A consistent approach to financing, with good access to debt markets, provides flexibility and capacity to deliver our strategy. Our policies are supported by five core principles which together form the basis for our strategic approach.
Our policies and principles are disclosed in our annual report, and is updated annually. The information below reflects the policy as at 31 March 2024.
Financial Policy
Leverage
Our use of debt and equity finance balances the benefits of leverage against the risks, including magnification of property returns. A loan to value (LTV) ratio measures our balance sheet leverage, on a proportionally consolidated basis (including our share of joint ventures) and for the Group (British Land and its subsidiaries). At 31 March 2024, proportionally consolidated LTV was 37.3% and for the Group was 28.5%. The ratio of Net Debt to EBITDA is a measure of leverage based on earnings, rather than asset valuations, which we also consider on both Group and proportionally consolidated bases. At 31 March 2024, our Group Net Debt to EBITDA was 6.8x and the proportionally consolidated measure was 8.5x. The calculations of these ratios are set out in the Notes to the Accounts. Our leverage is monitored in the context of wider decisions made by the business. We manage our LTV through the property cycle such that our financial position remains robust in the event of a significant fall in property values. This means that, alongside consideration of new commitments, we do not adjust our approach to leverage based only on changes in property market yields. Consequently, our LTV may be higher at the low point in the cycle and will trend downwards as market yields tighten.
Debt Finance
The scale of our business, combined with the quality of our assets and rental income, means that we are able to approach a diverse range of debt providers to arrange finance on attractive terms. Good access to the capital and debt markets allows us to take advantage of opportunities when they arise. Our approach to debt financing for British Land is to raise funds on an unsecured basis with our standard financial covenants, with the calculations set out in the Notes to the Accounts. This provides flexibility and low operational cost. During the year we have raised £475m of new term loans and extended £475m of existing revolving credit facilities (RCFs) on this basis. Our joint ventures that choose to have external debt are each financed in ‘ring fenced’ structures without recourse to British Land for repayment and secured on their relevant assets. We monitor our overall debt requirement by reviewing current and projected borrowing levels, available facilities, debt maturity and interest rate exposure. We undertake sensitivity analysis to assess the impact of proposed transactions, movements in interest rates and changes in property values on key balance sheet, liquidity and profitability ratios. We also consider the risks of a reduction in the availability of finance, including a temporary disruption of the financing markets. British Land’s undrawn facilities and cash amounted to £1.9bn at 31 March 2024. Based on our commitments and these available facilities, the Group has no requirement to refinance until early 2027.
Interest Rate Exposure
We manage our interest rate profile separately from our debt, considering the sensitivity of underlying earnings to movements in market rates of interest primarily over a five-year period. As debt finance is raised at both fixed and variable rates, derivatives (including interest rate swaps and caps) are used to achieve the desired hedging profile across proportionally consolidated net debt. As at 31 March 2024, the interest rate on our debt is fully hedged for the year ending 31 March 2025. On average over the next five years we have interest rate hedging on 86% of our debt, with a decreasing profile over that period. Accordingly, we have a higher degree of protection on interest costs in the short to medium term. The hedging required and use of derivatives is regularly reviewed and managed by a Derivatives Committee. The interest rate management of joint ventures is considered separately by each entity’s board, taking into account appropriate factors for its business.
Counterparties
We monitor the credit standing of our counterparties to minimise risk exposure in placing cash deposits and arranging derivatives. Regular reviews are made of the external credit ratings of the counterparties.
Foreign Currency
Our policy is to have no material unhedged net assets or liabilities denominated in foreign currencies. When attractive terms are available, we may choose to borrow in currencies other than Sterling, and will fully hedge the foreign currency exposure.
Financing Principles
1. Diversify our sources of finance
We monitor finance markets and seek to access different sources of finance when the relevant market conditions are favourable, to meet the needs of our business including joint ventures. We aim to avoid reliance on any particular source of funds and have arranged unsecured and secured, recourse and non-recourse debt. We develop and maintain long term relationships with banks and debt investors from different sectors and geographical areas, with around 30 debt providers in our bank facilities and private placements alone. Our reporting and disclosures enable lenders to evaluate their exposure within the overall context of the Group.
In the last five years we have arranged £3.2bn (British Land share £2.4bn) of new finance in unsecured and secured loans and US Private Placements, including £1.7bn of Green/ESG-linked finance. A European Medium Term Note programme is maintained to enable us to access the Sterling/Euro unsecured bond markets, where we have one outstanding Sterling bond, and our Sustainable Finance Framework enables us to issue Sustainable, Green, and/or Social finance, when it is appropriate for our business. We also have existing long-dated British Land debentures and securitisation bonds in our joint ventures.
Total drawn debt (proportionally consolidated) £3.4bn in over 25 debt instruments
2. Phase maturity of debt portfolio
The maturity profile of our debt is managed with a spread of repayment dates, currently between one and 14 years, reducing our refinancing risk in regard to timing and market conditions. At 31 March 2024, as a result of our financing and capital activity, based on our commitments and available facilities we have no requirement to refinance until early 2027 (longer than our preferred period of not less than two years). In order to maintain the position and in accordance with our usual practice, we expect to refinance debt in advance of relevant maturities.
Average drawn debt maturity (proportionally consolidated) 5.8 yrs
3. Maintain liquidity
In addition to our drawn debt, we aim always to have a good level of undrawn, committed, unsecured revolving bank facilities. These facilities provide financial liquidity, reduce the need to hold resources in cash and deposits, and minimise costs arising from the difference between borrowing and deposit rates, while limiting credit exposure. We arrange these revolving credit facilities in excess of our committed and expected requirements to ensure we have adequate financing availability to support business activity and new opportunities.
Undrawn facilities and cash £1.9bn
4. Maintain Flexibility
Our facilities are structured to provide valuable flexibility for investment activity execution, whether sales, purchases, developments or asset management initiatives. Unsecured revolving credit facilities provide full operational flexibility of drawing and repayment (and cancellation if we require) at short notice without additional cost. These facilities generally have initial maturities of five years (with extension options). Alongside this, our secured term debt in long-standing debentures has good asset security substitution rights, where we have the ability to move assets in and out of the security pool, as required for the business.
Total facilities £2.1bn
5. Maintain Strong Metrics
We use both debt and equity financing. We manage LTV through the property cycle such that our financial position would remain robust in the event of a significant fall in property values and we do not adjust our approach to leverage based only on changes in property market yields. We also consider the earnings-based leverage metric of Net Debt to EBITDA on both the Group basis (which is the ratio principally considered as part of our unsecured credit rating) and the proportionally consolidated basis. Our standard unsecured financial covenants apply to all our unsecured debt, as set out on the following page. Our interest rate profile is managed separately from our debt, within appropriate ranges of hedged debt over a five-year period and the longer term. We maintained our strong senior unsecured credit rating ‘A’, long term IDR credit rating ‘A-’, and short term IDR credit rating ‘F1’, affirmed by Fitch during the year with Stable outlook.
LTV (proportionally consolidated) 37.3%
Net Debt to EBITDA (Group) 6.8x
Senior unsecured credit rating A