British Land's first quarter results showcase the Company's operating resilience and the fruits of
our activist, customer focused strategy. They also reflect the pressures of a challenging external environment as asset valuations continue their decline and previously above trend rental growth
moves prospectively to below trend. But remember – our prime property assets will see out many economic cycles with a dependability few businesses can match. As spring follows winter, so too will property markets, in due course, see better times again.
From an operating perspective, we are pleased to report underlying earnings per share growth of 8% versus the March quarter. EPS is flat versus Q1 a year ago as rental growth and earnings enhancing disposals offset lower dividend income. As described herein, 'business-as-usual'
continues with new lettings, successful rent reviews, lease restructurings, development activity and portfolio reshaping. Like for like rental income growth of 6.3% and rent reviews settled on average 4% above estimated rental values (ERV) emphasise the customer appeal of our buildings.
Successful asset sales totalling £669 million (gross) in the quarter have kept gearing down; 40% LTV (debt/assets), 47% including Funds and Joint Ventures. Our debt structure
(average interest rate 5.3%, maturity 12.9 years, 'war-chest' £2.6 billion) remains a unique 'asset'
highlighted by its £810 million "mark-to-market" 'value' relative to that reflected in our stated Net Asset Value.
The stresses of the external environment are reflected in a 5% property valuation decline and resultant 10% Net Asset Value decline. While cash rents grow, prospective growth is softening reflecting the economic cycle – during the quarter ERV growth remained positive in Retail, while showing a decline in Offices.
Management Focus
British Land's management priorities remain as set out at the start of the year. The stressed
economic and market outlook and the uncertain depth and duration of downturn reinforces this
position.
- Business as usual for the Company – staying close to customers – active asset management in leasing space, capturing rental values and building future growth potential.
- Enhancing, preserving and benefiting from defensive strength – the actions of recent years have given us exceptional asset strengths and liability structure – prime property, long leases, high occupancy – no refinancing needs, fixed, low interest costs. In uncertain times, the ability to sustain these advantages and to reassure investors with their tangible value is key.
- Disciplined approach to capturing future value – tough times throw up opportunities to invest – in our own assets and securities, in distressed assets of others – we plan to be disciplined in assessing competing uses for capital and patient in timing, whilst awake to opportunities.
