British Land has posted a 6.4% fall in EPRA NAV per share as retail woes continue to take their toll on REITs.
EPRA NAV per share declined to £9.05 in the year to 31 March, from £9.67 in the previous year.
The value of its portfolio dropped by 4.8% to £12.3bn, driven by an 11.1% tumble in retail (to £5.6bn). This contrasted with its office assets, which inched up by 1.1% to £6.3bn, and a 10% increase in its developments.
British Land tallied the annualised impact of retail company voluntary arrangements and administrations at £16.9m over the past two years.
Consequently, the landlord aims to reduce its retail exposure to account for 30-35% of the total business, based on current valuations.
Its offices division is expected to make up 55-60% of the landlord’s business mix in the next five years, with its new flexible workspace brand Storey Club accounting for circa 5% of this.
The remainder will be residential, mainly build-to-rent, which will account for around 10% of the business.
Meanwhile, loan-to-value has remained stable, at 28.1%. British Land will also extend its share buyback programme by £125m, after buying back £500m over the past two years.
The REIT completed or exchanged on £1.5bn of asset disposals since last April, bringing the total gross value of its investment activity to £2.1bn during the year.
Its most significant office disposal during the period was the sale of 5 Broadgate, EC2, in which it sold its £500m share. The development generated a property return of 18% per annum.
Of the total, £646m of sales were in retail, comprising a mix of non-core multilet centres and standalone assets.
British Land said that, overall, sales were “marginally ahead” of book value, with multilet centres generally transacting at a discount. However, solus units, particularly those with good alternative use potential, gained “a premium to book value”.
Acquisitions during the year included the Royal Victoria Place shopping centre in Tunbridge Wells for £92m.
British Land also said it has arranged £1.4bn in new financing, with a weighted average interest rate of 2.9%.
At 31 March, the landlord had £1.8bn of committed unsecured revolving bank facilities, £1.5bn of which was undrawn. It estimated that there will be no requirement to refinance until late 2022.
Chris Grigg, chief executive of British Land, said: “This has been another year of good strategic and operational progress in an uneven market, as retail remained challenging but the London office market continued to be healthy.
“Looking ahead, retail is likely to remain challenging as structural change continues, but there are early signs on parts of our portfolio that some of the short-term operational headwinds impacting retailers are easing.
“We are mindful of the ongoing Brexit uncertainty, but our business is well positioned and financially strong.”
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