news release2016/11/16 · income statement h1 2015/16 h1 2016/17 change underlying profit 1 £171m...

News Release

The British Land Company PLC Half Year Results 16 November 2016

Chris Grigg, Chief Executive said: “We’ve delivered a good set of results with a significant increase in

underlying profits reflecting our actions and continued leasing momentum. We’re mindful of future uncertainty but are confident that our secure income streams and strong finances will ensure our business remains resilient. As occupiers become more discerning we expect our high quality portfolio to benefit from increasing polarisation. The evolving environment will be reflected in our tactical decisions, particularly on development where we expect to proceed more cautiously. We have modest speculative development commitments currently, even following our decision to redevelop 100 Liverpool Street. This is a great example of the opportunities within our portfolio which provide a source of future value.” Good results for the half year driven by our actions

• Underlying PBT +16.4% to £199 million driven by like-for-like income growth of 3.4% and reductions in finance and operating costs; IFRS PBT of £(205) million (H1 2016: £823 million)

• EPRA NAV reduced by 3.0% to 891p; IFRS Net Assets at £9.2 billion (March 2016: £9.6 billion) • Quarterly dividend of 7.3 pence bringing the half year dividend to 14.6 pence (+3.0%) • Total accounting return of -1.5% (H1 2016: +9.1%) Active management and quality portfolio attracting high volume of leasing, maintaining secure income

• 769,000 sq ft of lettings and renewals across the portfolio on average 11.6% ahead of ERV; 60% after the referendum

• Portfolio 98% let with average lease length of 9 years and high quality, diverse occupier base • 68,000 sq ft Office leasing 4.9% ahead of ERV adding £2.7 million rent in virtually fully let portfolio • £2.8 million of rent added through Office rent reviews; 18.7% ahead of previous rents • 656,000 sq ft Retail leasing 12.9% ahead of ERV adding £6.5 million rent, increasing multi-let ERVs +1.3% • Over 300,000 sq ft under offer across the portfolio; in discussions with occupiers from a range of sectors

on Office developments across all three campuses • Continuing outperformance in footfall (+0.1%, 240 bps ahead of benchmark) and retailer sales (-0.2%, 190

bps ahead of the benchmark)

Modest overall reduction in valuation, including larger falls on assets with short term expiries

• Portfolio valuation -2.8%; standing investments -2.8%; developments -3.0% • Office and Residential valuation -3.3%; 21 bps yield expansion; ERVs flat +0.1% (+0.5% like-for-like basis) • Retail and Leisure valuations -2.4%, 18 bps yield expansion; ERV growth +0.9%

Asset disposals ahead of valuation to progress strategy

• £690 million of non-core Retail asset disposals exchanged 3.6% ahead of March 2016 values, including £659 million post referendum; increases multi-let share of Retail portfolio to 76% (March 2016: 71%)

Committed to mixed-use redevelopment at 100 Liverpool Street doubling retail at Broadgate

• Committed to commence 520,000 sq ft redevelopment of 100 Liverpool Street in December; expect to more than double income, including from additional 90,000 sq ft of retail and F&B; £164 million development expenditure (BL share), completing 2019 to benefit from arrival of Crossrail; flexible accommodation designed to attract a diverse range of occupiers

• Speculative development commitment remains modest at 5%; will proceed more cautiously on other opportunities, requiring pre-lets prior to commitment or pursuing lighter touch refurbishment on key expiries

Strong financial position with further reductions in finance costs

• Proportionally consolidated LTV down 50bps at 31.6% (March 2016: 32.1%); weighted average interest rate of 3.2% (March 2016: 3.3%)

• Based on current commitments, the Group has no requirement to refinance until 2020

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British Land, York House, 45 Seymour Street, London W1H 7LX +44 (0)20 7486 4466 britishland.com Registered Office at business address Reg No. 621920 England

Income statement H1 2015/16 H1 2016/17 Change

Underlying profit1 £171m £199m +16.4%

IFRS profit/(loss) before tax £823m £(205)m

Diluted underlying earnings per share1,2 16.0p 19.3p +20.6%

IFRS basic earnings per share 79.8p (19.0)p

Dividend per share 14.18p 14.60p +3.0%

Total accounting return1 +9.1% -1.5%

Balance sheet YE 2015/16 H1 2016/17

Portfolio at valuation (proportionately consolidated)

£14,648m £13,919m -2.8%3

EPRA Net Asset Value per share1 919p 891p -3.0%

IFRS net assets £9,619m £9,181m

Loan to value ratio (proportionately consolidated) 32.1% 31.6% 1

See Glossary on pages 70 to 76 for definition 2

See Note 2 to the condensed set of financial statements 3 Valuation movement during the period (after taking account of capex) of properties held at the balance sheet date,

including developments (classified by end use), purchases and sales

Investor Conference Call

A presentation of the results will take place at 9.30am today, 16 November 2016, 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: 0808 109 0700 Passcode: British Land A dial in replay will be available later in the day and will be available for 7 days. The details are as follows: Replay number: 0208 196 1998 Passcode: 7368680# For Information Contact

Investor Relations

Jonathan Rae, British Land 020 7467 2938

Media

Pip Wood, British Land 020 7467 2838 Gordon Simpson, Finsbury 020 7251 3801 Guy Lamming, Finsbury 020 7251 3801

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http://www.britishland.com/


Forward-looking statements

This Press Release 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’, ‘outlook’, ‘schedule’, ‘target’, ‘aim’, ‘may’, ‘likely to’, ‘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. Forward-looking statements should be regarded with caution as actual results may differ materially from those expressed in or implied by such statements. 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) the consequences of the referendum on Britain leaving the EU, (c) industry and market trends (including demand in the property investment market and property price volatility), (d) competition, (e) the behaviour of other market participants, (f) 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), (g) inflation and consumer confidence, (h) labour relations and work stoppages, (i) natural disasters and adverse weather conditions, (j) terrorism and acts of war, (k) British Land’s overall business strategy, risk

appetite and investment choices in its portfolio management, (l) legal or other proceedings against or affecting British Land, (m) reliable and secure IT infrastructure, (n) changes in occupier demand and tenant default, (o) changes in financial and equity markets including interest and exchange rate fluctuations, (p) changes in accounting practices and the interpretation of accounting standards and (q) the availability and cost of finance. The Company’s principal risks are described in greater detail in the section of this Press Release headed Risk Management and Principal Risks. Forward-looking statements in this Press Release, or the British Land website or made subsequently, which are attributable to British Land or persons acting on its behalf should therefore be construed in light of all such factors. Information contained in this Press Release 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, and nothing in this Press Release should be construed as a profit forecast. 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, Disclosure Rules, Transparency Rules and the Market Abuse Regulations), 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. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of British Land since the date of this document or that the information contained herein is correct as at any time subsequent to this date. Presentation of financial information

The Group financial statements are prepared under IFRS where the Group’s interests in joint ventures and funds are shown as a single line item on the income statement and balance sheet and all subsidiaries are consolidated at 100%.

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Management considers the business principally on a proportionally consolidated basis when setting the strategy, determining annual priorities, making investment and financing decisions and reviewing performance. This includes the Group’s share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group’s subsidiaries. The financial key performance indicators are also presented on this basis. Refer to the Financial Review for a discussion of the IFRS results.

Notes to Editors:

About British Land We are one of Europe's largest publicly listed real estate companies. We own, manage, develop and finance a portfolio of high quality UK commercial property, focused on Retail and London Offices and Residential. We own or manage total assets of £19.0 billion (British Land share is £13.9 billion) as valued at 30 September 2016. Our properties are home to over 1,200 different organisations ranging from international brands to local start-ups. Our strategy is to create Places People Prefer. It is based on long term trends and creates a portfolio suited to current and future needs which are aligned to modern lifestyles. We employ our placemaking skills, and increasingly our mixed-use expertise to expand the appeal to a broader range of occupiers and drive long term performance. Retail accounts for 49% of our portfolio. We create outstanding places for modern consumer lifestyles, places to shop eat and be entertained. Comprising over 20 million sq ft of Retail and Leisure space across regional and local multi-let destinations, superstores, department stores and leisure assets, the Retail portfolio is modern, flexible and adaptable to a wide range of formats. Office and Residential accounts for 49% of our portfolio. It comprises 7.6 million sq ft of well-connected office-led campuses and ‘campus-lite’ clusters of high quality buildings. Office campuses include Regent's Place and Paddington Central in the West End and Broadgate (50% share) in the City. Other assets include The Leadenhall Building, York House, 10 Portman Square and Marble Arch House and our residential assets are at Clarges Mayfair, The Hempel Collection and Aldgate Place. Two per cent of our portfolio is at Canada Water - a 46 acre redevelopment opportunity in our medium term pipeline to create a new mixed-use urban centre for London. Sustainability is embedded throughout our business. Our places become part of their local communities and promote health, improve productivity and increase enjoyment. We protect asset value and generate income from energy generation and efficiency, materials innovation and flood risk reduction, and develop skills and opportunities to help local people and businesses grow. In April 2016 British Land received the Queen's Award for Enterprise: Sustainable Development, the UK's highest accolade for business success for economic, social and environmental benefits achievements over the last five years. Further details can be found on the British Land website at www.britishland.com

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CHIEF EXECUTIVE’S REVIEW

The UK’s decision to leave the EU marked the start of a prolonged period of uncertainty for the country, for our industry and for our occupiers. Ahead of the referendum, we positioned the business for a range of outcomes with modest development exposure, high occupancy with long leases, and robust finances. These features and our continuing actions mean that the business has proved resilient in the first few months following the referendum, evidenced by our improved underlying profit and the continuing volume of leasing activity. We have a range of tactical levers to address the evolving political and economic uncertainties, but our strategy, which is based on long term trends, remains unchanged. We will continue to create places that are aligned with modern lifestyles and respond to changing consumer behaviour. This means owning and operating places where we can control the broader environment, employing our placemaking skills and exploiting our mixed-use expertise to drive long-term performance. We believe that this differentiates our properties from the wider market, attracting a broader range of occupiers. In this environment, we see quality of space becoming ever more important to occupiers and that our strategy positions our assets to capture a greater share of demand. Our level of activity in the half has been better than expected immediately following the referendum. We are pleased that this, along with the decisions we made in positioning the business, have contributed to a 16.4% increase in underlying profit to £199 million. This reflects like-for-like income growth of 3.4% driven by our asset management and placemaking activities, as well as further reductions in our finance and operating costs. As we announced in the full year results, we are increasing our dividend for the year to March 2017 by 3% to 29.2 pence per share. In line with that, the second quarter dividend at 7.3 pence per share, brings total for the half year to 14.6 pence per share.

Since the referendum, we have seen differing dynamics in our markets with leasing momentum maintained in Retail and signs of more caution amongst occupiers in Offices. Overall, we completed 769,000 sq ft of lettings and renewals across the portfolio on average 11.6% ahead of ERV, resulting in occupancy of 98% and an average lease term of 9 years.

At this time of more cautious occupier demand in the London office market, we have benefited from having only a small amount of space to let. We completed 68,000 sq ft of Office lettings in the half, including the final vacant floors at The Leadenhall Building and Marble Arch House, achieving new rental highs. We have also seen good interest in our recently completed West End Office developments at Clarges Mayfair and Yalding House which are now over a third let or under offer, all ahead of March ERVs. We are also in discussions with a number of occupiers on significant space requirements at development opportunities across all four campuses. These activities demonstrate continued interest in new workspace from occupiers across a range of sectors, attracted to high quality buildings in well-connected London locations and vibrant environments, meeting both the needs of the business and its employees. In addition, we have made good progress on capturing reversion across our campuses following significant rental growth in recent years, particularly at Regent’s Place, where we have achieved a further £2.3 million uplift on rent reviews, 45% ahead of passing rent.

In Retail, the referendum has, as yet, had no discernible impact on occupier demand and letting activity in our portfolio. In total, we let or renewed 656,000 sq ft of space on average 12.9% ahead of ERV. In the multi-let portfolio, we let or renewed 373,000 sq ft, more than in the same period last year, on average 12.2% ahead of ERV. Within this, we were pleased to attract some new occupiers to our line-up that we have been targeting as well as meeting demand for additional space from our long standing retail partners. These successes reflect both our placemaking activity to improve environments and customer experience on the ground, and our enhanced data and marketing capabilities which help us attract new occupiers. In addition, we completed renewals on 8 Homebase leases, totalling 283,000 sq ft where we extended the lease term to 15 years, also increasing rents and providing a significant capital uplift for our single let portfolio.

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It has been a challenging period for some parts of the retail market, with consumer confidence initially dipping and then recovering in the period since the referendum. Reflecting this, footfall and sales were both down for the six months across the wider market, by -2.3% and -2.1% respectively, but our portfolio continued to outperform with footfall marginally up (+0.1%, 240 bps ahead of the market) and sales modestly down (-0.2%, 190 bps ahead of the market). Within reported sales, there has been mixed performance across the sectors with fashion and department stores weaker, partly due to unseasonal weather, and homewares, health and beauty, and food and beverage continuing to perform strongly.

Valuations across the market were broadly flat in the first half of 2016 in an environment of increasing uncertainty, before falling following the referendum. Our portfolio has registered a valuation fall of -2.8% since March, principally due to 19 bps of outward yield shift, partially offset by ERV growth of +0.5%, profits recognised on disposals and the benefit of lease extensions. There was a wide dispersion in asset level performance with valuations on long term, secure income proving resilient, but with much greater falls on assets with near term income expiries. The IPD benchmark fell -2.1% over the period, with the valuation reduction moderated by stronger performance from Industrials, a sector that British Land does not invest in.

This valuation fall translates to a 3.0% reduction in our EPRA net asset value to 891 pence per share. This includes the impact of no longer treating the 1.5% 2012 convertible bond as dilutive as the share price was below the exchange price of 693 pence at the period end. Along with the dividend, this provides a total accounting return of -1.5% for the period.

We were pleased to exchange contracts on £690 million of non-core Retail sales in the half, including the sale of Debenhams on Oxford Street for £400 million, shortly after the referendum and a further £79 million of superstores. These sales were achieved on average 3.6% ahead of March values and have resulted in the multi-let share of our Retail portfolio increasing to 76% from 71% in March. Acquisitions in the period totalled £90 million, of which £64 million was the acquisition of the New George Street Estate in Plymouth adjacent to our existing holding at Drake Circus. Investment in developments and placemaking was £151 million for the period, resulting in net investment proceeds of £469 million. Overall, we have been net sellers of almost £1 billion of assets in the last 18 months. The net divestment in the half has more than offset the impact of the valuation falls meaning that our proportionately consolidated LTV continued to move lower to 31.6% from 32.1% in March. The average financing cost is down 10 bps to 3.2% as a result of our financing activity and our decision to hold a higher proportion of our debt at variable rates. This, along with a £6 million reduction in our administrative costs has made a significant contribution to the increase in underlying profits. As well as being well priced, our financing is robust with average term of 8 years on drawn debt and no requirement for the group to refinance until 2020, even if the 1.5% convertible does not convert. Together with our partners GIC, we have committed to commence development at 100 Liverpool Street in Broadgate. The building has been designed to the highest standards with flexible floorplates to appeal to a wide range of occupier requirements. It is a further major step in transforming Broadgate into a vibrant, mixed-use destination, significantly enhancing the retail and leisure offer. Occupier interest will benefit from the opening of the Liverpool Street Crossrail station, which is immediately adjacent, in 2018, adding to current discussions with potential occupiers. With this commitment, our speculative development commitment remains modest at 5%. We continue to have a range of development opportunities within our portfolio which represent a source of future value. Reflecting the uncertain environment, we will proceed more cautiously on development and are only likely to commit to further major redevelopments with the benefit of pre-lets, as indicated in our last results. We will however take steps to progress our optionality to commit to these development opportunities when we see demand, and have achieved several planning successes in the period. The largest opportunity in our pipeline is at Canada Water where we will create a new mixed-use urban centre for London. We continue to progress the masterplan and have had encouraging discussions with potential occupiers across all possible uses, which is informing our planning application, due to be submitted in 2017.

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We continue to be recognised as a sector leader for sustainable placemaking. During the period, British Land was included in the Carbon Disclosure Project’s A List of the top 9% of global companies tackling climate change. For the third time, we were ranked as a European sector leader in the Global Real Estate Sustainability Benchmark and also scored in the 95th percentile of both the Dow Jones Sustainability and FTSE4Good indices. As a demonstration of sustainable placemaking in practice across our portfolio, we became members of RE100, committed to using 100% electricity from renewable sources. In addition, enhancing the wellbeing of those who shop, live and work in our places has been central to our delivery of the new leisure quarter at Glasgow Fort and public realm upgrades underway at Paddington Central.

We recognise that the outlook in our markets will remain uncertain for some time to come. We have an enduring strategy which is based on long term trends and this positions our high quality portfolio to benefit from increasing polarisation and to attract a broader range of occupiers. Our rental streams are secure, we have robust, low cost finances and we are disciplined in managing our operating expenses. The evolving environment will be reflected in our tactical decisions, particularly on development where we expect to proceed more cautiously. We have modest speculative development commitments currently, but also opportunities within the portfolio which provide a source of future value. These factors give us confidence that the business will prove resilient and is well positioned to capture upside in the future.

Chris Grigg

Chief Executive

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BUSINESS REVIEW

PORTFOLIO OVERVIEW

As at 31 March 2016 30 September 2016

Portfolio valuation £14,648m £13,919m

Occupancy 98.8% 98.1%

Weighted average lease length to first break 9.0 yrs 8.5 yrs

6 months to 31 March 2016 30 September 2016

Total property return 4.1% (0.8%)

- ERV growth 3.0% 0.5%

- Capital return 2.0% (2.8%)

Lettings/renewals vs ERV 9.5% 11.6%

Gross investment activity £337m £951m

- Acquisitions £3m £90m

- Disposals £187m £710m

- Capital investment £147m £151m

On a proportionately consolidated basis

Overview

The UK’s decision to leave the EU has significant consequences which will result in a period of uncertainty for the UK property market. Reactions have been varied. Some occupiers and investors are choosing to pause discretionary actions in the UK property market until the terms of the UK’s exit become clearer and this has

resulted in lower investment volumes across the market, and lower leasing activity in offices. Others are choosing to continue with their plans based on the current requirements of their business and their outlook on the impact of the referendum result. This is particularly the case in Retail where there has not yet been any discernible slowdown in leasing activity. The drivers of performance in our sectors are likely to differ in the coming years. For Retail, performance will be driven by the overall economic performance of the UK and in particular how this translates to real wage growth and consumer spend. In Offices, demand for space in Central London is more likely to be impacted by policy and regulatory changes arising from the UK’s departure from the EU, such as migration controls and passporting. Uncertainty in the occupier market may also be reflected in lower investment volumes, although the continuing gap between property yields and interest rates suggest that UK property will continue to appeal to certain investor groups. Transactional evidence in the period since the referendum has indicated some softening in investor demand for UK property and modest pricing adjustments, reflected in yields for the IPD benchmark moving out 13 bps in the three months to September. This takes the total yield movement since March to 15 bps following a period of stable yields prior to the referendum. There is no discernible variation in yield movement across our sectors but within sectors, transactional evidence suggests that assets with long dated secure income have seen much more resilient valuation than those with shorter term income. ERV growth has moderated across both Retail and Offices but remains positive for now. The combination of these factors has resulted in the first decline in capital values reported by IPD since 2012.

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Portfolio Performance Valuation Uplift (%)

6 months to 30

September 2016

Valuation £m Investment Portfolio Developments Total Portfolio

Retail and Leisure 6,811 (2.3) (10.3) (2.4)

Offices and Residential 6,819 (3.5) (2.3) (3.3)

Canada Water 289 (2.1) - (2.1)

Total 13,919 (2.8) (3.0) (2.8)


Against this backdrop, our portfolio saw a valuation fall of -2.8% in the period vs -2.1% for IPD. The total property return of the portfolio was -0.8%, underperforming the benchmark by 100 bps. The portfolio underperformance primarily reflects British Land’s lack of exposure to Industrial which has been the strongest performing segment in the UK in the period. Annualised outperformance vs IPD over the last five years remains at 160 bps on a capital return basis, and 90 bps on a total property return basis. The capital return on the investment portfolio was -2.8% with the small amount of our portfolio in committed developments and development land falling by -3.0%. On these assets, falls in end values were offset by recognition of development profit as these projects progress towards practical completion. Our Retail disposals, along with valuation movements, mean that our Retail and Leisure, and Offices and Residential portfolios are now equal in value at £6.8 billion, each representing 49% of the portfolio. Canada Water represents the balance of 2%. Within Retail, single-let asset disposals have increased the multi-let share of the portfolio to 76% from 71% in March. Of the multi-let, 42% is Regional and 34% Local. Following £79 million of further sales, the value of standalone superstores is now £681 million. 58% of our Office portfolio is located in the West End, with 42% in the City. Our three campuses at Regent’s Place, Paddington Central and

Broadgate represent 74% of the Office portfolio. Our placemaking approach applies to both our Office campuses and our multi-let Retail assets where the quality of the environment and delivering high quality customer service and memorable experiences to employees and shoppers alike is critical to the success and long term performance of the assets. We are increasingly sharing learnings across the Retail and Office businesses, accelerated by centralising areas of expertise in areas such as development and market insight. We believe that the combination of skills and relationships required to create and operate great places, will come to the fore in our increasingly mixed-use properties – at Broadgate, for example, where we plan to add a significant amount of retail and leisure, and at Canada Water where we are planning a new mixed-use urban centre for London. Investment Activity

6 months to 30

September 2016 Retail Offices Residential Canada Water Total

£m £m £m £m £m

Development Spend 12 70 13 5 100

Capital Spend 47 4 - - 51

Purchases 82 - - 8 90

Sales1

Purchases

(690) - (20) - (710)

Net Investment (549) 74 (7) 13 (469)

Gross Investment 831 74 33 13 951

On a proportionately consolidated basis 1

Of which £191m Retail sales and £9m Residential sales completing post period end

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The gross value of our investment activity since 1 April 2016, as measured by our share of acquisitions, disposals, capital spend on developments and other capital projects, was £951 million. The largest component of this activity was non-core Retail disposals of £690 million which transacted at an average yield of 4.0% and 3.6% ahead of March values. Despite the market uncertainty, £659 million of these sales contracted after the referendum. Residential sales of £20 million were spread across our developments at Aldgate Place and The Hempel and are described further below. Reinvestment was limited over the period with development spend low at £100 million, reflecting the small size of our current committed development programme, plus a further £51 million of capex on the investment portfolio. We have been disciplined in our purchasing activity, focusing only on opportunities with compelling strategic fit and strong income characteristics. In Retail, we made £82 million of acquisitions comprising the £64 million acquisition of the New George Street Estate in Plymouth, adjacent to our existing holding at Drake Circus, and £18 million of further HUT units, taking our ownership interest in HUT to 76.5%. Combined, this activity means that we have been a net seller of almost £1 billion of assets in the last 18 months. Developments

At 30 September 2016 BL Share

Sq ft Current Value

Cost to complete

ERV ERV let

Resi Exchanged

'000 £m £m £m £m £m

Completed in Period 284 135 18 5.9 2.3 -

Under Construction and Committed 838 619 277 28.7 - 286

Near term Pipeline 449 79 76

Medium term Pipeline 8,502

On a proportionately consolidated basis (except area which is shown at 100%)

As we approached the EU referendum, a combination of the phasing of our existing development pipeline and our judgements on the pace at which to progress certain initiatives guided us to a low amount of active development, which we considered appropriate given the uncertainty over the potential range of outcomes. During the half we completed three schemes – Phase 1 of our residential development at Aldgate Place developed in a joint venture with Barratt Homes, the 51,000 sq ft Office component of Clarges Mayfair, and our Leisure Quarter development at Glasgow Fort. Our under construction and committed programme represents a speculative commitment of under £0.7 billion which is 5% of our portfolio value. At 30 September, we had three schemes under construction including our super-prime residential scheme at Clarges Mayfair completing in late 2017, our prime residential development at The Hempel, W1, completing before the end of 2016 and our 147,000 sq ft Office development at 4 Kingdom Street, Paddington Central which will complete in spring 2017. We recently added 100 Liverpool Street at Broadgate to our committed programme. This development opportunity is another major step in our transformation of Broadgate into a vibrant mixed-use destination and we will start works in December once UBS have vacated the building, following their transfer to 5 Broadgate. Following the referendum we undertook a full review of our development and capex pipeline. We will continue to monitor both occupier demand and the impact of new development completions and make choices on the appropriate course of action for each opportunity. On 1 Finsbury Avenue, for example, we are now likely to proceed with a lower cost refurbishment than was originally planned when we receive the building back from

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UBS in December 2016. As a result of this review our near term pipeline now comprises only 1 Finsbury Avenue and our leisure development opportunities at Drake Circus, Plymouth and New Mersey, Speke which are substantially pre-let.

Our medium term pipeline comprises over 8 million sq ft of potential development opportunities, of which 1.9 million sq ft has planning permission secured. These projects are characterised by either being income producing currently, such as Canada Water and Eden Walk, Kingston, or having low carrying values, such as our option over the land at Blossom Street and the Meadowhall Leisure Hall site which currently forms part of our surrounding ownership. The final category of assets in our medium term pipeline is those which are currently income producing but have upcoming expiries. This includes 2-3 Finsbury Avenue and 135 Bishopsgate at Broadgate, and 1 Triton Square at Regent’s Place.

The most significant project in our medium term pipeline is Canada Water, a 46-acre inner-London redevelopment opportunity which we have assembled at a low cost of c.£5 million per acre. Over the last six months we have continued to develop our masterplan for a new mixed-use urban centre for London, engaging with a broad range of stakeholders including the local community, potential occupiers and the London Borough of Southwark to guide our designs. We have been encouraged by the range of interest in the development from potential occupiers and this is informing the mix of uses in our masterplan. We expect to submit a planning application in 2017. In the meantime, the Surrey Quays Shopping Centre and Leisure Park located on the site generate £8 million of annual income and we are also generating income and awareness of the opportunity with a range of events and meanwhile uses at the Printworks component of the site.

These opportunities represent a source of significant future additional value. Our focus now is to progress these opportunities to give ourselves the best range of options when we have decisions to make, by advancing planning and engaging with potential occupiers. These actions require relatively little capital but have the capacity to generate significant value. More details on the portfolio, property performance, individual developments and assets acquired during the

period can be found in the Retail and Leisure and Offices and Residential reviews on pages 12-15 and 16-19

and in the detailed supplementary tables on pages 58-69.

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RETAIL AND LEISURE REVIEW

Performance Highlights


Portfolio valuation (BL share) £7,341m £6,811m

Occupancy 99.0% 98.5%



Total property return 3.2% 0.1%


- Capital return 0.7% (2.4)%



Retail Strategy

Six months ago we set out our vision to create outstanding places for modern consumer lifestyles, places to shop, eat and be entertained. Our research and data tell us today’s consumer requires much more in a retail destination than just the right mix of retailers. They want a variety of food, drink and leisure in environments that promote a pleasurable experience, and events which bring the place to life, as well as, increasingly, a direct link to the communities in which the asset is located. In addition, our occupiers require easily configurable space in accessible locations, which form the core of their internet-enabled omni-channel offer. This is the overall vision for our multi-let assets, but within this, our portfolio meets the needs of a range of shopper journeys. We classify our assets into two broad categories – Regional centres attracting visitors from a wide catchment for planned trips, and Local centres which fit into the daily lives of communities. We know that this mirrors how successful operators set themselves up to achieve a broad reach across the population, profitably maintaining both an engaging brand presence and an efficient distribution network. During the period we conducted our True Value of Stores research with the retail consultancy Verdict, published on our website at www.britishland.com/truevalueofstores, to quantify the role of the physical store in each of today’s internet-enabled shopping channels. The findings, based on feedback from 30,000 consumers, showed that 89% of all retail sales in the UK touch a physical store, confirming the relevance of physical retail in today’s consumer environment and the important part it plays in the great majority of shopper journeys. This includes a 9% ‘boost’ on sales, excluding grocery, from click and collect transactions, and in-store browsing before purchasing online. Our experience and our research informs our view that both Regional and Local products will succeed. In an environment where physical sales continue to decline overall, we expect the polarisation between the best centres and those which may become obsolete to accelerate. Our continuing outperformance against IPD on capital returns and ERV growth give us confidence that our properties will be amongst the winners from this polarisation. As part of our ongoing commitment to ensuring our Retail assets benefit a wide range of stakeholders, we undertook a number of community initiatives over the period. At six regional centres we introduced our Bright Lights skills programme which provides tailored retail and customer service training and work placements with our retail and leisure occupiers. In addition, British Land has continued its partnership with the National Literacy Trust for a fifth year to support its Young Readers Programme. This year’s programme encouraged over 5,000

children under the age of 11 to read for fun in their spare time, through a wide range of activities at British Land Retail assets and in schools.

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http://www.britishland.com/truevalueofstores


We were pleased that our approach and achievements have received industry recognition, being awarded Retail Company of the Year 2016 by Estates Gazette. Market Overview It has been a challenging period for certain retailers, with consumer confidence initially dipping and then recovering in the period since the referendum. Reflecting this, footfall and sales were both down for the six months across the wider market, by -2.3% and -2.1% respectively, but our portfolio continued to outperform with footfall marginally up (0.1%, 240 bps ahead of the market) and sales modestly down (-0.2%, 190 bps ahead of the market). Within reported sales, there has been mixed performance across the sectors with fashion and department stores weaker, partly due to unseasonal weather, and homewares, health and beauty, and food and beverage continuing to perform strongly. Retail occupiers are facing increasing cost pressures, from the National Living Wage, the recent business rates revaluation and from the requirement to establish online platforms and fulfilment networks. Since the referendum, the weakening pound has resulted in an increase in import costs which will also affect many retailers. These pressures mean that retailers are increasingly focusing on their most profitable stores, where they can grow sales with lower occupancy costs. Our stores are often amongst the most profitable in retailers’

portfolios, and our assets remain affordable with a rent to sales ratio of only 10%. Factoring in the findings of our True Value of Stores research, we estimate that this reduces to 9%. The average business rates increase across our portfolio is expected to be just over 2% across the portfolio further supporting the relative affordability of our assets. We also commission research to increase understanding of the vital social and economic role that retail plays. This includes driving regeneration, supporting jobs and providing valuable local amenities and services. Since the referendum, we have continued to see strong demand from occupiers for our space. This reflects the appeal of our assets, their relative affordability, and the limited impact of the referendum on consumer behaviour to date. Looking further forward, we're conscious of the potential for headwinds for consumers and retailers to impact occupier demand. In the investment market, we have seen a continuation of the slowdown observed at the start of the calendar year, reflecting investor caution in this period of elevated uncertainty. Since the referendum, we have seen two dominant themes within the lower volume of transactions – UK funds selling assets to provide liquidity for redemptions, and local councils acquiring space to take advantage of the income yield relative to other investment opportunities. Properties traded have tended to be more secondary in nature and there has been limited evidence of prime retail transactions, particularly in the shopping park sector. The balance of evidence from these transactions, often with motivated sellers, indicates a modest outward movement in yields, which is more pronounced for secondary assets. During September, the UK funds returned to seeing net inflows. Portfolio Performance

Our Retail and Leisure portfolio valuation fell 2.4% over the six months which, along with disposals, resulted in a reduction in value of £0.5 billion to £6.8 billion. Our ERV growth has continued, up 0.9%, reflecting our placemaking improvements and leasing activity. We saw 18 bps outward yield shift on our portfolio, to a NEY of 5.3%. Our capital performance has benefited from our sales activity, with £690 million of disposals contracted on average 3.6% ahead of March values, and lease extensions. Overall this translates to 60 bps capital return outperformance against the benchmark, with ERV growth 40 bps ahead. The capital return on our multi-let portfolio was -3.8%, ahead of the comparative IPD shopping centre and shopping park benchmarks at -3.9% and -4.3% respectively. We achieved greater ERV growth in the multi-let portfolio, at +1.3% spread evenly across Regional and Local. Again, this is significantly ahead of the shopping centre (+0.7%) and shopping park (+0.5%) benchmarks. Evidence since the referendum implies a broad range of impacts on the investment appeal of retail assets based on a range of factors including lot size, income longevity and reversion, with yield movements on Regional assets in the range +7 bps to +41 bps and a range

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of +12 bps to +84 bps on Local. Those which have experienced greater yield shift are generally smaller assets in a market where UK funds have, in particular, been net sellers since the referendum. On the single-let assets, valuation gains in Department Stores include the surplus on the disposal of Debenhams, Oxford Street. The uplift on the Solus assets includes the benefit of the portfolio regear of eight Homebase stores on new 15 year leases at increased rents. The fall in values of superstores reflects ERVs down 3.0%. We’ve continued to sell superstores during the half at terms ahead of March values, and our holding is now only £681 million. Asset Management

The success of our placemaking activity, to create outstanding places for modern consumer lifestyles, is reflected in our leasing activity in the six months. We have been successful in attracting a broader range of operators to our portfolio including occupiers such as Joules, White Stuff, Pret, Comptoir Libanais, Nespresso and T2 which, together with increasing requirements from our long standing retail partners has increased demand tension, pushing ERVs +1.3% higher on our multi-let assets. As yet the referendum has had no discernible impact on occupier demand and letting activity in our portfolio. In total, we let or renewed 656,000 sq ft of space on average 12.9% ahead of ERV. In the multi-let portfolio, we let or renewed 373,000 sq ft, more than the same period last year, on average 12.2% ahead of ERV. In addition, Homebase has signed eight new 15 year leases on a total of 283,000 sq ft within our single let portfolio at increased rents, providing significant incremental capital value there. We have a further 290,000 sq ft of deals under offer which provides encouragement for continuing rental growth in the near term but we remain conscious of headwinds for the consumer and retailers which may impact occupier demand further out. We settled 0.8 million sq ft of rent reviews on average 3.2% ahead of previous rent and ahead of valuation assumptions. On the multi-let portfolio, the average rental increase was 4.7% on 0.4 million sq ft. Like-for-like rental growth was 1.7%, and 1.1% including surrender premia. This was driven by strong leasing activity, asset management activities, such as splitting units, and additional turnover income. The BHS administration had a negative 40 bps impact but we are progressing well with re-letting this space with 80% now let or under offer. Overall, the net impact of this activity has been to maintain our occupancy at 99% and our average lease length now stands at 9 years. Investment Activity

Gross Retail investment activity over the year was £831 million, with total sales of £690 million of which £191 million has exchanged and is scheduled to complete after the period end. Acquisitions totalled £82 million, with development spend and capex of £59 million. Reflecting our focus on multi-let assets, sales were predominantly single-let assets including the £400 million disposal of Debenhams on Oxford Street and £79 million of superstores. In total, Retail disposals were concluded at a yield of 4.0%, and at 3.6% ahead of March values and increased the multi-let share of the Retail portfolio to 76% from 71% in March 2016. Our sole property acquisition was the New George Street Estate in Plymouth. This acquisition supports our strategic vision for Drake Circus, enhancing our control of the environment around our existing holdings, including our planned leisure development. It also has attractive income characteristics with NIY of 6.4% and an average lease term to break of 19.6 years.

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We also acquired an additional £18 million interest in the HUT portfolio increasing our ownership to 76.5%. On average, these units were acquired at an effective net initial yield of 5.1%. Consistent with our broader positioning as we approached the referendum, we were on site with only one Retail development over the last six months. This is the new leisure quarter at Glasgow Fort, where we have added four new restaurants as well as 600 parking spaces in a new multi-storey car park development, adding over 30% to the parking capacity. It was clear to us that availability of parking was constraining growth in shopper numbers and so we needed to address this before we could undertake initiatives to increase lettable space further at this asset. Within our portfolio, Glasgow Fort has been leading the way in taking more premium occupiers to open air locations for the first time and so the design of the building and the environment created were carefully crafted to maintain this letting momentum. With its innovative design, gardens and play areas, we have created a place which sets the standard for design and enlivenment across our portfolio. We continue to see value in adding leisure uses to our multi-let assets and are progressing plans on two cinema and restaurant developments at Drake Circus, Plymouth and New Mersey, Speke which together are currently 71% pre-let. Looking further ahead, we have two significant opportunities in our medium term pipeline, the 330,000 sq ft Leisure Hall at Meadowhall and the 562,000 sq ft regeneration of Kingston town centre at Eden Walk. Following an encouraging consultation period over the summer at Meadowhall, we submitted a planning application in November. We expect a response in Spring 2017. If favourable, earliest anticipated completion is 2021. At Eden Walk, we made significant progress over the period securing approval from the Greater London Authority in August. We are continuing to progress our plans to secure vacant possession to enable commencement of the development. In the meantime the asset remains well let and provides an income yield of 3.6%. We have continued to invest in enhancing the quality of the environments across our multi-let portfolio, and providing our occupiers with the very best space. In addition to £12 million of development spend, we have spent £47 million on capex, of which £26m relates to initiatives with an immediate income return and £21m relates to enhancements to environments with a longer payback period. Within this, the most significant initiative is the £60 million refurbishment at Meadowhall (£10m spend in period – BL share) which will help reposition the centre to ensure it remains a modern shopping environment meeting the needs of today’s

retailers and consumers alike. The project remains on schedule to complete before the end of 2017. Where we are investing in upgrading the quality of the environments of our assets, we continue to see elevated rental growth ahead of our investment case. For the six properties where we completed works to enhance the environments in 2015, the average ERV growth in the last 12 months has been 8%.

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OFFICES AND RESIDENTIAL REVIEW

Highlights


Portfolio Valuation £7,024m £6,819m

Occupancy Rate 98.6% 97.5%



Total property return 5.0% (1.7)%


- Capital return 3.4% (3.3)%



Office Strategy and Market Overview

Uncertainty caused by the UK’s vote to leave the European Union has resulted in the central London office market registering its first capital value declines since 2009 following several years of strong growth in both rents and values. We recognise the impact that this uncertainty is having on businesses in London, and their ability to make plans for the future, but we believe that London will endure as a global centre. This belief is based on feedback we have received from our occupiers since the referendum – that their employees have a strong preference for living and working in London, that London offers the best choice of flexible, quality workspace and that the critical mass of talent and inter-connected businesses means that it is the best place in Europe to be located. The City also benefits from its language, time zone and international connectivity. London’s continued appeal means that, despite the uncertainty, leasing transactions have continued, either because occupiers are not affected by Brexit, have a lease event which means that they must find space, or are prioritising the long term benefits of consolidating or growing their business in high quality space over the short term uncertainty. This is more prevalent on smaller leases but we have also seen several major international brands including Apple and Wells Fargo commit to large leasing commitments since the referendum. In addition, some businesses are choosing to manage the uncertainty by extending existing leases or taking leases with shorter committed terms. Changes to the UK’s relationship with Europe may mean that some occupiers have no choice but to relocate certain parts of their businesses to other financial centres throughout Europe. Even if this is the case, we believe that over the medium term growth sectors such as the creative and tech industries which are increasingly calling London home, will absorb much of the additional space but we do expect a period of softening demand in the meantime. If there is a period of adjustment during which supply exceeds demand, it will be the best quality space that meets the needs of today’s office workers and consumers which will succeed. Our experience tells us that organisations are increasingly focusing on the benefits that high quality workspace has on attracting and retaining the best talent, and ensuring a productive, motivated workforce who value wellbeing as a high priority. Our focus on London campuses positions us well to benefit from any shift in demand. The mix of uses and engaging public spaces are in tune with modern lifestyles where the boundary between work and leisure is increasingly blurred. The workspaces that we provide are increasingly flexible to suit the changing requirements and scale of central London office occupiers, so we are confident of achieving broad appeal across a range of sectors. Our flexible development pipeline allows us to create space at each of our

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campuses when demand dictates. We also expect to be increasingly open to more flexible leasing arrangements. Our campuses, which account for 74% of our Office portfolio, are complemented by modern multi-let buildings developed by British Land and its partners, often in clusters and benefiting from managed environments around them. These are our campus-lite properties, and include assets such as York House, Marble Arch House and 10 Portman Square in the West End, as well as Leadenhall in the City. The London office market entered this period of uncertainty in a strong position, with vacancy below the long term average at 3.1% benefiting from a period of depressed supply from 2011 to 2015. Delivery of new space and a slowdown in the leasing market has seen vacancy rise to 4.4% in the City and 3.1% in the West End as at September 2016, remaining below the long term average. This has caused ERV growth to slow from the elevated levels of recent years, although the market still recorded positive ERV growth of 0.9% over the period. There will be at least 9 million sq ft of committed supply delivered into the market in the remainder of 2016 and 2017, above the 10 year average rate of completions, applying downward pressure on rents. Committed supply beyond 2017 is below the long term average, particularly in the West End, and developers have choices to make about how much of the speculative space which is currently planned they commit to. The investment market saw significantly reduced volumes in the six months to September 2016 as investors anticipated and absorbed the referendum result. There remains a weight of capital looking to invest in London, particularly from overseas. However, pricing levels following the referendum are yet to be established, particularly for larger lot sizes, with only two assets over £200 million trading in the period. Pricing of these transactions and others has informed the yield expansion on our London Office portfolio of 21 bps. In London residential, uncertainty from the UK’s decision to leave the EU has compounded existing trends in the prime market where supply has moved ahead of demand. There has been limited evidence in the super prime market. We continue to believe that exceptional product, such as Clarges Mayfair, will prove attractive to those who share our view of London as an enduring global capital, particularly where they can benefit from the weaker pound when acquiring. The mainstream market in London, under £1,000 psf has remained relatively robust with steady demand, evidenced by our continuing sales at Aldgate Place. Portfolio Performance

Influenced by market uncertainty following the referendum, the value of our Offices and Residential portfolio fell -3.3% in the half to close at £6.8 billion, primarily due to 21 bps of yield expansion. This represents a capital return for Offices 50 bps lower than the IPD benchmark for the period reflecting greater valuation falls on assets with near term expiries. ERV growth was up by 0.1%, including the impact of more modest refurbishment assumptions than previously planned at certain assets including 1 Finsbury Avenue. On a like-for-like basis with March 2016 assumptions, ERV growth is higher at 0.5%. The yield movement was greater in the City at 27 bps, where there is higher risk to occupational demand from Brexit-related policy shifts, including the potential loss of passporting. The movement in the West End was 16 bps. Overall this gives a portfolio NEY of 4.6%. This headline performance masks a wide dispersion in asset level performance. In the current uncertainty, investors are attaching a higher premium to long term, secure income and so 5 Broadgate with its 17 year lease to UBS with index-linked uplifts saw an increase in value, while buildings with low income security, such as those which UBS will vacate shortly, saw double digit valuation declines. The fact that this averages down to 3.3% across our Office and Residential portfolio indicates the strong weighting of our portfolio towards high quality, well-let buildings with long term, secure income. The residential portfolio, which represents 2% of our assets, has not changed in value. This reflects a modest reduction in end values, offset by profit releases as we progress towards practical completion at Aldgate Place and The Hempel.

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Asset Management

We entered this period of uncertainty 99% occupied and had less than 200,000 sq ft of space to let, including development completions in the period. Despite the uncertainty, occupiers have continued to be attracted to our high quality space and this has enabled us to complete 68,000 sq ft of lettings, 4.9% ahead of March ERVs, including the final floors at both The Leadenhall Building and Marble Arch House. Recently, attention has turned to letting the 51,000 sq ft office component of our development at Clarges Mayfair which completed in the half and was launched in September, and Yalding House, another West End development of 29,000 sq ft, which also completed earlier this year. We have received good interest and have 30,000 sq ft of this space let or under offer, ahead of March ERVs. In total, we have let or put under offer half of the available space to let. The combination of this activity and rent reviews we completed has contributed to like-for-like rental growth of 6.7%. At Regent’s Place, our focus has been on capturing reversion from the current rent review cycle. We concluded

rent reviews on 118,000 sq ft in the half, adding £2.3 million of annualised rent, an uplift of 45% to an average new rent of £62 psf. This brings the total rent review uplift secured across the portfolio in the last 18 months to £6.6 million. We also continue to progress plans for a major redevelopment of 1 Triton Square and in November submitted a planning application for a scheme which would add a further 121,000 sq ft to the building. Progressing that scheme would depend on securing a pre-let. We also remain focused on enhancing links with the communities in which we operate and at Regent’s Place, we have successfully partnered with occupiers on the Regent’s Place Community Fund, announcing five local charitable projects awarded with

grants of up to £9,000 each. The fund endeavours to make a meaningful difference to people in the local area by helping smaller organisations. We are delighted to work with occupiers in this way.

At Paddington Central, our focus has been on delivering our vision for the public realm. Our phase two works to bring Kingdom Street to life, with gardens and community areas, are on track to complete in time for the launch of our development at 4 Kingdom Street in Spring 2017. This 147,000 sq ft office development topped out in May. We are also progressing our works to strengthen the campus’ link with the canal side, and in June, brought the first of our barges into action as a marketing suite for the campus. As part of our continued enlivenment of the campus, we recently launched the public art installation “Message from an Unseen World” which celebrates the life and work of Alan Turing, a former Paddington resident and computer science pioneer. We are increasingly providing flexible working opportunities for existing occupiers and smaller companies who are attracted to our campus environments. At Paddington, which is virtually fully let, we identified a creative solution to add this to our offer, by activating previously redundant space within the atrium at 2 Kingdom Street to provide a flexible working operation for Central Working which went live in June 2016 and has been very successful. We are continuing to transform Broadgate into a world class, mixed-use destination, building on its excellent location, catchment and connectivity. UBS have now taken occupation of their new 710,000 sq ft office at 5 Broadgate and so have served their break notices on 100 Liverpool Street, 1 Finsbury Avenue and 2 Finsbury Avenue. Getting this space back provides us with the opportunity to accelerate wider plans and we will start by committing to the redevelopment of 100 Liverpool Street. This 520,000 sq ft mixed-use scheme is located at the entrance to the campus and adjacent to the station for Crossrail, which will cement Broadgate’s position as

one of the best connected locations in London when it arrives in 2018. British Land’s share of the development spend is £164 million and the returns on this investment are enhanced by the addition of 140,000 sq ft of new lettable space. 90,000 sq ft of this will be retail and food and beverage (‘F&B’), accounting for almost 25% of the rent. This new space will double the amount of rent from retail and F&B at Broadgate, integrating with Broadgate Circle and taking advantage of the significant footfall at Liverpool Street station. The space will be flexible to meet a broad range of occupier requirements and we expect to complete the building in 2019, shortly after the arrival of Crossrail. Our decision to commit to the development of 100 Liverpool Street is one outcome from a review we have conducted since the referendum of the phasing of all of our development opportunities and capex plans. At 1 Finsbury Avenue, whilst still assessing our options with our partner GIC, our preferred route is to undertake a

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lower cost refurbishment than previously planned to deliver the space back to the market by late 2018. In line with our aim to broaden the range of uses and occupiers at Broadgate, we plan for a mix of curated retail and leisure on the lower floors and less corporate and more flexible commercial space on the upper floors differentiating it from the remainder of the campus and in particular, 100 Liverpool Street. We were delighted to obtain planning for a 560,000 sq ft scheme at 2-3 Finsbury Avenue in October, giving us the option to treble the size of the building. We are not able to proceed with this development until we take 3 Finsbury Avenue back from UBS in late 2018 at the earliest. Even then, it is likely that we will only proceed with this redevelopment with the benefit of a significant pre-let. In the meantime, we will pursue meanwhile uses for 2-3 Finsbury Avenue. We are in discussions with a number of occupiers from a range of sectors on potential requirements for space at these development opportunities across all of our London campuses. In addition, we were pleased to agree terms with Credit Agricole, one of our largest occupiers at Broadgate, to extend their occupation at Broadwalk House until July 2025. This commitment reinforces Broadgate’s appeal and our track record of retaining

occupiers at our campuses. Investment Activity We have not made any office acquisitions or disposals since the year end. Our investment activity is currently focused on completing our existing developments at Clarges Mayfair, Aldgate Place, The Hempel Collection and 4 Kingdom Street, as well as progressing enabling works for 100 Liverpool Street. We completed the 51,000 sq ft office component of our super prime mixed-use development at Clarges Mayfair in the half. We launched this exceptional scheme to the market in September and have already placed two floors under offer as well as the ground floor restaurant, comprising 18,000 sq ft, at terms ahead of our valuation assumptions, despite the uncertainty caused by the referendum. This gives us confidence that quality buildings will continue to prosper. We continued to make good progress at our residential schemes, Aldgate Place and The Hempel Collection, selling £20 million of apartments. The prime residential market continued to soften and we achieved prices on average 4% below March values. At Clarges Mayfair, we have already pre-sold over 50% of the residential units by value and will market the remaining 12 units, predominantly on the upper floors, on completion in late 2017. We continue to be confident that these final units will sell well. This leaves total residential exposure, excluding pre-sold units, of £230 million, of which three quarters is at Clarges. Across our recently completed and under construction residential developments, anticipated profits remain significantly ahead of our investment case. Including our commitment to 100 Liverpool Street, and excluding pre-sold residential, the speculative development commitment is 5% of our portfolio. Apart from 1 Finsbury Avenue which is in our near term pipeline, our remaining Office and Residential development opportunities are included within our medium term pipeline. This includes 2-3 Finsbury Avenue at Broadgate, 1 Triton Square at Regent’s Place, 5 Kingdom Street at Paddington Central and Blossom Street in

Shoreditch. We will take steps to progress plans on these projects to put ourselves in the best position to act when demand justifies it. At Blossom Street, the Court of Appeal ruled in November that the planning permission for our proposed development could not be legally challenged, bringing the planning process to a successful conclusion. We will continue discussions with potential occupiers to secure a sufficient level of pre-lets before committing to the scheme.

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FINANCE REVIEW

6 months to 30 September 2015 30 September 2016

Underlying profit1,2 £171m £199m

Underlying earnings per share1 16.0p 19.3p

IFRS profit/(loss) before tax £823m £(205)m

Dividend per share 14.18p 14.60p

Total accounting return1,3 +9.1% -1.5%


EPRA net asset value per share1,2 919p 891p

IFRS net assets £9,619m £9,181m

LTV (proportionally consolidated)1,4 32.1% 31.6%

Weighted average interest rate 3.3% 3.2% 1 See Glossary for definitions

2 See Table B within supplementary disclosure for reconciliations to IFRS metrics

3 See Note 2 within financial statements for calculation

4 See Note 10 within financial statements for calculation and reconciliation to IFRS metrics

Overview

We delivered a good set of results, with underlying profit growth of 16.4% and underlying earnings per share (EPS) growth of 20.6%. Portfolio valuations decreased by 2.8% on a proportionally consolidated basis and EPRA net asset value (NAV) decreased by 3.0%. This includes the impact of no longer treating the 1.5% 2012 convertible bond as dilutive as the share price was below the exchange price of 693 pence at the period end, NAV decreased by 4.1% on a like-for-like basis. We undertook £1.0 billion of gross capital activity; proceeds from £0.5 billion of mature and non-core asset completed sales have partly been reinvested in our current committed development programme, portfolio capex and in selected acquisitions adjacent to existing assets. Our balance sheet metrics remain strong. The proportionately consolidated loan to value ratio has decreased by 50 bps to 31.6% from 32.1% at March 2016 with the impact of fall in values more than offset by sales. Our proportionally consolidated weighted average interest rate has decreased by 10 bps to 3.2% from 3.3% at March 2016. Underlying profit increased by 16.4% to £199 million; the impact of sales has been more than offset by like-for-like rental growth, leasing of developments, financing activity and a reduction in administrative expenses. The increase in underlying EPS of 20.6% is more than the increase in underlying profit of 16.4% due to the 2012 convertible bond no longer being dilutive. IFRS loss before tax for the half year of £205 million is lower than the prior period profit of £823 million, primarily due to a negative property valuation movement, resulting from outward yield shift offset in part by ERV growth. As announced in the 2015/16 full year results, we are increasing the dividend by 3% for the year to March 2017 which gives a full year dividend of 29.20p. In line with that, the second quarter dividend at 7.30p brings the total for the half year to 14.60p.

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Presentation of financial information The Group financial statements are prepared under IFRS where the Group’s interests in joint ventures and

funds are shown as a single line item on the income statement and balance sheet and all subsidiaries are consolidated at 100%. Management considers the business principally on a proportionally consolidated basis when setting the strategy, determining annual priorities, making investment and financing decisions and reviewing performance. This includes the Group’s share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group’s subsidiaries. The financial key performance indicators are also presented on this basis. A summary income statement and summary balance sheet which reconcile the Group income statements to British Land’s interests on a proportionally consolidated basis are included in Table A within the supplementary disclosures. Management monitors underlying profit as this more accurately reflects the Group’s financial performance and

the underlying recurring performance of our core property rental activity, as opposed to IFRS metrics. It is based on the Best Practices Recommendations of the European Public Real Estate Association (EPRA) which are widely used alternate metrics to their IFRS equivalents. Management also monitors EPRA NAV as this provides a transparent and consistent basis to enable comparison between European property companies. Linked to this, the use of Total Accounting Return allows management to monitor return to shareholders based on movements in a consistent applied metric, being EPRA NAV, and dividends paid. Loan to value (proportionately consolidated) is also monitored by management as a key measure of the level of debt employed by the Group to meet its strategic objectives, along with a measurement of risk. It also allows comparison to other property companies who similarly monitor and report this measure.

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Income statement

1. Underlying profit

Underlying profit is the measure that is used internally to assess income performance. No company adjustments have been made in the current or prior year and therefore this is the same as the pre-tax EPRA earnings measure which includes a number of adjustments to the IFRS reported profit before tax. This is presented below on a proportionally consolidated basis:

6 months to Section 30 September

20151

30 September

2016

£m £m

Gross rental income 326 327

Property operating expenses (17) (15)

Net rental income 1.1 309 312

Net fees and other income 7 8

Administrative expenses 1.3 (49) (43)

Net financing costs 1.2 (96) (78)

Underlying profit 171 199

Non-controlling interests in underlying profit 8 7

EPRA adjustments2 644 (411)

IFRS profit/(loss) before tax 2 823 (205)

Underlying EPS 1.4 16.0p 19.3p

IFRS basic EPS 2 79.8p (19.0)p

Dividend per share 3 14.18p 14.60p 1 Fees and other income and administrative expenses have been restated to reflect the change in presentation of the results of Broadgate Estates, a wholly owned subsidiary of the Group at 31 March 2016. This restatement has had no impact on underlying profit. Refer to note 1 of the financial statements for further details. 2 EPRA adjustments consist of investment and development property revaluations, gains/losses on investment and trading property disposals, changes in the fair value of financial instruments and associated close out costs. These items are presented in the capital and other column of the consolidated income statement. 1.1 Net rental income

£m

Net rental income for the six months ended 30 September 2015 309

Capital activity (11)

Like-for-like rental income growth 8

Leasing of developments 6

Net rental income for the six months ended 30 September 2016 312

The £3 million increase in net rental income during the year was the result of like-for-like growth and leasing of developments more than offsetting the impact of net sales. Net sales over the last 18 months have reduced rents by £11 million in the period. Retail and Leisure growth was 1.7% (1.1% including the impact of surrender premia). This was driven by strong leasing activity, asset management activities, such as splitting units, and additional turnover income. It also includes a 40 bps drag as a result of the BHS administration, however 80% of this space is now let or under offer.

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Like-for-like rental income growth was 3.4% excluding the impact of surrender premia. Office and Residential growth was 6.7%; just over half of this was due to the letting up of completed developments that are now in the like-for-like portfolio, predominantly The Leadenhall Building and Marble Arch House which are both now full, with the remainder being attributable to strong rent review activity, particularly at Regent’s Place. The successful letting of our recently completed development programme provided £6 million of additional rent this half year, benefitting from UBS’ index-linked lease at 5 Broadgate. 1.2 Net financing costs

£m

Net financing costs for the six months ended 30 September 2015 (96)

Financing activity – debt transactions 12 Financing activity – lower rates 5 Acquisitions (1) Disposals 3 Completion of developments (1) Net financing costs for the six months ended 30 September 2016 (78)

Financing costs were £18 million lower this half year. Debt transactions over the last 18 months, including the £350 million zero coupon convertible bond, reduced costs by £12 million this half year. In the current period, we used sales proceeds to repay revolving credit facilities and we completed the repayment of the £295 million TBL Properties Limited secured debt facility. Our liability management, which is NPV positive, has reduced NAV by 2p. We have also agreed one year extensions to a portion of our unsecured facilities, in total £885 million. Our approach to interest rate management remains an important factor in reducing interest costs. The decision to keep a portion of our debt at floating rates has seen us benefit from a saving of £5 million resulting from lower market rates. At the period end the proportion of our debt held at fixed rates was 52% on average over the next 5 years. The impact of capital activity and developments on net financing costs was broadly balanced. 1.3 Administrative expenses Overall, administrative expenses decreased by £6 million this half year. This is due to actions that we have taken to manage costs and reflects lower accruals on management incentives. The Group’s operating cost

ratio has reduced by 280 bps to 15.0% (H1 2015/16: 17.8%). Last year, we brought the property management of our Retail assets in-house to Broadgate Estates, a wholly owned subsidiary, in line with our strategic focus on customer orientation and placemaking. In recognition of the core role Broadgate Estates now plays in how we run the business, we changed the way its results were presented in the Group income statement at 31 March 2016. For the period to 30 September 2016, this has resulted in a £2 million increase in administrative expenses and an equal and offsetting increase in net fees and other income; importantly this change has no impact on underlying profit. The prior period comparatives for administrative expenses and net fees and other income have also been restated to reflect this change in presentation. 1.4 Underlying EPS

Underlying EPS was 19.3 pence (H1 2015/16: 16.0 pence) based on underlying profit after tax of £199 million (H1 2015/16: £171 million). The increase in underlying EPS of 20.6% is more than the increase in underlying profit of 16.4% as the 2012 1.5% convertible bond is no longer dilutive. As the share price fell below the 693

23


pence exchange price at period end, no dilution adjustment was made (H1 2015/16: £6 million interest added back and shares increased by 57.8 million), in line with EPRA guidance. 2. IFRS profit/(loss) before tax

The main difference between IFRS profit/(loss) before tax and underlying profit is that it includes the valuation movement on investment and development properties and the fair value movements of financial instruments. In addition, the Group’s investments in joint ventures and funds are equity accounted in the IFRS income statement but are included on a proportionately consolidated basis within underlying profit.

The IFRS loss before tax for the period was £205 million, compared to a profit before tax for the prior period of £823 million, resulting from outward yield shift and a slowdown in ERV growth, particularly following the UK’s

decision to leave the EU in June. This impacts IFRS profit/(loss) before tax through the valuation movement on the Group’s properties which was £654 million less than the prior period and the valuation movement on the properties held in joint ventures and funds which was £422 million less than the prior period. The £39 million decrease in IFRS net financing costs to £26 million was principally due to revaluation gains recorded in respect of the Group’s convertible bonds. IFRS basic EPS was a negative 19.0 pence per share, compared to a positive 79.8 pence per share in the prior period. The basic weighted average number of shares in issue during the period was 1,029 million (H1 2015/16: 1,022 million). 3. Dividends

As previously announced in May 2016, we proposed an increase in the dividend by 3% for the year to March 2017 which gives a full year dividend of 29.20p. In line with this, the second quarter dividend at 7.30p brings the total for the half year to 14.60p. The increase in EPS of 20.6% resulted in a reduction in the dividend pay-out ratio to 76% (H1 2015/16: 88%). Balance sheet Section FY 2015/16 H1 2016/17

£m £m

Properties at valuation 14,648 13,919

Other non-current assets 138 146

14,786 14,065

Other net current liabilities (257) (247)

Adjusted net debt 6 (4,765) (4,463)

Other non-current liabilities (90) (101)

EPRA net assets (undiluted) 9,674 9,254

Dilution impact of convertible bond 400 -

EPRA net assets (diluted) 10,074 9,254

EPRA NAV per share 4 919p 891p

Non-controlling interest 277 249

EPRA adjustments1 (732) (322)

IFRS net assets 5 9,619 9,181

1 EPRA net assets exclude the mark-to-market on effective cash flow hedges and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative revaluations. They include the valuation surplus on trading properties and are adjusted for the dilutive impact of share options. H1 2015/16 also includes an adjustment for the dilutive impact of the 1.5% convertible bond maturing

24


in 2017. No dilution adjustment is made for the £350 million zero coupon convertible bond maturing in 2020. Details of the EPRA adjustments are included in Table B within the supplementary disclosures. 4. EPRA net asset value per share

pence

EPRA NAV per share at 31 March 2016 919

Offices and Residential valuation movement (22)

Retail and Leisure valuation movement (17)

Underlying profit 18

Dividends (13)

Finance transaction costs (2)

Defined benefit pension movement (2)

1.5% convertible bond dilution reversal 10

EPRA NAV per share at 30 September 2016 891

The 3.0% decrease in EPRA NAV per share reflects a valuation decline of 2.8%. This is primarily due to outward yield movement of 19 bps, offset by ERV growth of 0.5% and the benefit of completing sales ahead of March 2016 valuations. Retail and Leisure valuations were down 2.4% with outward yield movement of 18 bps offset by ERV growth of 0.9%; the multi-let portfolio saw stronger ERV growth of 1.3%. Investment evidence since the referendum has been focused on smaller retail centres. This is reflected in the relative yield movements between the regional and local assets; yield movements in Regional have been in the range 7 bps to 41 bps and for Local, the range is 12 bps to 84 bps. Office and Residential valuations were down 3.3% with outward yield movement of 21 bps offset by modest ERV growth of 0.1%; the West End performed slightly better than the City, partly due to the reversion captured through rent reviews at Regent’s Place. City valuations were down 4.9%; this includes the Broadgate campus

which was down 5.5% reflecting a range of results; properties with lease expiries in the next 18 months were down 15% on average; conversely, UBS’ new headquarters at 5 Broadgate was up 3.6% reflecting the 17 year

unexpired lease term and RPI linked increases. The 2p impact of finance transaction costs primarily relates to early repayment of term debt facilities and associated swaps. Movements in liabilities of the Group’s defined benefit scheme, which is closed to new

members, contributed a 2p reduction in EPRA NAV as a result of falling corporate bond rates. There is a 10p benefit to EPRA NAV due to the reversal of the 2012 convertible bond dilution included in FY2015/16 results. As the share price fell below the 693p exchange price at period end, no dilution adjustment was made (FY2015/16: £400 million debt deducted from net asset value and diluted number of shares increased by 57.8 million). Excluding this adjustment, NAV decreases by 4.1% on a like-for-like basis. 5. IFRS net assets

IFRS net assets at 30 September 2016 were £9,181 million, a decrease of £438 million from 31 March 2016. This was primarily due to property revaluation losses in the current year, which were £257 million for the Group and £205 million for the Group’s share of joint ventures and funds. The short-term borrowings of £416 million represent the 1.5% £400 million convertible bond, which matures on 10 September 2017.

25


Cash flow, net debt and financing

6. Adjusted net debt1

£m

Adjusted net debt at 31 March 2016 (4,765)

Disposals 536

Acquisitions (88)

Development and capex (138)

Net cash from operations 173

Dividends (150)

Other (31)

Adjusted net debt at 30 September 2016 (4,463)

1 Adjusted net debt is a proportionally consolidated measure. It represents the Group net debt as disclosed in Note 10 and the Group’s share of joint venture and funds’ net debt excluding the mark-to-market on effective cash flow hedges and related debt adjustments and non-controlling interests. A reconciliation between the Group net debt and adjusted net debt is included in Table A within the supplementary disclosures. The impact of our investment activity in the half year was a net decrease in debt of £310 million. Completed disposals included the sale of Debenhams, Oxford Street for £400 million and BL’s interest in three superstores

totalling £79 million (BL share). Contracts were exchanged on the sale of a portfolio of non-core Retail assets for £191 million with completion scheduled for January 2017. Acquisitions completed in the year included the New George Street Estate in Plymouth for £64 million which will now be managed as an integrated part of Drake Circus which it is adjacent to, and the purchase of an additional 1.2% of the units in Hercules Unit Trust bringing the Group’s ownership to 76.5% at the period end. Other investment included development expenditure of £94 million and capital expenditure of £44 million related to asset management on the standing portfolio. The value of developments under construction or committed is £619 million with costs to come of £277 million. Speculative development exposure is 5% of the portfolio after taking into account residential pre-sales. There is 449,000 sq ft of developments in our near term pipeline with anticipated cost of £155 million. 7. Financing

Group Proportionally consolidated

31 March

2016

30 September

2016

31 March

2016

30 September

2016

Net debt / adjusted net debt 1 £3,617m £3,372m £4,765m £4,463m

Principal amount of gross debt £3,552m £3,297m £5,089m £4,804m

Loan to value 25.2% 24.6% 32.1% 31.6%

Weighted average interest rate 2.6% 2.5% 3.3% 3.2%

Interest cover 3.3 4.4 3.0 3.5

Weighted average debt maturity 7.2 years 7.2 years 8.1 years 8.0 years 1 The Group figures represent net debt as presented in note 10 of the interim financial statements. The proportionally consolidated figures include the Group’s share of joint venture and funds’ net debt and exclude

the mark-to-market on effective cash flow hedges and related debt adjustments and non-controlling interests.

Balance sheet metrics remain strong. LTV and weighted average interest rate on drawn debt were reduced and interest cover improved. Our proportionally consolidated LTV was 31.6% at September 2016, down 50 bps

26


from 32.1% at March 2016 reflecting the impact of the sales and fall in property values. The group LTV reduced for similar reasons from 25.2% to 24.6%. Note 10 of the interim financial statements sets out the calculation of the Group and proportionally consolidated LTV. The strength of the Group’s balance sheet is reflected in British Land’s senior unsecured credit rating which continues to be rated by Fitch at A-. Our proportionally consolidated weighted average interest rate reduced to 3.2% at 30 September 2016 from 3.3% at 31 March 2016. This reflects a rise of 20 bps due to repayment of cheaper facilities with sales proceeds received, including from the sale of Debenhams, Oxford Street, offset by a 30 bps reduction principally as a result of our financing activity. Our weighted average debt maturity has stayed stable at 8 years. British Land has £1.7 billion of committed unsecured revolving banking facilities. Of these facilities, £1.6 billion have maturities of more than two years and £1.0 billion was undrawn at 30 September 2016. Based on our current commitments and these facilities, the Group has no requirement to refinance until 2020, even if the 1.5% convertible does not convert. Further information on our approach to financing is provided in the financial policies and principles section of the audited annual report for the year ended 31 March 2016. Lucinda Bell

Chief Financial Officer

27


RISK MANAGEMENT AND PRINCIPAL RISKS For British Land, effective risk management is a cornerstone of our strategy and fundamental to the achievement of our strategic objectives in delivery of long term sustainable returns. The Group’s risk appetite

and its integrated approach to managing risk remains as set out on pages 57-58 of the Annual Report and Accounts published in May 2016.

The Directors have considered the principal risks and uncertainties that the company is exposed to, and which may impact performance for the remaining six months of the year, in light of the outcome of the UK’s

referendum on continued membership of the EU. Whilst, we consider the principal risks are unchanged from those set out on pages 60-63 of the Annual Report and Accounts published in May 2016, several risks are elevated as a result of the increased political and economic uncertainty. As a result of the increased economic and political risk, other principal risks that are considered to be impacted while the terms and timing of exit are negotiated, and potentially beyond, are; investor and occupier demand, availability of finance, execution of investment strategy and income sustainability. We have continued to see good activity and interest in our portfolio since the referendum, but are mindful of the increased uncertainty and have optionality in respect of our major development decisions to respond to the changing environment. We have a high quality portfolio with secure income and robust finances. Our principal risks and uncertainties are summarised below. Principal External Risks

Economic outlook – The economic climate and projections for interest rates present risks and opportunities in property and financing markets and the businesses of our occupiers.

Political outlook – Significant political events and policies, including the UK’s decision to leave the EU, bring risks both in terms of uncertainty until the terms of the exit are known and the impact of policies introduced. This will impact the businesses of our occupiers and the wider investment case for the UK.

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, the attractiveness of investment in the UK, availability of finance and the relative attractiveness of other asset classes.

Development cost inflation – Cost inflation presents a risk to the profitability of our development projects and has the potential to adversely affect our overall return on investment.

Occupier demand and tenant default – Underlying income, rental growth and capital performance could be adversely affected by weakening occupier demand and occupier failures resulting from variations in the health of the UK economy and corresponding weakening of consumer confidence, business activity and investment. 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 finance may adversely impact British Land’s ability to refinance debt and drive up cost. This may also result in weaker investor demand for real

estate. Increasing finance costs would reduce British Land’s underlying profits.

Catastrophic business event – An external event such as a civil emergency, including a large-scale terrorist attack, cybercrime, 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.

28


Principal Internal Risks

Investment strategy – In order to meet our strategic objectives we must invest in and exit from the right properties at the right time. 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.

Development exposure – 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. Development risks could adversely impact underlying income and capital performance including: development letting exposure; construction timing and costs; major contractor failure; and adverse planning judgements.

People – A number of 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 or impact the effectiveness of operations and decision making, in turn impacting business performance.

Capital structure – leverage – We maintain a capital structure which recognises the balance between performance, risk and flexibility. Leverage magnifies returns, both positive and negative. An increase in leverage increases the risk of a breach of covenants on borrowing facilities and may increase finance costs.

Finance strategy execution – Our strategy addresses risks both to 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.

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; nature and structure of leasing activity; and nature and timing of asset management and development activity.

29


Statement of directors’ responsibilities

The directors’ confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year;

and

material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of British Land plc are listed in the Annual Report and Accounts for the year ended 31 March 2016, which is available on the company website www.britishland.com. By order of the Board Lucinda Bell

Chief Financial Officer

15 November 2016

30



Independent review report to The British Land Company PLC Report on the condensed set of financial statements Our conclusion We have reviewed The British Land Company PLC's condensed set of financial statements (the "interim financial statements") in the half year results of The British Land Company PLC for the 6 month period ended 30 September 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom’s Financial Conduct Authority. What we have reviewed The interim financial statements comprise:

the consolidated balance sheet as at 30 September 2016; the consolidated income statement and consolidated statement of comprehensive income for the

period then ended; the consolidated statement of cash flows for the period then ended; the consolidated statement of changes in equity for the period then ended; and the explanatory notes to the interim financial statements.

The interim financial statements included in the half year results have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom’s Financial Conduct Authority. As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. Responsibilities for the interim financial statements and the review Our responsibilities and those of the directors The half year results, including the interim financial statements, are the responsibility of, and have been approved by, the directors. The directors are responsible for preparing the half year results in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom’s Financial Conduct Authority. Our responsibility is to express a conclusion on the interim financial statements in the half year results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom’s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. What a review of interim financial statements involves We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. We have read the other information contained in the half year results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

31


PricewaterhouseCoopers LLP Chartered Accountants London 15 November 2016

a) The maintenance and integrity of the The British Land Company PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.

b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

32

Six months ended 30 September 2016

Unaudited


Unaudited2

Note

Underlying pre-tax1

£m

Capital and other

£mTotal

£m

Underlying pre-tax1

£m

Capital and other

£mTotal

£m

Revenue 3 288 9 297 293 15 308Costs 3 (67) (6) (73) (69) (7) (76)

3 221 3 224 224 8 232Joint ventures and funds (see also below) 8 68 (199) (131) 63 219 282Administrative expenses (42) – (42) (49) – (49)Valuation movement 4 – (257) (257) – 397 397Profit on disposal of investment properties and investments – 27 27 – 26 26Net financing costs – financing income 5 2 32 34 3 4 7 – financing charges 5 (43) (17) (60) (62) (10) (72)

(41) 15 (26) (59) (6) (65)(Loss) profit on ordinary activities before taxation 206 (411) (205) 179 644 823Taxation 6 – 1 1 – 7 7(Loss) profit for the period after taxation (204) 830Attributable to non-controlling interests 7 (16) (9) 8 6 14Attributable to shareholders of the Company 199 (394) (195) 171 645 816Earnings per share:– basic 2 (19.0)p 79.8p– diluted 2 (20.3)p 75.4p

All results derive from continuing operations.


Unaudited


Unaudited

Note

Underlying pre-tax1

£m

Capital and other

£mTotal

£m

Underlying pre-tax1

£m

Capital and other

£mTotal

£m

Results of joint ventures and funds accounted for using the equity methodUnderlying Profit 68 – 68 63 – 63Valuation movement 4 – (205) (205) – 217 217Capital financing costs – (6) (6) – – –Profit on disposal of investment properties, trading properties and investments

– 12 12 – 2 2

Taxation – – – – – –8 68 (199) (131) 63 219 282

1 See definition in glossary.

2 The prior period comparatives have been re-stated – see note 1.

CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016

33

Six months ended 30 September

2016 Unaudited

£m


2015 Unaudited

£m

(Loss) profit for the period after taxation (204) 830Other comprehensive (expense) income:Items that will not be reclassified subsequently to profit or loss:Net actuarial loss on pension scheme (23) (1)Valuation movements on owner-occupied property (2) 12

(25) 11Items that may be reclassified subsequently to profit or loss:(Losses) gains on cash flow hedges– Group (47) 8– Joint ventures and funds (3) 4– Reclassification of items from the statement of comprehensive income – –

(50) 12Transferred to the income statement (cash flow hedges)– Foreign currency derivatives – 2– Interest rate derivatives 10 4

10 6Exchange differences on translation of foreign operations– Hedging and translation – 1

– 1

Deferred tax on items of other comprehensive income – (5)

Other comprehensive (expense) profit for the period (65) 25Total comprehensive (expense) income for the period (269) 855Attributable to non-controlling interests (10) 14Attributable to shareholders of the Company (259) 841

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


34

Note

30 September 2016

Unaudited £m

31 March 2016

Audited £m

ASSETSNon-current assetsInvestment and development properties 7 9,179 9,643 Owner-occupied property 7 93 95

9,272 9,738 Other non-current assetsInvestments in joint ventures and funds 8 3,145 3,353 Other investments 9 149 142 Deferred tax assets 3 3 Interest rate and currency derivative assets 10 255 167

12,824 13,403 Current assetsTrading properties 7 323 325 Debtors 41 33 Cash and short-term deposits 10 107 114

471 472 Total assets 13,295 13,875LIABILITIESCurrent liabilitiesShort-term borrowings and overdrafts 10 (416) (74)Creditors (217) (218)Corporation tax (16) (18)

(649) (310)Non-current liabilitiesDebentures and loans 10 (3,146) (3,687)Other non-current liabilities (147) (122)Interest rate and currency derivative liabilities 10 (172) (137)

(3,465) (3,946)Total liabilities (4,114) (4,256)Net assets 9,181 9,619EQUITYShare capital 260 260 Share premium 1,297 1,295 Merger reserve 213 213 Other reserves (134) (93)Retained earnings 7,296 7,667 Equity attributable to shareholders of the Company 8,932 9,342 Non-controlling interests 249 277 Total equity 9,181 9,619

EPRA NAV per share* 2 891p 919p

* As defined in glossary.

CONSOLIDATED BALANCE SHEET

AS AT 30 SEPTEMBER 2016

35

Note


2016 Unaudited

£m


20151 Unaudited

£m

Rental income received from tenants 241 216Fees and other income received 31 28Operating expenses paid to suppliers and employees (86) (83)Cash generated from operations 186 161

Interest paid (50) (58)Interest received 2 –Corporation tax repayments paid – (1)Distributions and other receivables from joint ventures and funds 8 25 30Net cash inflow from operating activities 163 132

Cash flows from investing activitiesDevelopment and other capital expenditure (109) (132)Purchase of investment properties (72) (240)Sale of investment and trading properties 436 390Payments received in respect of future trading property sales 4 16Purchase of investments (15) –Investment in and loans to joint ventures and funds (27) (208)Capital distributions and loan repayments from joint ventures and funds 64 323Indirect taxes paid in respect of investing activities (9) (1)Net cash inflow from investing activities 272 148

Cash flows from financing activitiesIssue of ordinary shares 2 2Purchase of ordinary shares (8) –Dividends paid (150) (116)Dividends paid to non-controlling interests (6) (9)Acquisition of units in Hercules Unit Trust (12) (55)Closeout of interest rate derivatives (11) 13Cash collateral transactions – (22)Decrease in bank and other borrowings (297) (369)Drawdowns on bank and other borrowings 40 11Drawdown of zero coupon 2015 convertible bond – 345Net cash outflow from financing activities (442) (200)

Net (decrease) increase in cash and cash equivalents (7) 80Cash and cash equivalents at 1 April 114 108Cash and cash equivalents at 30 September 107 188

Cash and cash equivalents consists of:Cash and short-term deposits 107 188

1 The prior period comparatives have been restated. See note 1.

CONSOLIDATED STATEMENT OF CASH FLOWS


36

Six month movements in equity

Share capital

£m

Share premium

£m

Hedging and

translation reserve

£m

Re- valuation

reserve £m

Merger reserve

£m

Retained earnings

£mTotal

£m

Non-controlling

interests £m

Total equity

£m

Balance at 1 April 2016 260 1,295 (107) 14 213 7,667 9,342 277 9,619 Total comprehensive expense for the period – – (36) (5) – (218) (259) (10) (269)Share issues - 2 – – – – 2 – 2Fair value of share and share option awards – – – – – 1 1 – 1Purchase of own shares (8) (8) – (8)Purchase of units from non-controlling interests – – – – – – – (12) (12)Dividends payable in period (14.18p per share) – – – – – (146) (146) – (146)Dividends paid to non-controlling interests – – – – – – – (6) (6)Balance at 30 September 2016 260 1,297 (143) 9 213 7,296 8,932 249 9,181

Balance at 1 April 2015 258 1,280 (76) (6) 213 6,563 8,232 333 8,565 Total comprehensive income for the period – – 11 14 – 816 841 14 855Share issues 1 13 – – – (10) 4 – 4 Fair value of share and share option awards – – – – – 6 6 – 6 Purchase of units from non-controlling interests – – – – – (1) (1) (54) (55)Dividends payable in period (13.84p per share) – – – – – (141) (141) – (141)Dividends payable by subsidiaries – – – – – – – (9) (9)Adjustment for scrip dividend element – – – – – 28 28 – 28 Balance at 30 September 2015 259 1,293 (65) 8 213 7,261 8,969 284 9,253

Prior year movements in equity

Share capital

£m

Share premium

£m

Hedging and

translation reserve

£m

Re- valuation

reserve £m

Merger reserve

£m

Retained earnings

£mTotal

£m

Non-controlling

interests £m

Total equity

£m

Balance at 1 April 2015 258 1,280 (76) (6) 213 6,563 8,232 333 8,565 Total comprehensive income for the period – – (31) 20 – 1,344 1,333 19 1,352Share issues 2 15 – – – (12) 5 – 5 Fair value of share and share option awards – – – – – 8 8 – 8 Loss on purchase of units from non-controlling interests – – – – – (1) (1) – (1)Purchase of units from non-controlling interests – – – – – – – (59) (59)Dividends payable in year (28.00p per share) – – – – – (287) (287) – (287)Dividends payable by subsidiaries – – – – – – – (16) (16)Adjustment for scrip dividend element – – – – – 52 52 – 52 Balance at 31 March 2016 260 1,295 (107) 14 213 7,667 9,342 277 9,619

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


37

During the year ending 31 March 2016 the accounting for Broadgate Estates, a wholly-owned subsidiary of the Group which acts as a property manager, was reviewed resulting in a reclassification of prior period items presented in the Consolidated Income Statement and Consolidated Statement of Cash Flows.

This reclassification had no impact on either IFRS profit before tax or Underlying Profit. For the six months ended 30 September 2015, this resulted in a £17m increase in other fees and commissions received offset by a £15m increase in other fees and commissions expenses and a £2m increase in administrative expenses.

This reclassification had no impact on the net cash inflow from operating activities presented in the Consolidated Statement of Cash Flows. It resulted in £18m increase in fees and other income received and a £18m increase in operating expenses paid to suppliers and employees.

Having assessed the principal risks discussed on pages 28 - 29, the Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily, and have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for at least 12 months from the signing date of these financial statements. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

The interim financial information was approved by the Board on 15 November 2016.

1 Basis of preparation

The financial information for the period ended 30 September 2016 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 March 2016 has been delivered to the Registrar of Companies. The auditors’ report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The financial information included in this announcement has been prepared on a going concern basis using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the European Union and in accordance with IAS 34 Interim Financial Reporting. The current period financial information presented in this document has been reviewed, not audited.

The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2016, which have been prepared in accordance with IFRS as adopted by the European Union.

The same accounting policies, estimates, presentation and methods of computation are followed in the half year report as applied in the Group’s latest annual audited financial statements.

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective for the current accounting period. None of these are expected to have a material impact on the consolidated financial statements of the Group, except the following set out below:

– IFRS 9 – Financial Instruments, will impact both the measurement and disclosures of financial instruments and is effective for the Group’s year ending 31 March 2019. The Group has not yet completed its evaluation of the effect of the adoption.

– IFRS 15 – Revenue from contracts with customers, does not apply to gross rental income, but does apply to service charge income, management and performance fees and trading property disposals and is effective for the Group’s year ending 31 March 2019. The Group does not expect adoption of IFRS 15 to have a material impact on the measurement of revenue recognition, but additional disclosures will be required with regards to the above sources of income.

– IFRS 16 – Leases, is effective for the Group’s year ending 31 March 2020. The Group does not expect adoption of IFRS 16 to have a material impact on the financial statements, since the impacts of the standard for lessors are minimal.

NOTES TO THE ACCOUNTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016

38

2 Performance measures

Earnings per shareThe Group measures financial performance with reference to underlying earnings per share, the European Public Real Estate Association (EPRA) earnings per share and IFRS earnings per share. The relevant earnings and weighted average number of shares (including dilution adjustments) for each performance measure are shown below, and a reconciliation between these is shown within the supplementary disclosures (Table B).

EPRA earnings per share is calculated using EPRA earnings, which is the IFRS profit after taxation attributable to shareholders of the Company excluding investment and development property revaluations, gains/losses on investing and trading property disposals, changes in the fair value of financial instruments and associated close-out costs and their related taxation. In the current period, diluted EPRA earnings per share did not include the dilutive impact of the 2012 convertible bond, as the Group’s share price was below the exchange price of 693 pence. IFRS diluted earnings per share includes the dilutive impact as IAS 33 ignores this hurdle to conversion. In the prior year period, both measures included the dilutive impact of the 2012 convertible bond, as the Group’s share price was above the exchange price.

Underlying earnings per share is calculated using Underlying Profit adjusted for underlying taxation (see note 6). Underlying Profit is the pre-tax EPRA earnings measure, with additional Company adjustments. No Company adjustments were made in either the current or prior period.

Six months ended 30 September 2016 Six months ended 30 September 2015

Relevant earnings

£m

Relevant number

of shares million

Earnings per share

pence

Relevant earnings

£m

Relevant number

of shares million

Earnings per share

pence

UnderlyingUnderlying basic 199 1,029 19.3 171 1,022 16.7 Underlying diluted 199 1,033 19.3 174 1,086 16.0 EPRAEPRA basic 199 1,029 19.3 171 1,022 16.7 EPRA diluted 199 1,033 19.3 174 1,086 16.0 IFRSBasic (195) 1,029 (19.0) 816 1,022 79.8 Diluted (221) 1,091 (20.3) 819 1,086 75.4

Net asset valueThe Group measures financial position with reference to EPRA net asset value (NAV) per share and EPRA triple net asset value (NNNAV) per share. The net asset value and number of shares for each performance measure is shown below. A reconciliation between IFRS net assets and EPRA net assets, and the relevant number of shares for each performance measure, is shown within the supplementary disclosures (Table B). EPRA net assets is a proportionally consolidated measure that is based on IFRS net assets excluding the mark-to-market on effective cash flow hedges and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative valuations. They include the valuation surplus on trading properties and are adjusted for the dilutive impact of share options.

As at 30 September 2016, EPRA NAV and NNNAV did not include the dilutive impact of the 2012 convertible bond, as the Group’s share price was below the exchange price of 693 pence. IFRS net assets includes the dilutive impact following the treatment of IFRS earnings per share. In the prior year period, both measures included the dilutive impact of the 2012 convertible bond, as the Group’s share price was above the exchange price.

30 September 2016 31 March 2016

Relevant net assets

£m

Relevant number

of shares million

Net asset value per

share pence

Relevant net assets

£m

Relevant number

of shares million

Net asset value per

share pence

EPRAEPRA NAV 9,254 1,039 891 10,074 1,096 919 EPRA NNNAV 8,623 1,039 830 9,640 1,096 880 IFRSBasic 9,181 1,030 891 9,619 1,029 935 Diluted 9,581 1,097 873 10,019 1,096 914

NOTES TO THE ACCOUNTS CONTINUED

39

2 Performance measures continued

Total accounting returnThe Group also measures financial performance with reference to total accounting return. This is calculated as the increase in EPRA net asset value per share and dividend paid in the year as a percentage of the EPRA net asset value per share at the start of the period.


Decrease in NAV per share

pence

Dividend per share paid

pence

Total accounting

return

Increase in NAV per share

pence

Dividend per share paid

pence

Total accounting

return

Total accounting return (28) 14.18 (1.5%) 62 13.84 9.1%

3 Revenue and costs



Underlying £m

Capital and other

£mTotal

£mUnderlying

£m

Capital and other

£mTotal

£m

Rent receivable 226 – 226 218 – 218 Spreading of tenant incentives and guaranteed rent increases (4) – (4) 10 – 10 Surrender premia 2 – 2 2 – 2 Gross rental income 224 – 224 230 – 230Trading property sales proceeds – 9 9 – 15 15 Service charge income 40 – 40 41 – 41 Management and performance fees (from joint ventures and funds) 3 – 3 3 – 3 Other fees and commissions 21 – 21 19 – 19 Revenue 288 9 297 293 15 308

Trading property cost of sales – (6) (6) – (7) (7)Service charge expenses (40) – (40) (41) – 41 Property operating expenses (10) – (10) (13) – 13 Other fees and commissions expenses (17) – (17) (15) – 15 Costs (67) (6) (73) (69) (7) (76)

221 3 224 224 8 232

1 The prior period comparatives have been restated. See note 1.

4 Valuation movements on propertySix months ended

30 September 2016

£m


2015 £m

Consolidated income statementRevaluation of properties (257) 397Revaluation of properties held by joint ventures and funds accounted for using the equity method (205) 217

(462) 614Consolidated statement of comprehensive incomeRevaluation of owner-occupied properties (2) 12

(464) 626


40

5 Net financing costsSix months ended

30 September 2016

£m


2015 £m

Underlying Financing chargesBank loans, overdrafts and derivatives (18) (20)Other loans (28) (46)Obligations under head leases (1) (1)

(47) (67)Development interest capitalised 4 5

(43) (62)Financing incomeDeposits, securities and liquid investments 2 1Loans to joint ventures – 2

2 3Net financing charges – underlying (41) (59)

Capital and other

Financing chargesValuation movements on translation of foreign currency debt – 2Hedging reserve recycling – (2)Valuation movements on fair value debt (88) 5Valuation movements on fair value derivatives 90 (4)Recycling of fair value movement on close-out of derivatives (10) (5)Capital financing costs (5) (6)Fair value movement on non-hedge accounted derivatives (4) –

(17) (10)Financing incomeFair value movement on convertible bonds 32 4

32 4Net financing income (charges) – capital 15 (6)

Total financing income 34 7Total financing charges (60) (72)Net financing costs (26) (65)

Interest on development expenditure is capitalised at the Group’s weighted average interest rate of 2.5% (Six months ended 30 September 2015: 3.1%). The weighted average interest rate on a proportionately consolidated basis at 30 September 2016 was 3.2% (Six months ended 30 September 2015: 3.6%).


41

6 TaxationSix months ended

30 September 2016

£m


2015 £m

Taxation income Current taxationCurrent period UK corporation taxation (30 September 2016: 19%; 30 September 2015: 20%) 1 2Adjustments in respect of prior periods – –Total current taxation income 1 2Deferred taxation on revaluations and derivatives – 5Group total taxation 1 7Attributable to joint ventures and funds – –Total taxation income 1 7

Taxation expense attributable to Underlying Profits for the six months ended 30 September 2016 was £nil (Six months ended 30 September 2015: £nil).


42

7 Property

Property reconciliation

Six months ended 30 September 2016 Year ended 31 March 2016 Investment

and development

propertiesLevel 3

£m

Trading properties

£m

Owner-occupied

Level 3£m

Total£m

Investment and

development properties

Level 3£m

Trading properties

£m

Owner-occupied

Level 3£m

Total£m

Carrying value at the start of the period/year 9,643 325 95 10,063 9,120 274 60 9,454Additions

– property purchases 74 – – 74 238 – – 238– development expenditure 48 28 – 76 54 59 – 113– capitalised interest and staff costs 3 3 – 6 4 5 – 9– capital expenditure on asset

management initiatives 28 – – 28 116 – – 116153 31 – 184 412 64 – 476

Depreciation – – – – – – (1) (1)Disposals (363) (6) – (369) (509) (11) – (520)Reclassifications 27 (27) – – (15) (2) 17 –Revaluations included in income statement (257) – – (257) 616 – – 616Revaluations included in OCI – – (2) (2) – – 19 19Movement in tenant incentives and contracted rent uplift balances (24) – – (24) 19 – – 19Carrying value at the end of the period/year 9,179 323 93 9,595 9,643 325 95 10,063Plus: surplus on trading properties 75 85Less: head lease liabilities (47) (37)Total Group property portfolio valuation at the end of the period/year 9,623 10,111Non-controlling interests (302) (324)Total Group property portfolio valuation at the end of the period/year attributable to shareholders 9,321 9,787

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 2014, ninth edition, published by The Royal Institute 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 Chief Financial Officer. The valuers meet with the external auditors and also present directly to the Audit Committee on a half yearly basis.

Property valuations are inherently subjective as they are made on the basis of significant unobservable inputs, including 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. There were no transfers between levels in the period. Inputs to the valuation, including equivalent yields, rental values and costs to complete, are ‘unobservable’ as defined by IFRS 13. The tables within the supplementary tables section set out the market value, yield and estimated rental values of the Group’s properties split by relevant sector

On 23 June 2016 the UK electorate voted to leave the European Union. Since the referendum, the external valuers have monitored market transactions and market sentiment in arriving at their opinion of fair value. There is still a shortage of comparable evidence of arm’s length transactions, resulting in the valuers exercising a greater degree of judgement than would be applied under more liquid market conditions.

Additional property covenant informationProperties valued at £1,880m (year ended 31 March 2016: £2,559m) were subject to a security interest and other properties of non-recourse companies amounted to £1,181m (year ended 31 March 2016: £1,244), totalling £3,061m (year ended 31 March 2016: £3,803m).


43

8 Joint ventures and funds

Summary movement for the period of the investments in joint ventures and fundsJoint

ventures £m

Funds £m

Total £m

Equity £m

Loans £m

Total £m

At 1 April 2016 3,109 244 3,353 2,851 502 3,353Additions 34 2 36 36 – 36Disposals (26) – (26) – (26) (26)Share of loss after taxation (123) (8) (131) (131) – (131)Distributions and dividends:

– Capital (32) (6) (38) (38) – (38)– Revenue (45) – (45) (45) – (45)

Hedging and exchange movements (3) (1) (4) (4) – (4)At 30 September 2016 2,914 231 3,145 2,669 476 3,145

Additional investments in joint ventures and funds covenant informationAt 30 September 2016 the investments in joint ventures included within the total investments in joint ventures and funds was £3,140m (31 March 2016: £3,348m), being the £3,145m (31 March 2016: £3,353m) total investment shown above, less the net investment of £5m (31 March 2016: £5m) in PREF, a property fund in continental Europe.

Summary income statement for the period of the investments in joint ventures and fundsSix months ended

30 September 2016 Six months ended 30 September 2015

£m100%

£mBL Share

£m100%

£mBL Share

Revenue 280 141 266 133Costs (64) (33) (56) (28)

216 108 210 105

Administrative expenses (3) (2) (2) (1)Net financing costs (75) (38) (81) (41)Underlying Profit before taxation 138 68 127 63

– –Valuation movement (408) (205) 431 217Capital financing costs (12) (6)Profit on disposal of investment properties, trading properties and investments 23 12 4 2(Loss) profit on ordinary activities before taxation (259) (131) 562 282

Taxation – – (1) –(Loss) profit on ordinary activities after taxation (259) (131) 561 282

(Loss) profit split between controlling and non-controlling interestsAttributable to non-controlling interests (2) (2)Attributable to shareholders of the Company (133) 280


44

8 Joint ventures and funds continued

Operating cash flows of joint ventures and funds (Group share)Six months ended

30 September 2016

£m


2015 £m

Rental income received from tenants 96 102Fees and other income received – 1Operating expenses paid to suppliers and employees (10) (9)Cash generated from operations 86 94Interest paid (41) (44)UK corporation tax paid – (3)Cash inflow from operating activities 45 47Cash inflow from operating activities deployed as:Surplus cash retained within joint ventures and funds 20 17Revenue distributions per consolidated statement of cash flows 25 30Revenue distributions split between controlling and non-controlling interestsAttributable to non-controlling interests 2 2Attributable to shareholders of the Company 23 28

9 Other investments

30 September 2016

£m

31 March 2016

£m

Investment held for trading 93 101Loans, receivables and other 56 41

149 142

The investment held for trading comprises interests as a trust beneficiary. The trusts’ assets comprise freehold reversions in a pool of commercial properties, comprising Sainsbury’s superstores. The interest was categorised as Level 3 in the fair value hierarchy, is subject to the same inputs as those disclosed in note 7, and its fair value was determined by the Directors, supported by an external valuation.


45

10 Net debt

10.1 Fair value and book value of net debt30 September 2016 31 March 2016

Fair value £m

Book value £m

Difference £m

Fair value £m

Book value £m

Difference £m

Debentures and unsecured bonds 1,783 1,696 87 1,637 1,613 24Convertible bonds 747 747 – 779 779 –Bank debt and other floating rate debt 1,130 1,119 11 1,384 1,369 15Gross debt 3,660 3,562 98 3,800 3,761 39Interest rate and currency derivative liabilities 172 172 – 137 137 –Interest rate and currency derivative assets (255) (255) – (167) (167) –Cash and short-term deposits (107) (107) – (114) (114) –Net debt 3,470 3,372 98 3,656 3,617 39Net debt attributable to non-controlling interests (106) (104) (2) (106) (104) (2)Net debt attributable to shareholders of the Company 3,364 3,268 96 3,550 3,513 37

The fair values of debt, debentures and the convertible bonds 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. Short-term debtors and creditors and other investments (see note 9) have been excluded from the disclosures on the basis that the fair value is equivalent to the book value.

10.2 Loan to value

Group loan to value (LTV) 30 September

2016 £m

31 March2016

£m

Group loan to value (LTV) 24.6% 25.2%

Principal value of gross debt 3,297 3,552 Less debt attributable to non-controlling interests (107) (109)Less cash and short-term deposits (balance sheet) (107) (114)Plus cash attributable to non-controlling interests 5 8 Total net debt for LTV calculation 3,088 3,337 Group property portfolio valuation (note 7) 9,623 10,111 Investments in joint ventures and funds (note 8) 3,145 3,353 Other investments (note 9) 149 142 Less property and investments attributable to non-controlling interests (355) (384)Total assets for LTV calculation 12,562 13,222

Proportionally consolidated loan to value (LTV)30 September

2016 £m

31 March2016

£m

Proportionally consolidated loan to value (LTV) 31.6% 32.1%

Principal value of gross debt 4,928 5,217Less attributable to non-controlling interests (124) (128)Less cash and short-term deposits (368) (353)Plus cash attributable to non-controlling interests 7 9Total net debt for proportional LTV calculation 4,443 4,745Group property portfolio valuation (note 7) 9,623 10,111Share of property of joint ventures and funds 4,666 4,937Other investments (note 9) 149 142Less other investments attributable to joint ventures and funds (3) (4)Less property attributable to non-controlling interests (371) (400)Total property for proportional LTV calculation 14,064 14,786


46

10 Net debt continued

10.3 British Land Unsecured Financial Covenants

The two financial covenants applicable to the Group unsecured debt including convertible bonds are shown below:

30 September2016

£m

31 March2016

£m

Net Borrowings not to exceed 175% of Adjusted Capital and Reserves 33% 34%

Principal amount of gross debt 3,297 3,552 Less the relevant proportion of borrowings of the partly-owned subsidiary / non-controlling interests (107) (109)Less cash and deposits (balance sheet) (107) (114)Plus the relevant proportion of cash and deposits of the partly-owned subsidiary / non-controlling interests 5 8 Net Borrowings 3,088 3,337 Share capital and reserves (balance sheet) 9,181 9,619 EPRA deferred tax adjustment (EPRA Table A) 2 5 Trading property surpluses (EPRA Table A) 76 93 Exceptional refinancing charges (see below) 281 287 Fair value adjustments of financial instruments (EPRA Table A) 205 198 Less reserves attributable to non-controlling interests (balance sheet) (249) (277)Adjusted Capital and Reserves 9,496 9,925

In calculating Adjusted Capital and Reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of £281m (31 March 2016: £287m) to reflect the cumulative net amortised exceptional items relating to the refinancings in the years ended 31 March 2005, 2006 and 2007.

30 September2016

£m

31 March2016

£m

Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets 29% 29%

Principal amount of gross debt 3,297 3,552 Less cash and deposits not subject to a security interest (being £89m less the relevant proportion of cash and deposits of the partly owned subsidiary of £2m) (87) (88)Less principal amount of secured and non-recourse borrowings (1,278) (1,563)Net Unsecured Borrowings 1,932 1,901 Properties (note 7) 9,623 10,111 Investments in joint ventures and funds (note 8) 3,145 3,353 Other investments (note 9) 149 142 Less investments in joint ventures (note 8) (3,140) (3,348)Less encumbered assets (note 7) (3,061) (3,803)Unencumbered Assets 6,716 6,455


47

10 Net debt continued

10.4 Convertible bonds

1.5% Convertible bond 2012 (maturity 2017)On 10 September 2012 British Land (Jersey) Limited (the Issuer), a wholly-owned subsidiary of the Group, issued £400 million 1.5% guaranteed convertible bonds due 2017 (the 2012 bonds) at par. The 2012 issuer is fully guaranteed by the Company in respect of the 2012 bonds.

Subject to their terms, the 2012 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. Bondholders may exercise their conversion right at any time up to (but excluding) the 20th dealing day before 10 September 2017 (the maturity date).

The initial exchange price was 693.07 pence per ordinary share. The exchange price is adjusted based on certain events.

From 25 September 2015, the Company has the option to redeem the 2012 bonds at par if the Company’s share price has traded above 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the 2012 bonds have been converted, redeemed, or purchased and cancelled. The 2012 bonds will be redeemed at par on 10 September 2017 (the maturity date) if they have not already been converted, redeemed or purchased and cancelled. No redemption of the bonds occurred in the period.

0% Convertible bond 2015 (maturity 2020)On 9 June 2015 British Land (White) 2015 Limited (the 2015 Issuer), a wholly owned subsidiary of the Group, issued £350 million zero coupon guaranteed convertible bonds due 2020 (the 2015 bonds) at par. The 2015 Issuer is fully guaranteed by the Company in respect of the 2015 bonds.

Subject to their terms, the 2015 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. From 20 July 2015 up to and including 29 June 2018, a bondholder may exercise its conversion right if the share price has traded at a level exceeding 130% of the exchange price for a specified period. Thereafter, and up to but excluding the 7th dealing day before 9 June 2020 (the maturity date), a bondholder may convert at any time.

The initial exchange price was 1103.32 pence per ordinary share. The exchange price is adjusted based on certain events (such as the Company paying dividends in any year above 14.18 pence per ordinary share).

From 30 June 2018, the Company has the option to redeem the 2015 bonds at par if the Company’s share price has traded above 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the 2015 bonds have been converted, redeemed, or purchased and cancelled. The 2015 bonds will be redeemed at par on 9 June 2020 (the maturity date) if they have not already been converted, redeemed or purchased and cancelled.

10.5 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).


Level 1 £m

Level 2 £m

Level 3 £m

Total £m

Level 1 £m

Level 2 £m

Level 3 £m

Total £m

Interest rate and currency derivative assets – (255) – (255) – (167) – (167)Other investments – available for sale (14) – – (14) – – – –Other investments – held for trading – – (93) (93) – – (101) (101)Assets (14) (255) (93) (362) – (167) (101) (268)Interest rate and currency derivative liabilities – 172 – 172 – 137 – 137Convertible bonds 747 – – 747 779 – – 779Liabilities 747 172 – 919 779 137 – 916Total 733 (83) (93) 557 779 (30) (101) 648

There have been no transfers between levels in the period. An £8m valuation loss in relation to the investment held for trading has been recorded in the six months ended 30 September 2016 (30 September 2015: £3m valuation gain). Further disclosures in relation to the valuation of the investment held for trading are included within note 9.


48

11 Dividend

The 2017 second quarter dividend of 7.30 pence per share, totalling £75m, is payable on 10 February 2017 to shareholders on the register at close of business on 6 January 2017.

The Board will announce the availability of the Scrip Dividend Alternative, if available, via the Regulatory News Service and on its website (www.britishland.com/dividends), no later than 4 business days before the ex-dividend date of 5 January 2017. The Board expects to announce the split between Property Income Distributions (‘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.

The 2017 first quarter dividend of 7.30 pence per share, totalling £75m was paid on 11 November 2016. The whole of the first quarter dividend was a PID and no scrip alternative was offered. £63m was paid to shareholders, and £10m of withholding tax was retained.

The Consolidated Statement of Changes in Equity shows total dividends in the six months to 30 September 2016 of £146m, £73m being the third quarter 2016 dividend of 7.09 pence per share paid on 6 May 2016, and the fourth quarter 2016 dividend of 7.09 pence per share, paid on 5 August, totalling £73m. No scrip alternatives were offered for the third or fourth quarters. The whole of the third quarter dividend was a PID, and half of the fourth quarter dividend was a PID.


49

12 Segment information Operating segmentsThe Group allocates resources to investment and asset management according to the sectors it expects to perform over the medium term. Its three principal sectors are Offices and residential, Retail and leisure and Canada Water. The Office sector includes residential, as this is often incorporated into Office schemes, and Retail includes leisure, for a similar rationale. Canada Water was added as a principal sector in the year ended 31 March 2016, reflecting the key role the campus has in the strategy of the Group. Consequently the prior period comparatives in this note have been restated to reflect this additional principal sector. There is no impact on the total figures disclosed for the prior period.

The relevant gross rental income, net rental income, operating result and property assets, being the measures of segment revenue, segment result and segment assets used by the management of the business, are set out below. Management reviews the performance of the business principally on a proportionally consolidated basis, which includes the Group’s share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group’s subsidiaries. The chief operating decision maker for the purpose of segment information is the Executive Committee.

Gross rental income is derived from the rental of buildings. Operating result is the net of net rental income, fee income and administrative expenses. No customer exceeded 10% of the Group’s revenues in either period.

Segment resultSix months ended 30 September

Offices and residential Retail and leisure Canada Water Other/unallocated Total

2016£m

2015£m

2016£m

2015£m

2016£m

2015£m

2016£m

2015£m

2016£m

2015£m

Gross rental incomeBritish Land Group 70 66 142 150 5 3 – – 217 219Share of joint ventures and funds 60 54 50 51 – – – 2 110 107Total 130 120 192 201 5 3 – 2 327 326

Net rental incomeBritish Land Group 67 61 136 142 4 3 – – 207 206Share of joint ventures and funds 58 52 47 49 – – – 2 105 103

Total 125 113 183 191 4 3 – 2 312 309

Operating resultBritish Land Group 66 51 129 133 3 3 (26) (26) 172 161Share of joint ventures and funds 56 54 49 50 – – – 2 105 106Total 122 105 178 183 3 3 (26) (24) 277 267

Reconciliation to Underlying Profit before taxation

Six months ended 30

September 2016

£m

Six months ended 30

September 2015

£m

Operating result 277 267 Net financing costs (78) (96)Underlying Profit 199 171 Reconciliation to profit on ordinary activities before taxationUnderlying Profit 199 171 Capital and other (411) 644 Underlying Profit attributable to non-controlling interests 7 8 Total (loss) profit on ordinary activities before taxation (205) 823

Of the gross rental income above, £nil (six months ended 30 September 2015: £2m) was derived from outside the UK.


50

12 Segment information continued

Segment assets Offices and residential Retail and leisure Canada Water Total

30 September 2016

£m

31 March 2016

£m

30 September 2016

£m

31 March 2016

£m

30 September 2016

£m

31 March 2016

£m

30 September 2016

£m

31 March 2016

£m

Property assetsBritish Land Group 4,143 4,181 4,889 5,323 289 283 9,321 9,787 Share of funds and joint ventures 2,676 2,843 1,922 2,018 – – 4,598 4,861 Total 6,819 7,024 6,811 7,341 289 283 13,919 14,648

Reconciliation to net assets

British Land Group

30 September 2016

£m

31 March 2016

£m

Property assets 13,919 14,648 Other non-current assets 146 138 Non-current assets 14,065 14,786

Other net current liabilities (247) (257)Adjusted net debt (4,463) (4,765)Other non-current liabilities (101) (90)EPRA net assets (undiluted) 9,254 9,674 Convertible dilution – 400EPRA net assets (diluted) 9,254 10,074 Non-controlling interests 249 277 EPRA adjustments (322) (732)Net assets 9,181 9,619

13 Related party transactions

There have been no material changes in the related party transactions described in the last annual report.

14 Contingent liabilities

The Group, joint ventures and funds have 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.

15 Share capital and reserves

£mOrdinary shares

of 25p each

Issued, called and fully paidAt 1 April 2016 260 1,040,562,323Issues – 357,689At 30 September 2016 260 1,040,920,012

At 30 September 2016, of the issued 25p ordinary shares, 2,685 shares were held in the ESOP trust (31 March 2016: 627), 11,266,245 shares were held as treasury shares (31 March 2016: 11,266,245 ) and 1,029,651,082 shares were in free issue (31 March 2016: 1,029,295,451). No treasury shares were acquired by the ESOP trust during the year. All issued shares are fully paid.


51

Table A: Summary income statement and balance sheet

Summary income statement based on proportional consolidation for the six months ended 30 September 2016The 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 basis and excluding non-controlling interests.


Group£m

Joint ventures and funds

£m

Less non-controlling

interests£m

Proportionally consolidated

£mGroup

£m

Joint ventures and funds

£m

Less non-controlling

interests£m

Proportionally consolidated

£m

Gross rental income 224 113 (10) 327 230 110 (14) 326Property operating expenses (10) (5) – (15) (13) (5) 1 (17)Net rental income 214 108 (10) 312 217 105 (13) 309

Administrative expenses (42) (2) 1 (43) (49) (1) 1 (49)Net fees and other income 7 – 1 8 7 – – 7Ungeared Income Return 179 106 (8) 277 175 104 (12) 267

Net financing costs (41) (38) 1 (78) (59) (41) 4 (96)Underlying Profit 138 68 (7) 199 116 63 (8) 171Underlying taxation – – – – – – – –Underlying Profit after taxation 138 68 (7) 199 116 63 (8) 171Valuation movement (462) 642Other capital and taxation (net)1 (411) 3Capital and other (873) 645Total return (674) 816

1 Includes other comprehensive income, movement in dilution of share options and the movement in items excluded for EPRA NAV.

SUPPLEMENTARY DISCLOSURES

UNAUDITED

52

Table A continued

Summary balance sheet based on proportional consolidation as at 30 September 2016The 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 basis and excluding non-controlling interests.

Group£m

Share of joint

ventures & funds

£m

Less non-

controlling interests

£m

Share options

£m

Deferred tax£m

Mark-to-market on

effective cash flow hedges and related

debt adjustments

£m

Head leases

£m

Valuation surplus on

trading properties

£m

EPRA Net assets

30 September 2016

£m

EPRA Net assets31

March 2016

£m

Retail properties 5,213 2,007 (371) – – – (38) – 6,811 7,341Office properties 4,084 2,675 – – – – (16) 76 6,819 7,024Canada Water properties 298 – – – – – (9) – 289 283Total properties 9,595 4,682 (371) – – – (63) 76 13,919 14,648Investments in joint ventures and funds 3,145 (3,145) – – – – – – – –Other investments 149 (3) – – – – – – 146 138Other net (liabilities) assets (336) (119) 3 39 2 – 63 – (348) (347)Net debt (3,372) (1,415) 119 – – 205 – – (4,463) (4,765)Dilution due to 1.5% convertible bond – – – – – – – – – 400Net assets 9,181 – (249) 39 2 205 – 76 9,254 10,074EPRA NAV per share (note 2) 891p 919p


£mPence per

share £mPence per

share

Opening EPRA NAV 10,074 919 9,035 829Income return 199 18 365 34Capital return (473) (43) 909 77Dividend paid (146) (13) (235) (21)Remove dilution of 1.5% convertible bond (400) 10 – –Closing EPRA NAV 9,254 891 10,074 919

SUPPLEMENTARY DISCLOSURES CONTINUED

53

Table B: EPRA Performance measures

EPRA Performance measures summary tableSix months ended

30 September 2016Six months ended

30 September 2015

£mPence per

share £mPence per

share

EPRA Earnings – basic 199 19.3 171 16.7– diluted 199 19.3 174 16.0

EPRA Net Initial Yield 4.3% 4.1%EPRA ‘topped-up’ Net Initial Yield 4.7% 4.6%EPRA Vacancy Rate 2.7% 2.6%


Net assets £m

Net asset value per

share penceNet assets

£m

Net asset value per

share pence

EPRA NAV 9,254 891 10,074 919 EPRA NNNAV 8,623 830 9,640 880

Calculation and reconciliation of EPRA/IFRS earnings and EPRA/IFRS earnings per shareSix months ended

30 September 2016

£m


2015£m

(Loss) profit attributable to the shareholders of the Company (195) 816Exclude:Group – taxation (1) (7)Group – valuation movement 257 (397)Group – profit on disposal of investment properties and investments (27) (26)Group – profit on disposal of trading properties (3) (8)Joint ventures and funds – valuation movement (including result on disposals) 193 (219)Joint ventures and funds - capital financing costs 6 –Changes in fair value of financial instruments and associated close-out costs (15) 6Non-controlling interests in respect of the above (16) 6EPRA earnings – basic 199 171Dilutive effect of 1.5% convertible bond – 3EPRA earnings – diluted 199 174

(Loss) profit attributable to the shareholders of the Company (195) 816Dilutive effect of 1.5% convertible bond (26) 3IFRS earnings – diluted (221) 819


2016Number

million


2015Number

million

Weighted average number of shares 1,040 1,033Adjustment for Treasury shares (11) (11)IFRS/EPRA weighted average number of shares (basic) 1,029 1,022Dilutive effect of share options 1 2Dilutive effect of ESOP shares 3 4Dilutive effect of 1.5% convertible bond 58 58IFRS weighted average number of shares (diluted) 1,091 1,086Remove dilutive effect of 1.5% convertible bond (58) –EPRA weighted average number of shares (diluted) 1,033 1,086


54

Table B continued

Net assets per share 30 September 2016 31 March 2016

£mPence

per share £mPence

per share

Balance sheet net assets 9,181 9,619 Deferred tax arising on revaluation movements 2 5 Mark-to-market on effective cash flow hedges and related debt adjustments 205 198 Dilution effect of share options 39 36 Surplus on trading properties 76 93 1.5% convertible bond adjustment – 400 Less non-controlling interests (249) (277)EPRA NAV 9,254 891 10,074 919 Deferred tax arising on revaluation movements (15) (24)Mark-to-market on effective cash flow hedges and related debt adjustments (205) (153)Mark-to-market on debt (411) (257)EPRA NNNAV 8,623 830 9,640 880

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 and derivatives.

30 September 2016

Numbermillion

31 March 2016

Numbermillion

Number of shares at period/year end 1,041 1,040 Adjustment for treasury shares (11) (11)IFRS/EPRA Number of shares (basic) 1,030 1,029 Dilutive effect of share options 3 2 Dilutive effect of ESOP shares 6 7 Dilutive effect of 1.5% convertible bond 58 58 IFRS number of shares (diluted) 1,097 1,096 Remove dilutive effect of 1.5% convertible bond (58) –EPRA number of shares (diluted) 1,039 1,096


55

Table B continued

EPRA Net Initial Yield and ‘topped-up’ Net Initial Yield30 September

2016£m

30 September 2015

£m

Investment property – wholly-owned 9,321 9,569 Investment property – share of joint ventures and funds 4,598 4,815 Less developments, residential and land (951) (805)Completed property portfolio 12,968 13,579 Allowance for estimated purchasers’ costs 914 846 Gross up completed property portfolio valuation 13,882 14,425 Annualised cash passing rental income 610 594 Property outgoings (9) (8)Annualised net rents 601 586 Rent expiration of rent-free periods and fixed uplifts1 50 76 ‘Topped-up’ net annualised rent 651 662 EPRA Net Initial Yield 4.3% 4.1%EPRA 'topped-up' Net Initial Yield 4.7% 4.6%

Including fixed/minimum uplifts received in lieu of rental growth 16 25 Total ‘topped-up’ net rents 667 687 Overall ‘topped-up’ Net Initial Yield 4.8% 4.8%‘Topped-up’ net annualised rent 651 662 ERV vacant space 19 18 Reversions 31 25 Total ERV 701 705 Net Reversionary Yield 5.0% 4.9%

1 The weighted average period over which rent-free periods expire is 1 year (30 September 2015: 1 year).

The above is stated for the UK portfolio only.

EPRA Net Initial Yield (NIY) basis of calculationEPRA 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 is determined by our external valuers as at 30 September 2016, 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 Rate30 September

2016£m

30 September 2015

£m

Annualised potential rental value of vacant premises 19 18 Annualised potential rental value for the completed property portfolio 710 708 EPRA Vacancy Rate 2.7% 2.6%The above is stated for the UK portfolio only.


56

Table B continued

EPRA Cost Ratios


2016£m


2015£m

Property operating expenses 10 12Administrative expenses 41 48Share of joint ventures and funds expenses 7 6Less: Performance & management fees (from joint ventures & funds) (4) (3)

Other fees and commission (4) (4)Ground rent costs (1) (1)

EPRA Costs (including direct vacancy costs) (A) 49 58Direct vacancy costs (6) (5)EPRA Costs (excluding direct vacancy costs) (B) 43 53

Gross Rental Income less ground rent costs 215 218Share of joint ventures and funds (Gross Rental Income less ground rent costs) 111 107Total Gross Rental Income (C) 326 325

EPRA Cost Ratio (including direct vacancy costs) (A/C) 15.0% 17.8%EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 13.2% 16.3%

Overhead and operating expenses capitalised (including share of joint ventures and funds) 2 2

In the current and prior periods employee costs in relation to staff time on development projects are capitalised into the base cost of relevant development assets.

Table C: Gross rental income


2016£m


2015£m

Rent receivable 317 304Spreading of tenant incentives and guaranteed rent increases 8 20 Surrender premia 2 2 Gross rental income 327 326

The current and prior period information is presented on a proportionally consolidated basis, excluding non-controlling interests.

Table D: Property related capital expenditure

Six months ended 30 September 2016 Year ended 31 March 2016

Group

Joint ventures

and funds Total Group

Joint ventures

and funds Total

Acquisitions 74 – 74 238 – 238Development 72 11 83 104 58 162Like-for-like portfolio 35 23 58 99 6 105Other 9 1 10 25 15 40Total property related capex 190 35 225 466 79 545

The above is presented on a proportionally consolidated basis, excluding non-controlling interests and business combinations. The ‘Other’ category contains amounts owing to tenant incentives of £4m (31 March 2016: £27m), capitalised staff costs of £2m (31 March 2016: £4m) and capitalised interest of £4m (31 March 2016: £9m).


57


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

From 1 April 2016 Price

(Gross) Price

(BL Share) Annual

Passing Rent

Acquisitions Sector Region £m £m £m2

Completed

New George Street Estate, Plymouth Retail South 64 64 5

Hercules Unit Trust unit purchase1 Retail Various 18 18 1

Dock Offices Canada Water London 8 8 -

Total 90 90 6

1 Units purchased over the course of the period. £18m represents purchased GAV 2 BL share of annualised rent topped up for rent frees From 1 April 2016

Price (Gross)

Price (BL Share)

Annual Passing

Rent

Disposals Disposals

Sector Region £m £m £m1

Completed

Debenhams, Oxford Street Retail London 400 400 13

Superstores Retail Various 147 79 3

Dumfries Cuckoo Bridge Retail Scotland 20 20 1

The Hempel Collection Residential London 5 5 -

Aldgate Place Residential London 13 6 -

Exchanged

Portfolio of Retail assets (York Clifton Moor, Debenhams Manchester, Wakefield Westgate)

Retail North 191 191 12

The Hempel Collection Residential London 8 8 -

Aldgate Place Residential London 1 1 -

Total 785 710 29

1 BL share of annualised rent topped up for rent frees

58


Gross Rental Income1,2

Accounting Basis £m 6 months to 30 September 2016 Annualised as at 30 September 2016

Group JVs & Funds

3

Total Group JVs & Funds

3

Total

Regional 29 43 72 58 84 142

Local 49 13 62 97 26 123 Multi-lets 78 56 134 155 110 265

Department Stores and Leisure 26 - 26 43 - 43

Superstores 5 16 21 10 31 41

Solus/Other 10 - 10 20 - 20 Retail and Leisure 119 72 191 228 141 369

West End 66 - 66 127 - 127

City 2 60 62 4 120 124 Offices 68 60 128 131 120 251

Residential4 2 - 2 3 - 3 Offices and Residential 70 60 130 134 120 254

Canada Water 5 - 5 8 - 8

Total 194 132 326 370 261 631

Table with previous Retail classification provided on Company website at www.britishland.com/results 1 Excluding developments under construction and assets held for development 2 Gross rental income will differ from annualised rents due to accounting adjustments for fixed and minimum contracted rental uplifts and lease incentives 3 Group’s share of properties in joint ventures and funds including HUT at share 4 Stand-alone residential

Major Holdings

At 30 September 2016 BL Share Sq ft Rent Occupancy Lease

(excl. developments under construction) % '000 £m pa1 rate %

2,4 length

yrs3,4

Broadgate 50 4,721 225 98.7 8.0

Regent's Place 100 1,590 80 99.1 7.1

Paddington Central 100 806 34 99.9 7.3

Meadowhall, Sheffield 50 1,500 82 98.3 6.6

The Leadenhall Building 50 603 40 99.9 10.8

Sainsbury's Superstores5 52 2,259 49 100.0 10.8

Drake Circus, Plymouth6 100 1,132 21 98.0 5.1

Teesside, Stockton 100 523 17 98.5 6.1

Glasgow Fort 77 510 20 97.4 6.4

Ealing Broadway 100 423 13 93.1 6.1 1 Annualised EPRA contracted rent including 100% of Joint Ventures and Funds 2 Includes accommodation under offer or subject to asset management at 30 September 2016 3 Weighted average to first break 4 Excludes committed developments (100 Liverpool Street) 5 Comprises stand-alone stores 6 Includes New George Street Estate, Plymouth acquired during the period

59

http://www.britishland.com/results


Portfolio Valuation At 30 September 2016 Group JVs &

Funds1

Total1 H1 Change²

£m £m £m % £m

Regional 1,087 1,791 2,878 (2.8) (83)

Local 1,796 471 2,267 (4.8) (116) Multi-lets 2,883 2,262 5,145 (3.7) (199)

Department Stores and Leisure 638 1 639 3.2 32

Superstores 139 542 681 (3.0) (24)

Solus/Other 346 - 346 3.7 13 Retail and Leisure 4,006 2,805 6,811 (2.4) (178)

West End 3,868 - 3,868 (2.4) (95)

City 103 2,653 2,756 (4.9) (143) Offices 3,971 2,653 6,624 (3.5) (238)

Residential3 173 22 195 - - Offices and Residential 4,144 2,675 6,819 (3.3) (238)

Canada Water 289 - 289 (2.1) (6)

Total 8,439 5,480 13,919 (2.8) (422)

Standing Investments 7,810 5,287 13,097 (2.8) (395)

Developments 629 193 822 (3.0) (27) 1 Group’s share of properties in joint ventures and funds including HUT at ownership share 2 Valuation movement during the period (after taking account of capex) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales 3 Stand-alone residential

Portfolio Valuation – Previous Classification Basis

At 30 September 2016 Group JVs & Funds

1

Total1 H1 Change²

£m £m £m % £m

Shopping parks 2,104 1,137 3,241 (4.1) (139)

Shopping centres 1,125 1,121 2,246 (2.1) (47)

Superstores 139 542 681 (3.0) (24)

Department stores 241 1 242 5.6 34

Leisure 397 4 401 (0.5) (2) Retail and Leisure 4,006 2,805 6,811 (2.4) (178)

1 Group’s share of properties in joint ventures and funds including HUT at ownership share 2 Valuation movement during the period (after taking account of capex) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales

60


Portfolio Weighting

At 30 September 2015 2016 2016 2016

(current) (current) (pro-forma1)

% % £m %

Regional Lifestyle 19.5 20.7 2,878 19.5

Local Lifestyle 16.3 16.3 2,267 16.1 Multi-lets 35.8 37.0 5,145 35.6

Department Stores and Leisure 7.0 4.6 639 4.4

Superstores 6.0 4.9 681 4.8

Solus/Other 2.6 2.5 346 2.3 Retail and Leisure 51.4 49.0 6,811 47.1

West End 25.5 27.8 3,868 28.4

City 19.6 19.8 2,756 21.1 Offices 45.1 47.6 6,624 49.5

Residential2 1.5 1.4 195 1.5 Offices and Residential 46.6 49.0 6,819 51.0

Canada Water 2.0 2.0 289 1.9

Total 100.0 100.0 13,919 100.0

London Weighting 57% 58% 8,508 58%

Table with previous/IPD classification provided on Company website at www.britishland.com/results

1 Pro forma for developments under construction and committed developments at estimated end value (as determined by the Group’s external valuers) and post period end transactions 2 Stand-alone residential

Total Property Return (as calculated by IPD)

6 months to 30 September 2016 Retail Offices Total

% British Land IPD British Land IPD British Land IPD

Capital Return (2.4) (3.0) (3.4) (2.9) (2.8) (2.1)

- ERV Growth 0.9 0.5 0.1 1.0 0.5 0.8

- Yield Expansion1 18 bps 20 bps 21 bps 21 bps 19 bps 15 bps

Income Return 2.6 2.5 1.7 1.8 2.1 2.3

Total Property Return 0.1 (0.5) (1.8) (1.1) (0.8) 0.2 1 Net equivalent yield movement

61


Portfolio Yields and ERV Movements 1,2

At 30 September 2016 EPRA net

initial yield %

EPRA topped up net initial

yield %3

Overall topped up net initial

yield %4

Net equivalent

yield %

Net equivalent

yield expansion

bps5

Net reversionary

yield %

ERV Growth

%5,6

Regional 4.5 4.7 4.7 5.0 16 5.0 1.3

Local 5.1 5.3 5.4 5.5 29 5.5 1.3 Multi-lets 4.8 4.9 5.0 5.2 22 5.2

1.3

Department Stores and Leisure

6.0 6.0 7.5 6.1 4 4.5

0.4

Superstores 5.5 5.5 5.5 5.4 8 5.3 (3.0)

Solus/Other 5.7 5.7 5.7 5.3 9 4.9 4.8 Retail and Leisure 5.0 5.1 5.3 5.3 18 5.1 0.9

West End 3.8 4.0 4.1 4.5 16 4.8

0.3

City 3.3 4.6 4.6 4.6 27 5.3 (0.2) Offices 3.6 4.2 4.3 4.6 21 5.0 0.1

Canada Water 2.7 2.7 2.8 3.3 4 3.4

0.9

Total 4.3 4.7 4.8 4.9 19 5.0

0.5 1 Including notional purchaser's costs 2 Excluding developments under construction, committed developments, assets held for development and residential assets 3 Including rent contracted from expiry of rent-free periods and fixed uplifts not in lieu of rental growth 4 Including fixed/minimum uplifts (excluded from EPRA definition) 5 6 months to 30 September 2016 6 As calculated by IPD

Portfolio Yields and ERV Movements1,2

– Previous Classification Basis

At 30 September 2016 EPRA net

initial yield %

EPRA topped up net initial

yield %3

Overall topped up net initial

yield %4

Net equivalent

yield %

Net equivalent yield

expansion bps

5

Net reversionary

yield %

ERV Growth

%5,6

Shopping Parks 5.0 5.1 5.2 5.3 26 5.3 1.6

Shopping Centres 4.6 4.8 4.8 5.0 14 5.1 1.3

Superstores 5.5 5.5 5.5 5.4 8 5.3

(3.0)

Department Stores 5.3 5.3 7.3 5.5 3 4.1 0.4

Leisure 6.4 6.4 7.7 6.5 4 4.8 0.4 Retail and Leisure 5.0 5.1 5.3 5.3 18 5.1 0.9

1 Including notional purchaser's costs 2 Excluding developments under construction, committed developments, assets held for development and residential assets 3 Including rent contracted from expiry of rent-free periods and fixed uplifts not in lieu of rental growth 4 Including fixed/minimum uplifts (excluded from EPRA definition) 5 6 months to 30 September 2016 6 As calculated by IPD

62


Lease Length and Occupancy1

At 30 September 2016 Average lease length yrs Occupancy rate %

To expiry To break Occupancy Occupancy (underlying)

2

Regional 8.0 6.9 96.6 98.1

Local 8.4 7.4 97.6 98.0 Multi-lets 8.2 7.2 97.1 98.1

Department Stores and Leisure 18.3 18.2 99.9 99.9

Superstores 12.0 11.6 100.0 100.0

Solus/Other 13.0 12.8 100.0 100.0 Retail and Leisure 10.0 9.2 97.8 98.5

West End 9.1 7.2 95.5 96.7

City 10.1 8.5 98.2 98.5 Offices 9.6 7.8 96.8 97.5

Canada Water 7.1 6.9 96.9 98.1

Total 9.8 8.5 97.3 98.1

Table with previous or IPD classification provided on Company website at www.britishland.com/results 1 Excluding developments under construction, committed developments, assets held for development and residential assets 2 Including accommodation under offer or subject to asset management and owner-occupied space

63



Annualised Rent and Estimated Rental Value (ERV)1

At 30 September 2016 Annualised rent (valuation basis) £m

2

ERV £m Average rent £psf

Group JVs & Funds

Total Total Contracted3

ERV

Regional 60 85 145 158 31.2 33.3

Local 98 28 126 135 24.3 25.2 Multi-lets 158 113 271 293 27.6 29.0

Department Stores and Leisure 41 - 41 32 13.8 10.6

Superstores 8 32 40 38 20.7 19.7

Solus/Other 20 - 20 17 19.8 17.0 Retail and Leisure 227 145 372 380 23.7 23.7

West End 137 - 137 171 53.0 61.7

City 4 88 92 149 51.0 60.2 Offices 141 88 229 320 52.4 60.9

Residential4 4 - 4 4 Offices and Residential 145 88 233 324

Canada Water 8 - 8 10 18.5 21.7

Total 380 233 613 714 29.7 31.9

Table with previous classification provided on Company website at www.britishland.com/results 1 Excluding developments under construction, committed developments (100 Liverpool Street with annualised rents £9m and ERV £13m) and assets held for development 2 Gross rents plus, where rent reviews are outstanding, any increases to ERV (as determined by the Group’s external valuers), less any ground rents payable under head leases, excludes contracted rent subject to rent free and future uplift 3 Annualised rent, plus rent subject to rent free 4 Stand-alone residential

64



Rent subject to Open Market Rent Review1

For period to 31 March 2017 2018 2019 2020 2021 2017-19 2017-21

At 30 September 2016 £m £m £m £m £m £m £m

Regional 6 11 17 10 18 34 62

Local 4 25 21 12 10 50 72 Multi-lets 10 36 38 22 28 84 134

Department Stores and Leisure - - - - - - -

Superstores 1 4 8 11 13 13 37

Solus/Other - - - - - - - Retail and Leisure 11 40 46 33 41 97 171

West End 4 22 20 15 9 46 70

City - 4 14 14 16 18 48 Offices 4 26 34 29 25 64 118

Canada Water - 2 - - - 2 2

Total 15 68 80 62 66 163 291

Potential uplift at current ERV2 - 2 4 3 1 6 10

Table with previous classification provided on Company website at www.britishland.com/results 1 Excluding developments under construction, committed developments and assets held for development 2 As determined by the Group’s valuers, excluding near term developments

Rent Subject to Lease Break or Expiry

1

For period to 31 March 2017 2018 2019 2020 2021 2017-19 2017-21

At 30 September 2016 £m £m £m £m £m £m £m

Regional 6 15 9 13 10 30 53

Local 6 5 8 11 9 19 39 Multi-lets 12 20 17 24 19 49 92

Department Stores and Leisure - 1 - - - 1 1

Superstores - - - - - - -

Solus/Other - - 2 - - 2 2 Retail and Leisure 12 21 19 24 19 52 95

West End 6 11 10 4 18 27 49

City 10 - 18 11 8 28 47 Offices 16 11 28 15 26 55 96

Canada Water 1 - - - 1 1 2

Total 29 32 47 39 46 108 193

% of contracted rent 4.3% 4.7% 6.9% 6.0% 6.7% 15.9% 28.6%

Potential uplift at current ERV (excl. Near and Medium term developments)

2 2 6 1 2 10 13

Table with previous classification provided on Company website at www.britishland.com/results 1 Excluding developments under construction, committed developments and assets held for development

65




Superstores

Stand-alone Superstores1 In Multi-let assets

2 Total Exposure

1,2,3

Store Size ‘000 SQ FT

No of

Stores Valuation

(BL share)

£m

Capital Value

psf

WALL to FB

yrs

No of

Stores Valuation

(BL share)

£m

Capital Value

psf

WALL to FB

yrs

No of

Stores Valuation

(BL share)

£m

Capital Value

psf

WALL to FB

yrs

>100

8

171 256 11.9

5 339 423

12.5

13 510 347 12.3

75-100

11

197 398 12.1

3 61 276

15.8

14 258 361 13.0

50-75

16

248 353 12.1

1 12 189

10.6

17 260 339 12.0

25-50

8

50 220 7.8

2 27 502

13.0

10 77 274 9.4

0-25

2

6 145 8.6

18 79 426

10.6

20 85 373 10.4 September 2016

45

672 315 11.6

29 518 391

12.6

74 1,190 344 12.1

March 2016

47

763 383 13.9

28 536 482

12.7

75 1,299 419 13.5

Geographical Spread Gross Rent (BL Share) Lease Structure

London and South 54% Tesco £38m RPI and Fixed 9%

Rest of UK

46% Sainsburys

£26m OMRR

91%

Other £5m 1 Excludes £9m non-foodstore occupiers in superstore led assets 2 Excludes non food-format stores e.g. Asda Living

3 Excludes £93m of investments held for trading comprising freehold reversions in a pool of Sainsbury’s Superstores

66


Occupiers Representing over 0.5% of Total Contracted Rent At 30 September 2016 % of total

rent % of total

rent

UBS AG1 5.8 Microsoft Co 0.9

Tesco plc 5.7

Vodafone 0.9

J Sainsbury plc 4.7

Aon Plc 0.9

Debenhams 3.8

SportsDirect 0.8

Kingfisher (B&Q) 2.6

Asda Group 0.8

Next plc 2.3

JPMorgan 0.8

HM Government 2.2

Deutsche Bank 0.7

Virgin Active 2.0

JD Sports 0.7

Facebook 1.7

Reed Smith 0.7

Wesfarmers (Homebase/Bunnings) 1.6

H&M 0.7

Spirit Group 1.6

Mothercare 0.7

M&S Plc 1.5

Mayer Brown 0.7

Alliance Boots 1.5

Lewis Trust (River Island) 0.6

Visa Inc 1.4

ICAP Plc 0.6

Dixons Carphone 1.4

Lend Lease 0.6

Dentsu Aegis 1.4

TGI Fridays 0.6

Arcadia Group 1.3

Pets at Home 0.6

Herbert Smith 1.2

Steinhoff 0.5

RBS 1.1

MS Amlin Plc 0.5

TJX Cos Inc (TK Maxx) 1.0

Credit Agricole 0.5

Gazprom 1.0

Henderson 0.5

New Look 0.9 1 Rent contracted on both 5 Broadgate and run off of 1-3 Finsbury Avenue and 100 Liverpool Street. 3.0% pro-forma for run off of UBS rent at 1-3 Finsbury Avenue/100 Liverpool Street.

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Recently Completed and Committed Developments At 30 September 2016 Sector BL

Share Sq ft PC

Calendar Year

Current Value

Cost to complete

ERV Let & Under Offer

Resi Sales Exchanged

& not completed

% '000 £m1 £m

2 £m

3 £m £m

4

Aldgate Place, Phase 1 Residential 50 221 Completed 7 9 - n/a -

Clarges Mayfair – Offices Offices 100 51 Completed 120 9 5.5 2.0 n/a Glasgow Fort Leisure Quarter Retail 75 12 Completed 8 - 0.4 0.3 n/a

Total Completed in Period 284 135 18 5.9 2.3 -

4 Kingdom Street Offices 100 147 Q2 2017 111 39 9.4 - n/a Clarges Mayfair – Retail and Residential Residential 100 114 Q4 2017 322 74 0.8 - 259

The Hempel Phase 1 Residential 100 25 Q4 2016 16 1 n/a n/a 13

The Hempel Phase 2 Residential 100 32 Q4 2016 55 6 n/a n/a 14

100 Liverpool Street Offices 50 520 Q4 2019 115 157 18.5 - - Total Under Construction and Committed

838

619 277 28.7 - 286

Retail Capex5 117

Data includes Group's share of properties in Joint Ventures and Funds (except area which is shown at 100%) 1 Excludes completed sales of £93m

2 From 1 October 2016. Cost to complete excludes notional interest as interest is capitalised individually on each development at our

capitalisation rate 3 Estimated headline rental value net of rent payable under head leases (excluding tenant incentives)

4 At agreed sales price

5 Capex committed and underway within our investment portfolio relating to leasing and asset management

Near term Pipeline At 30 September 2016 Sector BL Share Sq ft Start On

Site Total Cost

1 Status

'000 £m

1 Finsbury Avenue Offices 50 281 2017 102 Consented

Speke (Leisure) Retail 67 66 2017 18 Consented

Plymouth (Leisure) Retail 100 102 2018 35 Consented Total Near term 449 155

Retail Capex2 100 1 Total cost including site value. Excludes notional interest as interest is capitalised individually on each development at our capitalisation rate 2 Forecast capital commitments within our investment portfolio over the next 12 months relating to leasing and asset enhancement

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Medium term Pipeline At 30 September 2016 Sector BL Share Sq ft Status

'000

2-3 Finsbury Avenue Offices 50 560 Resolution to grant

135 Bishopsgate Offices 50 340 Pre-submission

Blossom Street Offices 100 340 Consented

1 Triton Square Offices 100 338 Submitted

5 Kingdom Street Offices 100 240 Consented

Gateway Building Offices 100 104 Pre-submission

Aldgate Phase 2 Residential 50 145 Consented

Canada Water Phase 11 Mixed Use 100 5,500 Pre-submission

Bradford (Retail & Leisure) Retail 100 43 Consented

Meadowhall Leisure Retail 50 330 Submitted Eden Walk Retail and Residential Mixed Use 50 562 Resolution to grant

Total Medium Term 8,502

1 Assumed net area based on gross area of up to 7m sq ft

Residential development programme At 30 September 2016 Sq Ft No.

Market Units

PC Date/ Status

BL Share

Current Value

1

Cost To come

2

Sales Exchanged &

not Completed

1,3

'000 % £m £m £m

Clarges Mayfair4 103 34 Q4 2017 100 308 72 259

Mixed Use 103 34 308 72 259

The Hempel Phase 1 25 15 Q4 2016 100 16 1 13

The Hempel Phase 2 32 19 Q4 2016 100 55 6 14

Aldgate Place Phase 1 221 154 Completed 50 7 9 -

Resi-led 278 188 78 16 27

Total Committed Residential 381 222 386 88 286

Data includes Group's share of properties in Joint Ventures and Funds (except area which is shown at 100%) 1 Excludes completed sales of £93m

2 From 1 October 2016. Cost to complete excludes notional interest as interest is capitalised individually on each

development at our capitalisation rate 3 At agreed sales price

4 Includes 9,500 sq ft of affordable housing (11 units)

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GLOSSARY

Adjusted net debt is the Group net debt and the Group’s share of joint venture and funds’ net debt excludes

the mark-to-market on effective cash flow hedges and related debt adjustments and non-controlling interests. A reconciliation between Group net debt and adjusted net debt is included in table A within the supplementary disclosures. 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 owned and 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 social and environmental criteria. Capital return is calculated as the change in capital value of the UK portfolio, less any capex incurred, expressed as a percentage of capital employed (start value plus capex) 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 rents subject to a maximum level of uplift at the specified rent reviews as agreed at the time of letting. Collar rents are rents subject to a minimum level of uplift at the specified rent reviews as agreed at the time of letting. Contracted rent is the annualised rent adjusting for the inclusion of rent subject to rent free periods. Developer’s profit is the profit on cost estimated by the valuers that a developer would expect. 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 capex 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 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% 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.

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EPRA earnings is the IFRS profit after taxation attributable to shareholders of the Company excluding investment and development property revaluations, gains/losses on investing and trading property disposals, changes in the fair value of financial instruments and associated close-out costs and their related taxation. These items are presented in the capital and other column of the income statement. A reconciliation between profit attributable to shareholders of the Company and EPRA earnings is included in table B within the supplementary disclosures. EPRA NAV per share is EPRA NAV divided by the diluted number of shares at the period end. EPRA net asset value (EPRA NAV) is a proportionally consolidated measure, representing the IFRS net assets excluding the mark-to-market on effective cash flow hedges and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative valuations. It includes the valuation surplus on trading properties and is adjusted for the dilutive impact of share options. A reconciliation between IFRS net assets and EPRA NAV is included in table B within the Supplementary Disclosures. 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 adding notional purchaser’s costs (adding notional purchaser’s costs), excluding development and residential properties. 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. 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. 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. ERV growth is calculated monthly and compounded for the period subject to measurement, as calculated by IPD. Fair value movement is accounting adjustment to change the book value of an asset or liability to its market value. Footfall is the annualised number of visitors entering our assets. Footfall growth movement in footfall against the same period in the prior year, on properties owned throughout both comparable periods, aggregated at British Land’s ownership share for each asset.. 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.

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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 financing costs 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. Lettings and lease 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.

Letting performance against ERV comparison of achieved letting terms on long term lettings and renewals against valuation assumptions on like-for-like space, calculated on a net effective basis, aggregated at 100% share.

Leverage see loan to value (LTV). 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 incentive adjustments but excludes properties held for development in either period and lease accounting adjustments related to 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. Managed portfolio consists of multi-let properties where we have control of facilities and utilities management.

Mark-to-market is the difference between the book value of an asset or liability and its market value. Managed portfolio consists of multi-let properties where we have control of facilities and utilities management. 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 tenant incentives.

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

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termination date. Net equivalent yield ‘NEY’ is the weighted average income return (after adding 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 ‘NIY’ is the current annualised rent, net of costs, expressed as a percentage of capital value, after adding 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. 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 and residential properties. It includes accommodation under offer, subject to asset management (where they have been taken back for refurbishment and are not available to let as at the balance sheet date) or occupied by the Group. 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. 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. REITs also pay out normal dividends, called non-PIDs, which are taxed in the same way as dividends received from non REIT companies; these are not subject to withholding tax and for UK individual shareholders qualify for the tax free dividend allowance. Portfolio 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. Proportionally consolidated measures include the Group’s share of joint ventures and funds and exclude

non-controlling interests in the Group’s subsidiaries. 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.

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REITs are property companies that allow people and organisations to invest in commercial property and receive benefits as if they directly owned the properties themselves. The rental income, after costs is passed directly to shareholders in the form of dividends. In the UK REITs are required to distribute at least 90% of their tax exempt property income to shareholders as dividends. As a result, over time, a significant proportion of the total return for shareholders is likely to come from dividends. The effect is that taxation is moved from the corporate level to the investor level as investors are liable for tax as if they owned the property directly. British Land became a REIT in January 2007 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. Retailer sales growth movement in retailer sales against the same period in the prior year, on occupiers providing sales data throughout both comparable periods, aggregated at British Land’s ownership share for each asset. Retail planning consents are separated between A1, A2 and A3 – as set out in The Town and Country Planning (Use Classes) Order. Within the A1 category, Open A1 permission allows for the majority of types of retail including fashion to be accommodated, while Restricted A1 permission places limits on the types of retail that can operate (for example, 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 Shops, retail warehouses, hairdressers, undertakers, travel and ticket agencies, post offices, pet shops, sandwich bars, showrooms, domestic hire shops dry cleaners, funeral directors and internet cafes.

A2 Financial and professional services

Financial services such as banks and building societies, professional services (other than health and medical services) and including estate and employment agencies. It does not include betting offices or pay day loan shops – these are now classed as “sui generis” uses.

A3 Restaurants and cafes For the sale of food and drink for consumption on the premises – restaurants, snack bars and cafes.

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 letting of vacant space or re letting of expiries. Scrip dividend For certain periods, 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, or held for 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.

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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 property return is calculated as the change in capital value, less any capex 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. Total accounting return is the growth in EPRA NAV per share for the period plus dividends paid 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 is the pre-tax EPRA earnings measure with additional Company adjustments. No Company adjustments were made in either the current or prior period. Valuation uplift is the increase in the portfolio valuation and sales receipts of properties sold during the period, net of capex, capitalised interest and development team costs, and transaction costs incurred, expressed as a percentage of the portfolio valuation at the start of the period plus net capex, capitalised interest and development team costs, and transaction costs. 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 sum of the results is divided by total Group debt in issue at the period end. Weighted average interest rate is the Group loan interest and net 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.

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Yield on cost is the estimated annual rent of the completed development divided by the total cost of development including site value and notional finance costs 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. Yield expansion refers to an increase in yields.

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news release2016/11/16 · income statement h1 2015/16 h1 2016/17 change underlying profit 1 £171m...

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