sustainability standard.

Results from an independent survey of occupiers in our new office buildings concluded that 95% rate their overall satisfaction with British Land as good or excellent. At our Head Office, a green roof is focused on creating, enhancing and conserving habitat for flora and fauna, particularly protected species, and in August, the first of two beehives was installed on the roof to further improve biodiversity. In July, we launched our first Community Charter setting out our approach to key local issues, such as training, employment and education; local sourcing; providing clean and green environments and community engagement throughout the development process. We have made ten commitments to the communities in which our major UK properties and developments are located to ensure a strong and consistent approach to understanding local needs and developing long-term community relationships.

Outlook

Against the background of slowing economic growth and renewed concern about the Eurozone, our results demonstrate that British Land is highly defensive and well positioned in the near term. Our results reflect the quality of our portfolio and the actions we continue to take to grow and secure our income through acquisitions and leasing initiatives and to strengthen our finances. We are also well placed to grow and outperform in the future as the economy improves. Our portfolio is rack rented and will continue to benefit from polarisation in both the retail and office markets. At the same time, there is considerable unrealised value in our development programme, which is well underway. Our pre-let agreements with UBS, Debenhams and Aon, underline the enduring attractions of our developments.

Chris Grigg

Chief Executive

BUSINESS REVIEW

Highlights

· Total property return of 5.1%, outperforming IPD benchmark by 120 bps

· Portfolio valuation up 2.2% to £10.2 billion for the six months

· Estimated Rental Value (ERV) increased by 1.3%; ahead of IPD benchmark (0.3%)

· £332 million of acquisitions adding £21 million of new annual income

· 2.2 million sq ft of income initiatives adding £13.1 million of new annual rent

· Office developments over 50% pre-let adding £32.4 million of annual income; construction costs 66% fixed, in line or better than original expectations

PORTFOLIO PERFORMANCE

To 30 September 2011¹	3 mths		6 mths
	British Land	IPD	British Land	IPD
Income Return (%)	1.3	1.4	2.5	2.9
Capital Return (%)	0.9	0.4	2.5	1.0
Total Property Return (%)	2.2	1.9	5.1	3.9

¹as calculated by IPD, excluding Europe

For the six months ended 30 September 2011, our portfolio generated a total property return of 5.1% with returns broadly equally balanced between income and capital returns. We continued to outperform the market with our total property returns 120 bps ahead of the IPD benchmark.

Portfolio Valuation

At 30 September 2011	Group	JVs & Funds¹	Total	Change²	Change²	Change²
	£m	£m	£m	3 mths %	6 mths %	12 mths %
Retail³:
Retail warehouses	1,881	807	2,688	0.4	1.0	4.7
Superstores	143	1,208	1,351	0.8	1.2	3.0
Shopping centres	497	1,025	1,522	0.4	0.6	5.1
Department stores	448	-	448	0.0	0.1	5.2
UK Retail	2,969	3,040	6,009	0.4	0.9	4.5
Europe Retail	-	278	278	(2.2)	(2.0)	-
All Retail	2,969	3,318	6,287	0.3	0.7	4.3
Offices⁴:
City	515	1,490	2,005	0.9	5.0	10.0
West End	1,313	-	1,313	2.8	6.4	13.7
Provincial	90	8	98	-	(1.9)	(1.7)
All Offices	1,918	1,498	3,416	1.6	5.3	11.0
Other	455	5	460	1.1	1.4	2.5
Total	5,342	4,821	10,163	0.8	2.2	6.3

¹ 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 committed and prospective developments of £77 million, down 8.9% in the 6 months to September 2011 (3 months: down 9.7%)

⁴ including committed and prospective developments of £502 million, up 15.2% in the 6 months to September 2011 (3 months: up 7.1%)

The value of our portfolio increased by 2.2% to £10.2 billion driven by a combination of our portfolio mix, the quality of our individual assets, our asset management initiatives and increased profits from our London development programme.

The Office portfolio was ahead by 5.3%, reflecting capital growth due to asset management activities, further de-risking of our development programme through pre-lets and pre-sales and continued growth in the London market. The value of our London programme increased 15.2% to £502 million. Our UK Retail portfolio grew more modestly, up 0.9%. In Europe Retail, the portfolio value fell by 2.0% reflecting growing economic uncertainty in the Eurozone.

Further detail is provided in the Retail and Offices Performance Review sections.

Portfolio Yield and ERV Movements

Excluding Developments	EPRA topped up net initial yield %^1,2	Net equivalent yield %¹	Net equivalent yield compression¹		ERV Growth³
	EPRA topped up net initial yield %^1,2	Net equivalent yield %¹	3 mths bps	6 mths bps	3 mths %	6 mths %
Retail:
Retail warehouses	5.6%	5.7%	-	(3)	0.3	0.7
Superstores	5.0%	5.0%	(2)	(2)	-	0.3
Shopping centres	5.8%	5.8%	(5)	(8)	(0.1)	0.5
Department stores	5.8%	6.5%	1	2	-	-
UK Retail	5.5%	5.7%	(2)	(4)	0.1	0.5
Europe Retail	6.7%	7.8%	8	10	n/a	n/a
All Retail	5.6%	5.7%	(1)	(3)	0.1	0.5
Offices:
City	6.2%	5.7%	3	(8)	0.9	2.8
West End	5.5%	5.6%	4	(3)	1.5	2.8
Provincial	7.1%	6.4%	18	(1)	7.9	7.9
Offices	6.0%	5.7%	4	(6)	1.3	3.0
Other	7.6%	8.5%	(5)	(3)	-	-
Total	5.8%	5.8%	-	(4)	0.5	1.3

¹ including notional purchaser's costs

²including rent contracted from expiry of rent free periods and contracted uplifts not in lieu of growth

³like for like (as calculated by IPD), excluding Europe

Over the six months to 30 September 2011, on a like for like basis, our portfolio net equivalent yield moved in by 4 bps to 5.8% compared to yield compression of 9 bps for the IPD benchmark. There was no yield compression in our portfolio in the second quarter, compared to 3 bps for the IPD.

The growth in our estimated rental value (ERV) of 1.3% for the six months compares to an increase of 0.3% for the market as a whole as measured by IPD. Our Office ERV was ahead by 3.0% with growth broadly balanced between the first and second quarters and between the West End and the City, In Retail, we saw modest levels of growth across all of our main sub-sectors over the half but with much of the 0.5% growth in overall ERVs driven by the first quarter.

Further detail on our portfolio yields and ERVs can be found in the supplementary tables.

SECTOR AND ASSET SELECTION

Portfolio %	2010	2011	2011 Pro forma
At 30 September	%	%	%¹
Retail:
Retail warehouses	27.8	26.5	24.6
Superstores	15.1	13.3	12.4
Shopping centres	13.0	15.0	13.9
Department stores	4.9	4.4	4.1
UK Retail	60.8	59.2	55.0
Europe Retail	3.8	2.7	2.6
All Retail	64.6	61.9	57.6
Offices:
City	20.5	19.7	22.8
West End	12.1	12.9	14.5
Provincial	0.5	1.0	0.9
All Offices	33.1	33.6	38.2
Other	2.3	4.5	4.2
Total	100.0	100.0	100.0

¹ pro forma for committed developments at estimated end value (as determined by the Group's external valuers)

We have focused our portfolio on sectors and assets - high quality UK retail and Central London offices - which we expect to benefit from significant secular changes in occupier and investor demand over time. Over the last eighteen months, we have been increasing our investment in the Central London market, (mainly offices but also high-end residential projects) both to take advantage of a cyclical upturn in demand and increase our long-term exposure to the West End. We have also made a small number of selected acquisitions in the half where we see opportunities to create incremental value by exploiting market pricing anomalies. These properties provide sustainable and growing income streams and potential for capital appreciation over time.

On a pro-forma basis, taking our valuers' latest estimates of the net end value of our developments, Offices accounts for 38.2% of our portfolio, as against 33.1% at 30 September 2010. This increase reflects capital committed to the London development programme.

The rise in the proportion of our portfolio accounted for by "Other", principally reflects our purchase of a portfolio of 17 Virgin Active Racquet clubs in July 2011.

Committed Developments

	Current Value	Cost to Complete¹	Notional Interest	ERV	Pre-let	Pre-sales
	£m	£m	£m	£m	£m	£m
Offices (inc. residential)	437	583	79	72.3	32.4	94
Retail	40	65	9	8.9	3.8	-
Total	477	648	88	81.2	36.2	94

¹excludes notional interest

At 30 September 2011, the value of our committed development pipeline was £477 million with a further £648 million expected spend required to complete the projects (excluding £88 million of notional interest). We achieved a number of important milestones in our office development programme during the half, including a major planning approval; pre-lets in buildings in the City and West End; and further pre-sales of high-end residential units. As a result, we are now on site at all of our six office developments, have agreed pre-lets on over 50% of the office space and pre-sold 166 of our 196 residential units for a total of £94 million. Detail on the individual developments can be found in the separate Retail and Offices sections and in the supplementary tables.

Acquisitions and Disposals

Since 1 April 2011	Completed	Gross Price £m	British Land Share £m	Annual Contracted Rent £m
Acquisitions:
17 Virgin Active Racquet Clubs	21 July 11	179	179	13
Grenfell Island, Maidenhead	24 June 11	74	74	5
Wardrobe Court, EC4	1 July 11	57	57	3
Other		22	22	-
Total Acquisitions		332	332	21

Disposals:
New Century Park, Coventry	Exchanged¹	17	8	-
Total Net Investment		315	324	21

¹Post 30 September 2011

During the half, we acquired £332 million of assets at an average net initial yield of 6.8% on the income producing assets. All of these assets have strong and sustainable rental income profiles where we see the potential to create value through both rental and capital growth. Having previously secured planning consent for a residential development, after the half year we exchanged contracts for the sale of a 27-acre site in Coventry to Barratt Group for £17 million (British Land share £8 million).

The most significant transaction was the £179 million purchase of a portfolio of 17 premium Virgin Active Racquet Clubs, at a net initial yield of 7.3%, and a net equivalent yield of 8.4%. The properties, which are mainly located in the South East of England, were let on new 25 year leases to Virgin Active at an initial rent of £8 per sq ft and are subject to a fixed uplift at year five, compounded at 2.5% per annum. Thereafter rents rise annually based on RPI uplifts of between 1% and 4% for the remainder of the lease term.

We acquired Grenfell Island, a 198,000 sq ft office and leisure scheme in Maidenhead, at a net initial yield of 7.5%. The building is in the centre of the town opposite the mainline railway station which will become the western terminus for CrossRail. Hutchison 3G UK Ltd occupies the 113,000 sq ft of office space and the 85,000 sq ft of leisure space is anchored by a 10-screen Odeon cinema and health club. The overall unexpired lease term is 10.4 years.

Wardrobe Court, a Grade II listed 71,000 sq ft residential investment property in the City of London, close to St Paul's Cathedral and the London Stock Exchange, was acquired at an average capital value of £800 per sq ft and a net initial yield of 4.7%. It has 92 serviced apartments let to BridgeStreet, a leading serviced apartment operator, until December 2014 with rent subject to annual uplifts in line with RPI.

RETAIL PERFORMANCE REVIEW

Highlights

· 0.9% capital return, outperforming IPD by 50 bps reflecting our focus on quality locations and asset management

· Continued ERV outperformance relative to IPD All Retail: +0.5% vs -0.3% for IPD; fifth consecutive quarter of ERV growth

· 527,300 sq ft of new lettings and renewals in first half, on average 5.4% ahead of ERV

· 520,000 sq ft of lettings exchanged or under offer post half year end, the majority at or above ERV

· Occupancy maintained in the UK at high levels at 98.3%

Our Retail business continued to outperform the broader retail market, reflecting our focus on stronger performing parts of the market combined with our ability to provide retailers with modern, flexible and affordable retail environments where they are able to trade profitably and grow.

As the market outlook has become more uncertain, retailers are more aggressively consolidating their portfolios onto the best space putting further downward pressure on rents and occupancy rates in poorer quality locations. This polarisation has been most marked in the occupational market in recent years, but in the last few months it has become more evident in both the occupational and investment markets. In the investment market, we are starting to see a widening of the gap between prime and secondary shopping centre yields with more secondary stock coming onto the market.

The value of our Retail portfolio rose by 0.7% over the six months, predominantly due to asset management initiatives with yields compressing by only 4bps. Demand for space across our UK portfolio remained robust throughout the half with occupancy at 98.3% at the period end and our rental trends remaining positive. ERVs rose by an average of 0.5% compared to a 0.3% fall for the IPD benchmark. We have now had five consecutive quarters of ERV growth ahead of the previous quarter's ERV in a market where overall rental values have generally been falling. The rise in retail administrations had a limited impact on our portfolio with retailers in administration at 0.4% of total rent compared with 0.3% at 31 March 2011. We successfully re-let or assigned most of the space released from administrations at rents overall higher than previous rents.

Asset Management

Our leasing activity was broadly balanced across the two quarters both in terms of quantum and relative to ERV. In total we agreed 1.5 million sq ft of lettings, lease renewals and rent reviews in the half securing £25.8 million of rent, £4.8 million ahead of previous passing rent and overall ahead of ERV.

New lettings and renewals in the half were agreed on 527,300 sq ft of space at an average of 5.4% ahead of ERV and with an average lease length to first break of nearly 11 years. The performance versus ERV was similar in both quarters. Stronger retailers such as Asda, M&S, Next, Hobbycraft and Smyths Toys continued to take space on our schemes across the UK, demonstrating our ability to provide our occupiers with the breadth and quality of space they need. M&S took 15,600 sq ft of new space at our retail parks at Stockton and Hull with a further 85,000 sq ft under offer post the half year. Next expanded and regeared a further 58,600 sq ft of space at Birstall, Cheltenham and Oldham and Smyths Toys added 15,200 sq ft following the successful change of use of a leisure unit at Glasgow Fort.

At Meadowhall, we continued to enhance the premium retail and food offer across the scheme. 31,000 sq ft of long-term deals including new lettings to Van Mildert, Holland & Barrett and Beaverbrooks, with Urban Outfitters agreed post half year end. The £7 million refurbishment of the Oasis food court has now been completed with new lettings to Giraffe, Rice and Chaophraya.

Rent reviews were settled on 996,000 sq ft of space across our portfolio at rents on average 6.4% above the previous passing rent. This included 358,000 sq ft within our Superstore portfolio generating an increase of 10.5%; as well as 364,000 sq ft of Retail Warehousing and 248,000 sq ft of Shopping Centre rent reviews settled at 5.6% and 4.1% above previous passing rent respectively.

We have continued to see good levels of leasing activity into our third quarter, although deals are taking longer to conclude. Post the half year end, we have had 520,000 sq ft of deals completed or under offer including 140,000 sq ft of pre-let deals on developments. The majority of these deals are expected to be at or around ERV.

Investment Activity

No significant retail assets were acquired or disposed of during the period. Our investment activity focused on our development pipeline, both committed and prospective. See the development tables in the supplementary tables.

In the UK, we have 73,000 sq ft of committed extensions to existing superstore sites and around 1 million sq ft of prospective development projects. Of our prospective projects, we have made good progress on pre-letting. At Glasgow Fort, we have pre-let or have under offer 100% of a 48,000 sq ft leisure extension to the scheme and expect to start on site this winter. We have also an agreement in principle with an anchor tenant on a further 142,000 sq ft extension. The two extensions will significantly enhance the retail and leisure offer at the Park, increasing available space by nearly 50%.

In Spain, our 1.4 million sq ft scheme in Zaragoza is progressing to plan with completion on track for autumn 2012. The development is now 50% pre-let or under offer.

OFFICES PERFORMANCE REVIEW

· 5.6% capital return outperforming IPD by 330 bps driven by asset management and development

· 192,800 sq ft of lettings and pre-lets, with lettings at 6.0% above ERV; 159,000 sq ft of lease extensions above ERV

· Occupancy and lease length maintained at 97.7% and 9.2 years; rents subject to break or expiry over next three years reduced to 4.9% (IPD: 31.7%)

· Significant development milestones achieved: 15.2% increase in value to £502 million

· Pre-let agreements on 336,000 sq ft: exchanged on a 145,000 sq ft pre-let to Debenhams at Regent's Place; signed binding agreement with Aon on a 191,000 sq ft pre-let at The Leadenhall Building

· Over 50% of development now pre-let (62% in the City; 25% in the West End)

We remain focused on modern, high quality, well located offices in Central London, and this focus has again served us well. We continued to add value through asset management and in particular through our significant development programme. The development programme also meets two main strategic objectives; of increasing our office weighting during a cyclical upturn by the incremental cost to complete of £583 million; and increasing our investment in the West End.

Our focus on London Offices is about the market outlook, and in the medium term we believe, despite the current financial uncertainties, it remains positive. We believe that there will be occupier demand, not least from occupiers with upcoming lease expiries - we are already beneficiaries of this demand notably from Aon and Debenhams - and at the same time supply for the foreseeable future is likely to be low compared to historical levels. However, in the short term occupiers may be wary about making decisions to take up accommodation.

On the investor side, demand for London offices is still relatively buoyant, and for prime, well let properties we believe the market will be resilient. Secondary, poorly located assets are more likely to see investor demand fall. We remain confident that the portfolio is relatively well positioned from both occupier and investor demand perspectives.

Our London office portfolio performed well in the half. Values are up by 5.3%, and capital returns have comfortably beaten the All Office IPD benchmark by 330 bps. Over the half year a significant minority of the performance has been yield shift, although over Q2 there has been no yield shift, and the majority of the added value has been created by asset management initiatives and development. Development was a key contributor, with values up by 15.2%. We remain confident that our development programme is well timed both from a tendering of construction costs and a letting perspective - with most completions between 2013/14. We have been thoughtful about our letting risks and balance between the City and the West End by joint venturing and pre-letting projects.

ERVs across the portfolio grew on average by 3% (1.3% in Q2) compared with 1.9% for the All Offices IPD benchmark. The ERV growth was broadly balanced across the City and the West End. This continues the relatively strong trend of rental growth on our portfolio with values up 15% since the start of the cycle at the end of 2009.

Our secure income stream remains a key characteristic of the portfolio. New lettings and renewals helped us to broadly maintain the weighted average lease length of over 9 years to first break, and to keep the portfolio nearly fully occupied at 97.7%. Only 9.9% of our leases are subject to break or expiry over the next 3 years, down from 11.8% a year ago. This will be reduced to 4.9% when our Agreement for Lease with UBS at 5 Broadgate becomes unconditional which is expected to be by the end of the financial year.

We made significant progress in pre-letting key parts of the development programme concluding an agreement with Debenhams to take around 40% of the offices at our NEQ development at Regent's Place and, post the half year, signing the pre-let with Aon on the lower ten floors of The Leadenhall Building. As a result, our development programme is now over 50% pre-let.

Asset Management Activity

The investment portfolio has a high occupancy rate at 97.7% so we have concentrated on selective lettings within the standing portfolio where we can increase rents and lease renewals which add to the security of our income. New lettings and pre-lets were agreed on 192,800 sq ft of accommodation, with new lettings 6.0% ahead of ERV.

In the City, we let 13,000 sq ft to William Blair at the Broadgate Tower at an initial rent of £54 per sq ft and an additional 10,000 sq ft to an existing occupier, Alpari at 201 Bishopsgate. 201 Bishopsgate is now fully let. We agreed to extend UBS' 74,000 sq ft lease on 3 Finsbury Avenue at Broadgate to over 7 years. This is in addition to the 755,000 sq ft of lease extensions agreed as part of the Agreement for Leases signed with UBS to pre-let 5 Broadgate, which will complete when the agreement becomes unconditional.

In the West End at Regent's Place, we agreed 53,000 sq ft of lease extensions at an average of 10% above previous passing rents: Regus and The General Medical Council agreed to remove break options, extending the term certain on their leases until September 2017 and May 2029. We also continued to improve the food offer across our office portfolio, agreeing 14,000 sq ft of food lettings to operators including Giovanni Rana, EAT, Pod Food and The Coffeesmiths Collective.

Investment and Development Activity

We made selective acquisitions and disposals over the first half with the acquisition of Grenfell Island, Maidenhead and completion of the conditional contract to purchase Marble Arch House, W1. Since the half-year, we have exchanged contracts for the sale of 27 acres at New Century Park, Coventry.

Our investment activity was focused on our committed 2.2 million sq ft development programme which has an end value based on British Land's share of £1.3 billion. We continued to achieve significant milestones and are now on site at all six of our London office developments. We have placed 66% of construction costs at prices either in line or slightly better than our original expectations of cost and timing.

At 5 Broadgate, we have cleared the main conditions of planning and vacant possession in line with our obligations under the agreement for lease with UBS and are confident that we will clear the remaining minor conditions by the financial year-end. This will also deliver the lease extensions at 1 and 2 Finsbury Avenue and 100 Liverpool Street, adding a minimum of £27 million (British Land share) contracted income over the additional term. We are on site at 5 Broadgate, demolishing the existing buildings and the development is scheduled for practical completion in Q4 2014. Also at Broadgate, we received planning for the substantial refurbishment of 199 Bishopsgate, placed a contract for the works and started on site in August 2011. Practical completion is scheduled for late 2012.

Following our pre-letting agreement with Aon, our main speculative letting risk in the City is now the upper floors at The Leadenhall Building. Aon have agreed to take 191,000 sq ft on the lower 10 floors (levels 4 - 13) of the building with options on a further 85,000 sq ft. The leases will be for a weighted average term of 19 years to first break at an average rent of £56.60 per sq ft with an average rent free period of 33 months. We successfully appointed Laing O'Rourke as the main contractor in August 2011, within budget and programme and they are on site with the anticipated completion date moved ahead from Q3 2014 to Q2 2014.

In the West End, we will complete our transformation of the Regent's Place Estate with the completion of the NEQ development. We exchanged an agreement for lease with Debenhams for a 145,000 sq ft pre-letting on the ground and lower 4 floors of offices at 10 Brock Street, representing around 40% of the offices at NEQ. Debenhams will take a 25 year lease without break at an initial rent of £50 per sq ft rising to a minimum of £53.50 per sq ft at first rent review. We continued to achieve pre-sales on the residential units, at prices in excess of our investment case, with 70% now pre-sold. Construction is well underway with the office cores complete and steelwork up to Level 4 and the market residential structure up to Level 8. We have successfully placed 80% of the construction costs and have a further 7% out to tender.

We also completed the acquisition of Marble Arch House in September 2011 for £18 million. Vacant possession was secured and the demolition programme started, to allow development of the 86,000 sq ft mixed use scheme, scheduled for delivery in Q4 2013. At 10 Portman Square (previously 2-14 Baker Street), we completed demolition works with construction underway and on schedule for delivery of the 158,000 sq ft mixed use scheme in Q2 2013.

Also see the development tables in the supplementary tables.

FINANCIAL REVIEW

Highlights

· Net rental and related income increased by 5.5% to £269 million; +1.1% on a like for like basis

· Underlying profit before tax up 3.9% to £132 million

· EPRA Net Asset Value per share up 4.2% to 591 pence

· Total accounting return of 6.5% for the six months

· £1.2 billion of new, well timed financings extending maturities and liquidity

· Dividend maintained at 13.0 pence for the half year

Income Statement (data presented on a proportionally consolidated basis - Table A)

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 the 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.

6 months to 30 September	2011			2010
	Group	JVs & Funds	Prop Consol	Group	JVs & Funds	Prop Consol
	£m	£m	£m	£m	£m	£m
Gross rental income	146	137	283	127	140	267
Property outgoings	(7)	(7)	(14)	(5)	(7)	(12)
Net rental and related income	139	130	269	122	133	255
Fees & other income	8	-	8	7	2	9
JVs & Funds underlying profit	54			60
Administrative expenses	(35)	(3)	(38)	(28)	(4)	(32)
Profit before interest and tax			239			232
Net financing costs	(34)	(73)	(107)	(34)	(71)	(105)
JVs & Funds underlying profit		54			60
Group underlying profit before tax	132		132	127		127

Gross rental income for the six months ended 30 September 2011 increased by 6.0% to £283 million (including our share of joint ventures and funds), with growth from acquisitions including Drake Circus Plymouth, Grenfell Island Maidenhead, and the Virgin Active portfolio, adding £17 million in the period. A further £5 million was received from development lettings at Regent's Place offset by £4 million in respect of properties which were previously income generating but are now developments and a £2 million reduction due to the impact of disposals including Sainsbury's Macclesfield and the Croydon Valley Leisure Park last year.

Like for like net rental and related income	2011	2010	Change
At 30 September	£m	£m	%
Properties owned throughout:
Retail	152	151	+0.7
Offices	69	67	+1.8
Other	7	7	+2.1
Total UK (like for like)	228	225	+1.2
Europe	7	7	(1.1)
Total UK and Europe (like for like)	235	232	+1.1
Disposals	-	2
Acquisitions	17	1
Development	14	13
Accounting adjustments	3	7
Total net rental and related income	269	255	+5.5

On a like-for-like basis, net rental income was 1.1% higher than a year ago. Offices showed growth of 1.8% compared with September 2010, largely due to new lettings at Ropemaker Place and Regent's Place. Retail increased 0.7% driven by our Superstore portfolio.

Creating sustainable and growing rental income is one of our strategic priorities. We focus on those sectors and assets where we expect demand from occupiers will be the strongest and seek to grow our income over time through asset management, development and acquisitions. Occupancy remains strong at 97.8% with an average lease length of 11.7 years. 24% of rent roll is subject to annual RPI or fixed uplifts and temporary lets and leases in administration account for less than 1% of our rent profile.

Net operating costs (representing property outgoings and administrative expenses, net of fees and other income) increased by £9 million to £44 million compared to the previous year. As expected, administration expenses grew by £6 million to £38 million on a proportionally consolidated basis, principally due to share scheme costs increasing as a result of non-vesting in the prior period. The ratio of net operating costs to gross rental income was 15.5% (half year 2010: 13.1%). Controlling our costs so that we maximise the amount of profit we generate continues to be a key focus of our business. We are currently making investment in our development programme and the additional overhead cost of this investment is being carried within our operating costs.

The £2 million movement in net financing costs for the half year was principally due to the cost of financing acquisitions, and additional commitment fees payable in respect of the £560 million loan refinancing secured in May 2011.

As a result, half year underlying profit before tax increased by 3.9% to £132 million compared with £127 million in the comparative half year.

Movement in underlying profit before tax		£m
Half year ended 30 September 2010		127
Impact of acquisitions and disposals		14
Development lettings		5
Assets transferred to development		(4)
Fees and other income		(1)
Administrative costs		(6)
Net finance costs		(2)
Other		(1)
Half year ended 30 September 2011		132

Underlying diluted earnings per share for the half year increased by 2.8% to 14.6 pence (half year to September 2010: 14.2 pence), with the diluted weighted average number of shares for the half year being 887 million (half year 2010: 876 million). The underlying tax rate for the half year is 1.5% (September 2010: 2.4%).

Balance Sheet

EPRA net asset value per share at 30 September 2011 was 591 pence representing an increase of 4.2% on 31 March 2011.

	As at 30 September 2011			As at 31 March 2011
	Group	JVs & Funds	Prop Consol	Group	JVs & Funds	Prop Consol
	£m	£m	£m	£m	£m	£m
Properties at valuation	5,342	4,821	10,163	4,783	4,789	9,572
Investment in JVs & Funds	2,131			2,066
Other non-current assets	59	(4)	55	51		51
	7,532	4,817	10, 218	6,900	4,789	9,623
Other net current liabilities	(222)	(28)	(250)	(205)	(4)	(209)
Net debt	(2,207)	(2,631)	(4,838)	(1,714)	(2,697)	(4,411)
Other non-current liabilities	(39)	(27)	(66)	(51)	(22)	(73)
JVs & Funds net assets		2,131			2,066
IFRS net assets	5,064		5,064	4,930		4,930
EPRA adjustments	279		279	171		171
EPRA net assets¹	5,343		5,343	5,101		5,101
EPRA NAV per share	591p		591p	567p		567p

¹EPRA net assets exclude mark-to-market on effective cash flow hedges and related debt adjustments, as well as deferred taxation on revaluations

The principal movements in EPRA net asset value are summarised below:

Movement in EPRA net asset value		pence
At 31 March 2011		567
Property and investment revaluation (net of disposals)
- Office - Retail - Development		11 5 7
Underlying profit after tax		14
Dividends (including the effects of the scrip)		(13)
At 30 September 2011		591

Property and other investments at the end of the half year were £10.2 billion, up from £9.6 billion in March, largely due to a net valuation movement of £203 million and net additions made of £392 million in the period.

Proportionally consolidated net debt at 30 September 2011 was £4,838 million (31 March 2011: £4,411 million). The increase of £427 million was principally due to the purchases of Grenfell Island, Maidenhead, Luton Power Court, Wardrobe Court, the Virgin Active portfolio and capital expenditure.

The loan to value (LTV) ratio was 45% (including the Group's share of joint ventures and funds), consistent with 31 March 2011 and 30 September 2010. Interest cover for the 6 months to 30 September 2011 has also remained constant at 2.2 times compared with the prior year period.

The Group LTV ratio increased from 22% at 30 September 2010 to 28%, following draw downs to fund acquisitions, and interest cover was 3.3 times. The Group average debt maturity is 10.0 years, or 9.8 years on a proportionally consolidated basis - this compares to the proportionally consolidated weighted average lease length to first break of 11.7 years.

The proportionally consolidated weighted average interest rate at 30 September 2011 has improved to 4.7%, compared to 5.2% at 30 September 2010.

In May, we finalised a £560 million 5-year unsecured revolving bank facility. The margin is 125bps. In addition, we have closed and drawn funds on a $480 million US private placement bond issue with maturities ranging from 7 to 15 years, an average life of 11 years. The financing, which was drawn on 1 September, was swapped from US Dollars at a fixed rate to £300 million at a floating rate of 146 basis points over LIBOR.

In September, Hercules Unit Trust (HUT), the specialist retail warehouse fund advised by British Land and in which it has a 38.6% interest, signed a new £350 million five year loan facility. The facility is split into a £250 million term loan, and a £100 million revolving loan to provide flexibility for the Fund in respect of acquisitions, disposals and further general business purposes.

During the last 12 months, British Land has completed £860 million of group unsecured loans and a further £595 million has been arranged for British Land related joint ventures and funds. The Group currently retains £2.5 billion of available committed banking facilities of which £1.5 billion have a maturity of more than 2.5 years, as well as £311 million of cash, short-term deposits and liquid investments. With scale, quality assets and income longevity from strong occupier covenants, we are able to achieve attractive financing opportunities.

Financing statistics	Group	Prop Consol
IFRS Net debt	£2,207m	£4,838m
Weighted average debt maturity	10.0 yrs	9.8 yrs
Weighted average interest rate	4.3%	4.7%
% of debt at fixed/capped rates	74%	89%
Interest cover¹	3.3 times	2.2 times
Loan to value²	28%	45%

¹underlying profit before interest and tax / net interest

² principal value of gross debt less cash, short term deposits and liquid investments to property and investments

Cash Flow

Net cash inflow from operating activities for the six months was £96 million including receipts from joint ventures and funds of £35 million.

Investing activity absorbed a net £454 million, of which £362 million was spent on purchases and £49 million on development expenditure. Acquisitions in the period included the purchase of Grenfell Island, Maidenhead for £74m, the Virgin Active portfolio for £179 million, Wardrobe Court for £57 million, Marble Arch House for £18 million and Luton Powercourt for £11 million.

Dividends

The second quarter dividend of 6.5 pence per share, totalling £58 million, is payable on 17 February 2012 to shareholders on the register at close of business on 13 January 2012.

The Board will announce the availability of the Scrip Alternative via the Regulatory News Service and on the group's website (www.britishland.com), no later than 48 hours before the ex-dividend date of 11 January 2012. The Board expects to announce the split between PID and non-PID income at that time.

In respect of the 2012 first quarter dividend of 6.5 pence per share, totalling £58 million, no scrip alternative was offered in lieu of cash. The dividend was paid on 11 November 2011.

In respect of the 2011 fourth quarter dividend of 6.5 pence per share, totalling £58 million, 19% of shareholders elected for the scrip alternative in lieu of £10 million in cash dividends. The remaining cash element of £48 million was paid on 12 August 2011.

Principal Risks and Uncertainties for the remaining six months of the financial year

The Annual Report published in May 2011 set out the principal risks facing the Group. The background since then has been one of slowing economic growth and renewed concern about the Eurozone leading to increased uncertainty. The Outlook statement in the Chief Executive's review describes how the company is defensively positioned in the near term.

Further details on the 2011 principal risks are set out on pages 102 to 105 of the Annual Report where the risks are categorised under Performance (strategy, development, cost of finance, investor demand and office and retail occupier markets), Operational (financing availability and credit risk) and Legal and other (people, health & safety and political).

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 ("Interim Financial Reporting");

(b) the adoption of a going concern basis for the preparation of the financial statements continues to be appropriate based on the current and forecast financial position of the Group; and

(c) the interim management report includes a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority ("FSA").

By order of the Board, Lucinda Bell, Finance Director

SUPPLEMENTARY TABLES (Data includes Group's share of Joint Ventures and Funds)

Portfolio Yield Profile

Excluding developments	EPRA net initial yield %¹	EPRA topped up net initial yield %^1,2	Overall topped-up net initial yield %^1,3	Net reversionary yield %¹	Net equivalent yield %¹
Retail:
Retail warehouses	5.4%	5.6%	5.7%	5.7%	5.7%
Superstores	5.0%	5.0%	5.1%	5.0%	5.0%
Shopping centres	5.5%	5.8%	5.8%	5.9%	5.8%
Department stores	5.8%	5.8%	8.9%	4.6%	6.5%
UK Retail	5.4%	5.5%	5.8%	5.5%	5.7%
Europe Retail	6.7%	6.7%	6.7%	7.3%	7.8%
All Retail	5.4%	5.6%	5.8%	5.6%	5.7%
Offices:
City	4.6%	6.2%	6.3%	6.0%	5.7%
West End	3.7%	5.5%	5.8%	5.9%	5.6%
Provincial	7.1%	7.1%	7.1%	5.8%	6.4%
Offices	4.4%	6.0%	6.1%	6.0%	5.7%
Other	7.6%	7.6%	9.7%	6.4%	8.5%
Total	5.2%	5.8%	6.1%	5.7%	5.8%

¹ including notional purchaser's costs

²including rent contracted from expiry of rent free periods and fixed uplifts not in lieu of growth

³ Including fixed/minimum uplifts (excluded from EPRA definition)

Annualised Gross Rental Income and Annualised Rent

At 30 September 2011	Annualised gross rental income (accounting basis) £m¹			Annualised rent (cash flow basis) £m²			ERV
Excluding developments	Group	JVs & Funds	Total	Group	JVs & Funds	Total	Total
Retail:
Retail warehouses	107	42	149	109	44	153	159
Superstores	8	64	72	8	64	72	72
Shopping centres	34	60	94	34	58	92	98
Department stores	33	-	33	28	-	28	22
UK Retail	182	166	348	179	166	345	351
Europe Retail	-	18	18	-	18	18	21
All Retail	182	184	366	179	184	363	372
Offices:
City	25	81	106	5	83	88	114
West End	56	-	56	40	-	40	64
Provincial	6	-	6	6	-	6	5
Offices	87	81	168	51	83	134	183
Other	36	-	36	31	-	31	27
Total	305	265	570	261	267	528	582

¹ gross rental income will differ from annualised rents due to accounting adjustments for fixed & minimum contracted rental uplifts and lease incentives

² 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

Average Rent, Lease Lengths and Occupancy Rate

Excluding developments	Average rent		Average lease length		Occupancy rate
Excluding developments	Contracted £psf	ERV £psf	To expiry yrs	To first break, yrs	Occupancy%	Occupancy (overall) %¹
Retail:
Retail warehouses	23	23	11.0	10.1	97.7	98.2
Superstores	21	21	16.3	16.3	100.0	100.0
Shopping centres	28	29	10.4	9.6	96.0	96.8
Department stores	12	9	29.1	25.6	99.7	99.7
UK Retail	22	22	13.4	12.5	97.8	98.3
Europe Retail	9	10	11.7	5.2	89.1	89.1
All Retail	21	21	13.3	12.1	97.4	97.8
Offices:
City	46	44	11.3	9.3	96.9	97.0
West End	42	44	11.1	8.7	98.5	98.7
Provincial	21	17	11.2	11.0	100.0	100.0
Offices	43	42	11.3	9.2	97.6	97.7
Other	11	10	23.1	22.6	99.1	99.1
Total	23	23	13.1	11.7	97.5	97.8

¹ including accommodation under offer or subject to asset management

Rent Subject to Lease Break or Expiry

12 months to 30 September	2012	2013	2014	2015	2016	2012-14	2012-16
Excluding developments	£m	£m	£m	£m	£m	£m	£m
Retail:
Retail warehouses	3	5	3	9	7	11	27
Superstores	-	-	-	-	-	-	-
Shopping centres	5	5	5	5	7	15	27
Department stores	1	-	-	-	-	1	1
UK Retail	9	10	8	14	14	27	55
Europe Retail	2	3	2	2	2	7	11
All Retail	11	13	10	16	16	34	66
Offices:
City¹	1	3	0	0	19	4	23
West End	2	2	1	4	1	5	10
Provincial	-	-	-	-	-	-	-
Offices	3	5	1	4	20	9	33
Other	1	1	-	-	-	2	2
Total¹	15	19	11	20	36	45	101
% of contracted rent	2.4%	3.0%	1.9%	3.3%	5.8%	7.3%	16.4%

¹ Pro forma for 755,000 sq ft of extensions on existing UBS leases by an average of at least 18 months as part of 5 Broadgate pre-let.

Rent Subject to Open Market Rent Review

12 months to 30 September	2012	2013	2014	2015	2016	2012-14	2012-16
Excluding developments	£m	£m	£m	£m	£m	£m	£m
Retail:
Retail warehouses	19	28	22	18	26	69	113
Superstores	4	3	10	25	13	17	55
Shopping centres	16	9	11	17	12	36	65
Department stores	-	-	-	-	5	-	5
UK Retail	39	40	43	60	56	122	238
Europe Retail	-	-	-	-	-
All Retail	39	40	43	60	56	122	238
Offices:
City	19	7	37	24	12	63	99
West End	12	4	1	13	4	17	34
Provincial	-	-	-	1	5	-	6
Offices	31	11	38	38	21	80	139
Other	-	-	-	1	1	-	2
Total	70	51	81	99	78	202	379
Potential uplift at current ERV	2	2	2	5	1	6	12

Top 10 Properties by British Land Share of value

Excluding developments	Sq ft	BL Share	Rent	Occupancy	Lease length
	'000	%	£m pa¹	rate %²	yrs³
Broadgate	4,436	50	174	97.3	7.7
Meadowhall Shopping Centre	1,376	50	83	98.0	10.1
Regent's Place	1,210	100	52	98.3	9.3
Ropemaker Place	594	100	27	100.0	15.0
Teesside Shopping Park	460	100	14	100.0	9.1
Drake Circus Shopping Centre	560	100	15	96.6	7.9
Debenhams, Oxford Street	367	100	16	100.0	27.5
York House, Seymour Street	132	100	5	100.0	6.2
Glasgow Fort	393	39	16	98.3	7.4
St Stephen's Shopping Centre	410	100	8	98.8	8.9

¹ annualised contracted rent including 100% of Joint Ventures & Funds

² includes accommodation under offer or subject to asset management

³ to first break

Committed Developments

At 30 September 2011	BL Share	Sq ft '000	PC (calendar year)	Current Value £m	Cost to complete £m	Notional interest¹ £m	ERV² £m	Pre-let £m	Resi end value³ £m
Offices:
5 Broadgate, EC2	50%	700	Q4 2014	100	154	28	19.1	19.1	-
The Leadenhall Building, EC3⁴	50%	610	Q2 2014	65	151	21	18.6	5.6	-
NEQ, Regent's Place, NW1⁵	100%	500	Q2 2013	151	175	17	19.0	7.7	110
10 Portman Square, W1⁶	100%	158	Q2 2013	72	53	6	8.2	-	17
199 Bishopsgate, EC2	50%	142	Q4 2012	28	16	2	3.5	-	-
Marble Arch House, W1⁷	100%	86	Q4 2013	21	34	5	3.9	-	11
Total Offices		2,196		437	583	79	72.3	32.4	138

Retail:
Puerto Venecia, Zaragoza	50%	1,360	2012	40	55	9	8.3	3.2	-
Four superstore extensions	50%	73	2012	-	10	-	0.6	0.6	-
Total Retail		1,433		40	65	9	8.9	3.8	-
Total Committed		3,629		477	648	88	81.2	36.2	138

Data includes Group's share of properties in Joint Ventures & Funds (except area which is shown at 100%)

¹ from 1 October 2011 to Practical Completion (PC) based on a notional cost of finance of 6%

²estimated headline rental value net of rent payable under head leases (excluding tenant incentives)

³parts of residential development expected to be sold, no rent allocated - of which £94 million exchanged

⁴191,000 sq ft pre-let to Aon signed with an option to take a further 85,000 sq ft

⁵includes 120,000 sq ft of residential

⁶includes 25,000 sq ft of off-site residential and retail (95-99 Baker Street)

⁷includes 10,000 sq ft of residential

Prospective Developments

At 30 September 2011	BL Share	Sq ft '000
Offices:
39 Victoria Street, SW1	100%	90	Planning submitted
6-9 Eldon Street, EC2	100%	33	Pre submission
Colmore Row, Birmingham	100%	280	Detailed planning consent
Meadowhall Metropolitan¹, Sheffield	100%	2,200	Outline planning consent
New Century Park², Coventry	50%	1,000	Outline planning consent - mixed use
Total Offices		3,603

Retail:
Whiteley Village, Fareham	50%	302	Detailed planning consent
Glasgow Fort Shopping Park	39%	175	Detailed planning consent
Glasgow Fort Shopping Park (leisure)	39%	48	Detailed planning consent
Fort Kinnaird, Edinburgh	19%	223	Detailed planning consent
Surrey Quays Shopping Centre	50%	103	Planning pending
Deepdale Retail Park, Preston	19%	76	Planning pending
Broughton Park, Chester	39%	58	Planning pending
Power Court Luton	100%	200	Planning pending
Superstore extensions	50%	103	Planning pending
Kingston Centre, Milton Keynes	50%	21	Detailed planning consent
Total Retail		1,309
Total Prospective		4,912

¹development under option to joint venture with LSP Green Park Property Trust

²contracts exchanged for sale of 27 acres with residential consent

Occupiers Representing Over 0.5% of Rent

At 30 September 2011	% of total rent		% of total rent
Tesco	7.4	Reed Smith		0.9
Sainsbury's	6.3	Argos		0.8
Debenhams	4.3	Gazprom		0.8
UBS	3.8	Deutsche Bank		0.8
Virgin Active	2.6	Mayer Brown		0.8
Homebase	2.3	Cable & Wireless		0.8
Kingfisher (B&Q)	2.3	KESA (Comet)		0.8
HM Government	2.2	Mothercare		0.8
Next (inc. Next at Home)	2.0	British Home Stores		0.7
Spirit Pub Company	1.7	ICAP		0.7
Bank of Tokyo-Mitsubishi UFJ	1.7	Lend Lease		0.7
Macquarie Group	1.6	SportsDirect		0.7
Herbert Smith	1.5	Burton/Dorothy Perkins/Wallis/Evans		0.7
Alliance Boots	1.4	Credit Lyonnais		0.6
RBS	1.3	Pets at Home		0.6
Asda (inc. Asda Living)	1.2	H&M		0.6
Hutchison 3G	1.2	JD Sports (inc. Bank Fashion)		0.6
Currys	1.1	Henderson Global Investors		0.6
Marks & Spencer	1.1	Carpetright		0.6
House of Fraser	1.1	Carlson		0.5
New Look	0.9	Atos		0.5
TK Maxx	0.9	Markit Group		0.5
Aegis Group	0.9
JP Morgan	0.9

GLOSSARY

ABOUT REITS

The Government established the REIT status in the UK in 2007 to remove tax inequalities between different real estate investors and with the aim of improving overall investor access to real estate. Real Estate Investment Trusts (REIT) are companies which are exempt from corporate taxation on profits from property rental income and capital gains on the sale of investment properties.

REITs must distribute 90% of UK rental income in the form of property income dividends (PIDs). The consequence of this is to make the tax implications of investing in REITs similar to that of investing directly in property. REITs are also required to meet certain conditions including the proportion of total profits and assets accounted for by their property rental businesses. They remain liable to corporation tax on non-property investment businesses e.g. management fees and interest receivable.

The UK has had a tax exempt real estate regime since 1 January 2007. A number of other countries, notably the US, Australia and France also have tax exempt REIT regimes. British Land has been a REIT since 1 January 2007.

The government is looking to encourage the growth of the REIT sector. The 2011 budget proposals are looking to relax qualifying conditions to encourage new entrants, including the abolition of the entry charge.

Property Income Distributions (PIDs)

Profits distributed as PIDs 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 not subject to withholding tax.

RENTS

Headline rent is the contracted gross rent receivable which becomes payable after all the tenant incentives in the letting have expired.

Net effective rent is the contracted gross rent receivable taking into account any rent free period or other tenant incentive. The incentives are treated as a cost to rent and spread over the lease to the earliest termination date.

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.

Under rented is the term used to describe when the contracted rent is below the estimated rental value (ERV), implying a positive reversion (see below). Over rented is the inverse of this.

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.

LEASES AND LETTINGS

Lettings and Lease Renewals are divided between short-term (less than two years lease length) and long-term (over 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.

Rent reviews are compared to the previous passing rent.

Tenant (or lease) incentives are any incentives offered to occupiers to enter into a lease. Typically the incentive will be an initial rent-free period, or a cash contribution to fit-out. Under accounting rules the value of lease incentives given to tenants is amortised through the income statement on a straight-line basis to the earliest lease termination date.

Turnover rents is where all or a portion of the rent is linked to the sales or turnover of the occupier.

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.

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.

RENTAL INCOME

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.

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.

Annualised rent is the gross rent receivable on a cash basis as at the reporting date. Additionally where rent reviews are outstanding, any increases to applicable estimated rental value (as determined by the Group's external valuers), less any ground rents payable under head leases.

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.

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 to the period subject to measurement.

Like-for-like rental income growth is the growth in gross 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, properties with guaranteed rent reviews, asset management determinations and surrender premiums.

Passing rent is the gross rent, less any ground rent payable under head leases.

PROPERTY YIELDS

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 (after notional purchaser's costs), excluding development properties.

EPRA Topped-Up Net Initial Yield is the annualised rents generated by the portfolio, after the deduction of an estimate of annual recurring irrecoverable property outgoings, plus rent contracted from expiry of rent free periods and uplifts agreed at the balance sheet date which are not intended to compensate for future inflation, expressed as a percentage of the portfolio valuation (after notional purchaser's costs), excluding development properties.

Overall Topped-up Net Initial Yield is the EPRA Topped-Up Net Initial Yield adding guaranteed fixed uplifts to the annualised rents.

Net Equivalent yield is the weighted average income return (after deducting 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. The British Land definition excludes Europe, where leases are linked to annual indexation.

Net Reversionary yield is the anticipated yield, which the initial yield will rise to once the rent reaches the estimated rental value.

Yield shift is a movement (usually expressed in basis points) 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.

LEASE LENGTH AND OCCUPANCY

Occupancy rate is the estimated rental value of let units expressed 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).

Total occupancy rate is the occupancy rate excluding accommodation under offer or subject to asset management.

Weighted average 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 short-term lettings, residential leases and properties allocated as developments.

Virtual freehold represents a long leasehold tenure for a period up to 999 years. A 'peppercorn', or nominal, rental is paid annually.

PLANNING

The 1947 Town and Country Planning Act requires all proposals, with a few exclusions, to secure planning permission from the local authority. The requirement to obtain planning permission extends not only to new construction, but also to substantive changes of use of a property. There are various 'use classes'. Change of use to a different use class generally requires Planning consent.

Planning consent gives consent for a development, and covers matters such as use and design. Full details of the development scheme must be provided in an application for full planning consent, including detailed design, external appearance and landscaping before a project can proceed. Outline planning consent establishes the broad outline of the scheme and is subject to the later approval of the details of the design.

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, an Open A1 consent grants planning for any type of retail, while Restricted A1 consent places limits on the types of retail that can operate from the site (this is typically a restriction that only bulky goods operators are allowed to trade at that site).

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
A2	Financial and professional services	Financial services; professional services professional services (other than health or medical); or other services (including betting) appropriate for a shopping area
A3	Restaurants and cafés	Sale of food/drink (i.e. restaurants)
A4	Drinking establishments	Pub, wine bar or other drinking establishment
A5	Hot food takeaways	Sale of hot food for consumption off premises

PROPERTY VALUATION

Property valuation In accordance with usual practice, the Group's external valuers report valuations net, after the deduction of the prospective purchaser's costs, including stamp duty land tax, agent and legal fees.

Market value in relation to property assets is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion (as determined by the Group's external valuers). In accordance with usual practice, the Group's external valuers report valuations net, after the deduction of the prospective purchaser's costs, including stamp duty land tax, agent and legal fees.

Portfolio valuation uplift is the increase in value of the portfolio (after taking account of capital expenditure and capitalised interest) of properties held at the balance sheet date and sales during the period.

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.

DEVELOPMENT

Development construction cost is the total cost of construction of a project to completion, excluding site values and finance costs.

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). It is based on the valuers view on ERVs, yields, letting voids and rent frees.

The residual site value of a development is calculated as the net development value, less a developer's profit margin, development construction costs to complete, finance costs (assumed at a notional rate) of a project to fully let and notional site acquisition costs. The residual is then determined to be the current site value.

Developer's profit is the profit on cost assumed by the valuers to be required to start a project. The developers profit is typically calculated by the valuers to be a percentage of the estimated total development costs.

EPRA DEFINITIONS

EPRAis the European Public Real Estate Association, the industry body for European REITs.

EPRA earnings is the profit after taxation excluding investment property revaluations and gains/losses on disposals, intangible asset movements and their related taxation.

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, deferred taxation on revaluations and diluting for the effect of those shares potentially issuable under employee share schemes.

EPRA NAV per share is EPRA NAV divided by the diluted number of shares at the period end.

EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of debt and derivatives and to include deferred taxation on revaluations.

EPRA vacancy rate is the estimated market rent of value (ERV) of vacant space divided by ERV of the whole portfolio, excluding developments. This is the inverse of the total occupancy rate.

FINANCIAL

Underlying profit before tax (Underlying PBT) is the pre-tax EPRA earnings measure with additional company adjustments, including realisation of cash flow hedges and non-recurring items.

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.

Loan to Value (LTV) is the ratio of the principal value of gross debt less cash, short-term deposits and liquid investments to the aggregate value of properties and investments.

IFRS are the International Financial Reporting Standards as adopted by the European Union. IFRS profits before tax (IFRS PBT) are as defined by the International Financial Reporting Standards.

Interest cover is the number of times net interest payable is covered by underlying profit before net interest payable and taxation.

Mark-to-market is the difference between the book value of an asset or liability and its market value.

REIT 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.

REIT income return is underlying profit before tax (as defined above) after deduction of attributable underlying tax.

REIT capital return is REIT total return less REIT income return (as defined above).

Net operating costs are property operating expenses and administrative expenses net of fees and other income.

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.

Total shareholder return is the growth in value of a shareholding over a specified period, assuming that dividends are reinvested to purchase additional units of stock.

OTHER

CACI Ltd is a wholly owned subsidiary of Consolidated Analysis Center Incorporated (CACI) providing marketing solutions and informational systems to local and central government and to business from most industry sectors (including retail).

Group is The British Land Company PLC and its subsidiaries and excludes its share of joint ventures and funds on a line-by-line basis (i.e. not proportionally consolidated).

IPD is Investment Property Databank Ltd which produces an independent benchmark of property returns.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR DXBDBXUBBGBS

Companies

British Land Company (BLND)

Monday, 20th May 2024

COMPANIES COVERED:

KWS BLND KNOS

Keywords Studios surges as another London-listed tech firm looks set to be bought out by private equity, Kainos posts 14th consecutive year of growth and British Land sells down its remaining stake in Sheffield’s Meadowhall mall.

Full Archive

UK 100

Latest directors dealings

2 minutes ago Restore
6 minutes ago Tesco
6 minutes ago Keller Group
17 minutes ago Petra Diamonds Ltd.(DI)
2 hours ago BT Group

All directors dealings today