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British Land at a Glance
British Land is a property investment company registered in London and
listed on the London Stock Exchange, investing in prime, modern properties.
The portfolio is valued at £9.6 billion: the majority is directly
owned and managed; the balance is held in joint ventures and partnerships,
of which British Land’s share is valued at £1.4 billion.
Our investment approach is to concentrate on the fundamentals of individual
assets. A key criterion is a property’s enduring attraction to occupiers,
because of its business suitability, location and efficiency.
The portfolio continues to focus on areas where the principles of supply
and demand over the long term are strong. Some 38% is invested in out
of town retail properties, including Meadowhall Shopping Centre (one of
only six regional centres in the UK), 93 supermarkets and 69 retail warehouses.
A further 44% is invested in Central London offices, including Broadgate,
the premier City office estate.
British Land continually and rigorously reviews assets for long term performance
potential. Over the last five years £2.5 billion of property has
been sold: on average around £500 million each year.
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The principal revenue source is rental income with current annualised
net rents of £546 million.
The rental income is predominantly contracted on 25 year leases with rent
reviews every five years to the higher of the passing rent or the prevailing
open market rent. The weighted average unexpired lease term, assuming
breaks are exercised at the earliest date, is 16 years.
The portfolio has significant further income growth potential from both
investment properties where current rents are below market levels and
new rents from committed developments. These currently aggregate a further
£101 million pa, of which £41 million is already contracted.
Prospective development projects could provide an additional income of
£104 million, if developed and let. These are ready to be progressed
when pre-lets are agreed or when market conditions are right.
Our high quality properties, balanced portfolio and long lease profile
have secured IPD upper quartile performance with total compound property
returns of 12.7% per annum over the last 10 years.
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The graph provides a snapshot of committed income and estimated
income based on ERV at 31 March 2003, including our share of joint
ventures. Upward only rent reviews across the portfolio protect
rental income from falling below passing rent (prior to expiry/break).
In addition, no account is taken of future acquisitions, disposals,
expenditures or other events. Rental income will be affected by
such transactions and future opportunities; the graph is not a forecast.
Annualised net rents are gross rents plus, where rent reviews are
outstanding, any increases to estimated rental value (as determined
by the Group’s external valuers), less any ground rents payable
under head leases.
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British Land has an efficient capital structure with optimal gearing
to enhance returns on equity. The cost of capital is minimised as debt
finance is cheaper than equity and is tax deductible.
The ratio of debt to assets is maintained at or around 50%, while maintaining
a strong financial position in terms of recurring interest cover and available
liquidity.
The Group’s financing is risk averse with a long average debt maturity,
18 years, low average cost of debt, 6.31%, and with some 64% of debt ringfenced
with no recourse for repayment to other Group companies or assets. Over
the medium term, approximately 85% of debt is protected against upward
movements in interest rates.
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| Total Return |
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| Over |
1yr |
2yrs |
3yrs |
4yrs |
5yrs |
6yrs |
7yrs |
8yrs |
9yrs |
10yrs |
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| Compound Total Return pa |
8.8% |
7.0% |
9.6% |
9.8% |
9.2% |
11.7% |
12.0% |
10.8% |
9.8% |
12.8%
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Net Rental Income
Total net rental income rose by 7.6% (£36.4 million) to £513.3
million (2002: £476.9 million), mainly as a result of increased
rents achieved from rent reviews and new lettings.
Underlying Profit before Tax
Profit before tax, excluding gains from asset disposals of £26.7
million, was £145.7 million (2002: £127.5 million).
This was 14.3% higher than last year, driven by the increase in
net rental income, while interest costs grew by only 2.7%.
Total Return
The total return on adjusted diluted net assets per share was 8.8%
for the year. Over the last ten years, British Land has produced
a compound total return of 12.8% per annum.
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Net Asset Value per Share
Adjusted diluted net asset value per share rose since 31 March 2002
by 7.1% (57 pence) from 803 pence to 860 pence.
The key drivers of this increase are the revaluation surplus, which
contributed 10 pence (like-for-like valuation up 0.7%), retained
earnings 14 pence and share repurchases 34 pence (including redemption
of Convertible Bonds).
Dividends per Share
In line with our continuing policy of progressive dividend growth,
the dividend per share is 13.4 pence (2002: 12.4 pence), an increase
of 8.1% over 2002.
The dividend payment of £65.9 million is covered 2.1 times
by the profits for the year.
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