Good morning, everyone, and welcome to Broadgate. This morning, I'll set out how our consistent approach of investing behind themes has driven our performance this year and positions us well to further evolve our business. First, I'd like to welcome Simon Carter, our new CFO, who's out there in the front row and starts on Monday. No difficult questions for him, by the way. I'm also pleased to introduce Jonty McNuff, our Head of Financial Reporting, who will present the financial section today. Let's start, though, with the results. Profits were GBP 380 million, down slightly on last year. That's despite asset sales, though, of GBP 1.5 billion over two years. NAV is nearly 6% ahead, reflecting a valuation increase of more than 2%, plus the impact of our share buyback. Our leasing activity has covered 2.4 million sq ft.
Pricing has remained firm, with deals 8% ahead of ERV and at 97% occupancy. We're once again effectively full in offices and retail. At the same time, we're reporting some of our strongest ever financial metrics, and we've again increased the dividend. Jonty will talk more about that. As usual, I'll take our segments in turn, starting with offices. Here, progress has been exceptional. Our activity has covered more than 1 million sq ft, four times what we achieved last year. That's a striking number. It reflects our strategic focus on our campuses and on delivering quality space. Our lettings to Dentsu Aegis Network at Regent's Place, which was the largest West End pre-let in more than 20 years, is a strong endorsement of our approach. Overall, terms were 5.6% ahead of ERV, and we're under offer or in negotiation on another half million sq ft. We've also successfully launched Storey.
Again, it was a strategic decision to invest behind a growing theme in the market, but our offer is clearly differentiated. It's performing well, and I'll talk more about that in a minute. Of course, the market remains cautious, but one effect of Brexit is that it has constrained London office development at a time when many feared oversupply. Actually, businesses who want high-quality space don't have a lot of options. We're faced with what might be termed an unconventional London cycle, which continues to reward sensible development and our differentiated offer. Turning to retail, you're all aware of the environment we're operating in. Are we. Retailers face a combination of long-term structural challenges, principally Internet related, as well as short-term pressures like rising costs and fragile consumer confidence. Polarization is playing out, and indeed it's accelerating.
As our operational performance demonstrates, we're generally on the right side of that trend. Yes, retailer sales are down, but in a tough market, we're 130 basis points ahead of the index and our footfall is positive. Here we're more than 300 basis points ahead. Our leasing activity again covered more than 1 million sq ft, and we signed these deals on average 10% ahead of ERV. At Meadowhall, where we completed our refurbishment, they were over 13% ahead. Overall, incentives remained stable, and as I said, the portfolio is virtually full. We've all seen the recent news flow and activity has slowed in the last couple of months. That said, across our portfolio, the combined impact of administrations and CVAs is around 1% of our total gross income. Let me remind you, in the last four years, we've made GBP 2.3 billion of retail asset sales.
That includes GBP 1 billion worth of superstores and half a billion of multi-let assets that don't fit our strategy. We're also investing in assets that do. Let me give you an example. At Fort Kinnaird, we opened a new leisure extension in 2015 with a seven-screen Odeon and a range of restaurants. We've improved the environment and extended the trading hours. In 2016, we opened a purpose-built store for Primark. All this represented ERV, and we welcomed new occupiers like PureGym and Wagamama on a three and five-year basis. We've also maintained our disciplined approach to capital allocation. We completed on the sale of the Leadenhall Building, an iconic city asset, at a 24% premium, and we've made over GBP 400 million of retail disposals. We've continued to invest in our development program and in GBP 200 million worth of acquisitions, primarily mixed-use opportunities.
Finally, we completed our GBP 300 million share buyback at an average price of GBP 6.30. We've cut our interest bill from GBP 200 million five years ago to GBP 128 million today, and reduced our weighted average interest rate to an all-time low of 2.8%, and that's without materially impacting NAV. At the same time, leverage is now down to 28%. This all reflects our consistent approach to managing our finances, which has been very accretive to our long-term performance. I said I would set out how the consistent strategic aims we have taken over several years have driven our performance. Some of these actions are laid out here. First, we've invested in London. Today, it accounts for nearly 60% of our assets, up from around 40% in 2010. We've shifted our focus away from the traditional city, so that the West End now accounts for some 60% of our office exposure.
At the same time, Broadgate, our only remaining city asset, continues to thrive. Banks exposure is now 66% of the whole portfolio, and this building represents around half of that. By contrast, TMT is up to 8%. We recognized the importance of Crossrail early on. In 2013, we acquired Paddington Central and Ealing Broadway, and we recently added the Woolwich estate. Today, GBP 4.6 billion of our assets stand to benefit from Crossrail. Of course, our campus approach has been absolutely key to a lot of this. It's a real differentiator for us, and it plays to our mixed-use skills. Almost 80% of our offices are now in our three London campuses. Here, we not only own the buildings, but the spaces outside too.
We can meet people's needs throughout the working day, and increasingly 7% of the Central London market, which compares with around us owning about 2% of the stock. We're attracting a broader mix of occupiers than ever before. How are we doing this? Look at Paddington. Five years ago, we raised equity to buy Paddington Central. It was an estate which frankly had lost it in the public realm. That's made a huge difference as you can see here, and I know a number of you have seen it live. We've let space to Pergola, a pop-up dining concept, which had brought nearly 180,000 people to the campus last year, and has just reopened for another season. We've nearly doubled the provision of restaurants and cafes, and we've turned the canal from a barrier into a feature. We've really changed the perception of the campus.
The result for Kingdom Street was nearly 90% let before it launched last summer. Today, our top rates are nearly GBP 80 a square foot. Back in 2013, they were below GBP 60. We've achieved a total unlevered return of 12% a year. It's a great example of how we allocate our capital well, and this year, Paddington was our strongest performing campus with values more than 7% ahead. Crossrail opens next year, bringing further momentum. At Broadgate, we're further ahead in that journey. Take a look around. You'll see pop-up cafes, art installations, and a lot of blue sky above 100 Liverpool Street, at least for the next couple of years. Such a relief somebody laughed at that. You've no idea. There's been a lot riding on that, let me tell you, not all for me. We're now on site at 1 Finsbury Avenue and 135 Bishopsgate even.
Including 100 Liverpool Street, we're delivering more than 1 million square feet of space. More than 30% of that is already pre-let. 15% of that space is F&B and retail, we're really progressing our mixed-use vision. This year, we're delighted to have signed Eataly at 135 Bishopsgate. It's a world-class Italian marketplace concept and represents a real step change in our offering. This will be their first U.K. store. This signing is clear demonstration of how our expertise in retail is really adding value, and it sparked interest across Broadgate from a range of other occupiers. Storey is another example of investing in a theme, and it's delivering. As well as larger organizations seeking add-on space. We've got a genuinely differentiated offer because we own the buildings that house Storey. Our contracted lease term is more than 2 years, and the average size is over 50 people.
Equally important to our customers, they can brand their own space, they have their name on the door, and they really like that. One year in, occupancy is nearly 80%, and we're achieving a premium of nearly 50%. That's an impressive start, but we think it will settle over time at more like 20%. We're attracting a lot more tech companies. Around three-quarters of Storey space is let to TMT occupiers. We're learning a lot about this part of the market, and that insight. You may remember that our 2010 program delivered more than GBP 1 billion of profits. We've had another great year of progress. We've more than doubled our committed pipeline. 55% is pre-let or under offer. Our speculative exposure remains low at under 5% of the portfolio, and future costs are substantially covered by residential receipts to come.
Looking further forward, we have a very significant opportunity at Canada Water. I'm pleased with our progress here. We signed the Master Development Agreement with Southwark Council last week and submitted our planning application for the overall master plan and for 3 buildings in the first phase. That phase covers 1.8 million square feet with around 650 new homes. That's really complementary to our mixed-use model. We're continuing to engage with the local community. 10,000 people have visited our exhibitions so far, and their views remain critical to our approach going forward. This urban. We're pleased that today our portfolio is nearly twice as efficient as it was in 2009. We've maintained our leading sustainability performance across a range of indices. I'll pause there and hand you over to Jonty for an update on our financials.
Thanks, Chris, morning, everyone. Profit for the year was GBP 380 million, down moderately by 2.6%, following the successful sale of GBP 1.5 billion of income-producing assets over the last two years. EPS is down by just 1.1% due to the positive impact of the GBP 300 million share buyback, which added GBP 0.004. There's a further GBP 0.01 of benefit to come on this next year. As previously announced, we increased the dividend by 3% to just over GBP 0.30 for the year. NAV is up 5.7% at GBP 9.67, with valuations up 2.2%. LTV has reduced by 150 basis points to 28.4%, as our sales were partially offset by the impact of the share buyback. Altogether, we've delivered a total accounting return of 8.9% for the 12 months to March. Let's look at the income statement in more detail. I'll start with the rents.
Net sales we've made over the last two years have reduced rents by GBP 44 million. The impact of lease expiries of properties in our development pipeline is largely offset by one-off surrender premium. Principally, the GBP 15 million received from RBS at 135 Bishopsgate. Income from our completed developments, GBP 6 million for the year. Turning now to financing costs, which we've reduced by a further GBP 23 million. This is the result of thoughtful financing and debt management that we've undertaken over the last two years, as well as our net divestment. We successfully issued a GBP 300 million unsecured sterling bond for 12 years at a coupon of 2.375%. That's the lowest for a U.K. real estate company in this market. Earlier this month, we extended our largest revolving credit, 90 basis points. We're pleased with the support of the 12 banks in the syndicate.
On a spot basis, the interest rate on our debt is 80% hedged. This reduces to 60% on average over a five-year look forward based on projected debt. Bringing this all together, you can see the significant impact that our capital activity has had on this year's profits. As I've mentioned, we've largely offset this through NPV positive financing and debt management, as well as one-off surrender premium received. Looking to next year, the usual guidance slide is included within the appendices. It's important to highlight that we're not expecting any further significant one-off surrenders. GBP 25 million is included in this year's profits. We'll obviously keep you updated on future capital activity as and when it happens. Looking down the income statement, we've covered the significant movements in rent and financing costs. Admin costs are down GBP 3 million to GBP 83 million as a result of lower variable pay.
We expect next year's admin costs to be broadly in line with this. In looking at the dividends for the coming year, we're proposing a further increase of 3% to GBP 0.31. Turning now to valuation performance. Valuations are up 2.2% for the year, with growth of 1.4% in the first half slowing to 0.9% in the second. Overall, yields were stable and we've delivered ERV growth of 1.8%. This performance reflects our strong leasing, development, and sales activity. Our developments were up 9.6%, which is GBP 112 million. This includes the profit release at Clarges Residential, where we've made sales of GBP 344 million, of which we've received proceeds of GBP 231 million to date. The remaining units will be formally launched in the summer. Looking at offices in a bit more detail. Overall, valuations are up 4.5%. Our West End asset valuations were up 5.8% overall.
At Paddington, values are up 7.3%, the rest of the campus. Over at Regent's Place, values are up 4.2% as a result of achieving planning and pre-letting to Dentsu Aegis, as Chris mentioned earlier. City asset valuations were up 2.8%, in part reflecting the Leadenhall Building sale, which completed last May. Finally, Broadgate was up 1.8%, driven by successful pre-lets, along with ERV growth of 1.5% on the standing investments. In retail, valuations are up 0.3%, all of which came through in the first half, with values flat overall in the second. Regionals performed better than locals, with values marginally up by 0.2% for the year. Across retail, ERV growth has offset marginal outward yield shift. We've seen good ERV growth of 1.2 million sq ft of lettings, at 10% a head of ERV. This was driven 0.8%. Bringing the results together, NAV is up 5.7% at GBP 9.67.
This is driven by the valuation increase of 2.2%, together with the positive impact of the share buyback, which added GBP 0.15. Finally, looking at debt, we are again reporting some of our strongest ever metrics. Loan to value stands at 28%, followed 2.8%. Our interest cover stands at 4 times, with undrawn debt facilities of GBP 1.2 billion, and no requirement to refinance until early 2021. The strength of the company's balance sheet and underlying business is reflected in our senior unsecured credit rating, which was upgraded to A by Fitch earlier this year. That external validation of the strength of our finances seems a good note on which to hand back to Chris.
Thank you, Jonty. Earlier, I explained how identifying attractive market themes and then investing heavily has changed our business and delivered value. Going forward, you should expect us to continue to evolve our business. Building on our strengths, we will focus on opportunities which complement and enhance our model to build a more mixed-use business. We will remain focused on high-quality places which reflect a broad range of needs and which are properly embedded within local communities. They reflect modern, diverse lifestyles and are places where people want to work and to spend time. I set out here the future shape of the business. We're moving towards. Just to be clear, this slide illustrates the direction of travel. It's indicative and not representing scale or exact size.
The three areas are a London office business focused principally on campuses, a further refined retail business, and a growing residential business, principally Build to Rent. Our customer focus through our operational expertise is part of that customer story. I'll take you through these elements in more detail. First, a London office business focused on our campuses, providing high quality, well-located and sustainable office space, as we delivered at 4 Kingdom Street and we're developing at 100 Liverpool Street. We'll also offer the right mix of core and Storey space to cater for an even broader range of occupiers. We'll build that Storey. We've identified another 120,000 sq ft across our campuses that we will progress during this year. Over time, it could become 10% of our office business, both on our campuses and potentially in some standalone buildings. Secondly, on retail.
Let me be clear, physical retail has an important role to play in our business. We recognize that the retail market is changing and the types of assets which retailers need to succeed is also changing. We're focusing on providing quality places for which there is more demand than supply. We're already making significant progress. I explained earlier how proactive we've been over several years. Halfway in, we're on track. On balance, we're likely to sell more solus or local retail. Over time, although we see a role for both regional and local assets, our retail business will comprise a smaller number of, on average, larger schemes. Thirdly, as we build an increasingly mixed-use business, owning more residential assets, principally, as I said, Build to Rent, will play an increasing role.
It's a complementary and structurally growing part of the market, which is highly fragmented. We see a real opportunity here. As you know, we already have a number of residential options in our portfolio. At Canada Water, where phase one includes plans for 650 homes, and at Ealing, Eden Walk and Woolwich. We've already got a strong track record in residential. For example, at The Hempel and Aldgate, and most recently at Clarges, albeit that is a unique scheme. There are a number of ways we can build scale in this market, starting with opportunities in our portfolio, site acquisitions, or bolt-on acquisitions of portfolios or operating companies. Providing people's homes does come with a real responsibility. We're aware of that. We'll focus on providing those residents with high-quality customer service. That brings me to my next point. Customer focus will become even more important to us.
Increasingly, we think about real estate as a service, not just as physical space. Yes, we will continue to deliver great buildings, but we can do more than that. Our insights into our customers and the people in communities who use our spaces mean we can provide places which reflect their evolving needs, whether that's through Storey, a residential business, a more focused retail, operational expertise are real advantages for British Land and will be fundamental in our business. In all of this, we'll remain committed to deploying capital in a disciplined and thoughtful way. As I've said already, we'll continue selling retail assets and continue to extract value from office assets which are mature and fully let, while at the same time progressing our strategic agenda and investing in our business.
We've got significant optionality embedded within our model. On top of that, our current financial position is as strong as it's been for many years. Our leverage is low and with committed development costs. Of course, as always, we're mindful of the importance of shareholder returns. Looking forward, as I said earlier, we think that this office cycle is proving somewhat unconventional. Despite uncertainty, businesses are continuing to commit to London. The supply of high-quality new office space is relatively constrained. We expect demand for the space we manage and develop to remain good. Occupiers face headwinds and polarization is playing out of retailers. Today, I've set out a clear plan for the future development of our business.
As you'd expect, we are mindful of the current market conditions, but our unique strengths, including the scale, balance, and quality of our portfolio, the opportunities we've created, and our strong balance sheet all mean we look to the future with confidence. With that, I'll turn it over to questions. As usual, if you can kind of give your name and organization at the outset, it gives an advantage to the people on the phones. We'll probably take some questions from the phones at the end. Good morning. Can we get this to work?
Can you hear me?
Yeah, I can.
Thank you very much, Chris. Very good presentation. I have two questions for you. The first one is a technical one, is how appraisers are assessing the value of office building in which you have a Storey, i.e., massive premium to ERV is. What is a numerator, what is a denominator?
Sure.
The other one will be talking about smart use of capital. Can we have a sense of what will be over the next three years, the kind of big blocks you're anticipating in term of investment? I think you've got GBP 900 million still near term, as you call it.
Yep
plus GBP 3 billion longer term.
Yep.
How that optionality can play out within those GBP 900 million?
Yep.
Disposals and on the other side, dividend, obviously. Thank you.
Okay. I'll try and get through all of that. I'm going to start off with the valuation point, which nobody in the room will be surprised to know that I'm going to hand over to Tim. That's what we pay him to do. Well, we don't actually pay him to do it. The guys at the back of the room get to do the valuation bit.
Morning. What the valuers are doing is they're applying a slightly higher yield on the Storey income because that income, they believe, is of a short-term nature. Where the premium is particularly high, they do do some top slicing. I think with respect to Storey, as Chris has said, it's been strategically a fantastic success because we're attracting new occupiers, new SME occupiers to the campuses. A great example, if I get my geography, is 2 and 3 FA where we've got a FinTech cluster. Also, it's meeting the needs of our existing occupiers who want core space, but they also like the idea of some flex.
Moving on to the kind of big blocks, to use your words, Mark. I would say the following. First of all, if we look at the committed program, which is principally, as you know, offices, in terms of cash flow, that's principally, as I mentioned in my remarks, paid for by the cash coming in from the disposals. Looking forward, one of the things we really like is the optionality, and I mean that seriously because that gives us the choice rather than having to make that now. How you should think about this is that rent will build over time as the development comes to fruition. These are big buildings, so it tends to be slightly delayed. That's part one.
Part two, in terms of the kind of medium-term opportunities we have, we will look at each of those, and they're all set out in the book, over time to just look at what the returns are. We'll balance that with other potential uses of capital, I hope I was clear about that, including the possibility of share buybacks. Obviously, we're also minded of the importance of building for the future in terms of our business. Those decisions will come up over the next few years. How will we finance them? You should expect us, as I said in my comments, to be principally out of sales of either mature City offices, buildings, or alternatively, I'll be able to see how the dispose of retail assets that we don't think fit for the future, for our view of the future.
That's kind of where the cash flows. I don't know, guys, if you want to add anything to that. That's very nice of you.
Well done, boss.
It's bonus time. Okay.
Just to make sure I understand correctly the valuation, what sort of premium we end up, sorry, on this Storey valuation? Is it the same type of valuation than a classic office building or do we have a premium? What sort of premium are we talking about? You gave sense that lower rent, higher yield, but net net, does it mean a higher premium?
At the moment, net net on a 48% premium. At a valuation level, started off well. We don't expect to maintain that 48% premium. We are targeting more towards a 20% premium. At a 20% premium, we still expect it to be accretive to the business and accretive to valuation.
Quick in terms of response. The first one follows on in respect to Storey, that the 10% long-term aspiration or the 10% potential. Just interested to know how you've derived that number. Is that your view of the latent market demand, or is it the extent of your risk appetite there? The second question, which covers a few, is with respect to the build-to-rent aspiration for the business. Do you have any thoughts around what the achievable gross to net might be there? Also, when you talk about bolt-ons, can you give a feel for scale and the
In terms of the strategic view that it could be 10% of the office business, that is because of our view of where demand is coming from. I've talked already about that. It's two areas. Structurally, demand is growing from SMEs, and it's an ability for us to attract a wider range of occupiers into our campuses, which helps us with demand and enlivenment and rental growth. The other thing that we are hearing from nearly all our occupiers is that they are really attracted to this core and flex approach. We think that we will be providing our existing occupiers in the future, a degree of flex. To put this into perspective, as Chris has said, we've got about 115,000 sq ft in Storey. We are already committed to 230,000 sq ft. At the moment, the office portfolio is about 7 million sq ft.
You could see it growing to 700,000 sq ft, I think, relatively easily.
In terms of the BTR questions, I'll take the ones on bolt-on and how to manage them. Where we would see the opportunity is to gain either incremental assets in a platform that has some assets or some incremental expertise. If you look at what we did in Storey, there we really took existing talent from within our business and added a couple of people who we hired out of other operations. That's worked very well for us. That's our kind of starting point.
Certainly, if something came up that was incremental in terms of either people where we know we don't have every skill set that we're going to require or gets us a bit of scale straight away to add to what we can build from our own resource, that would seem to us to be a neat way of doing it. It's not really feasible to give you a sense of size until they show up, if you see what I mean. I'm not dodging the question, it's just really hard. That's really how I would see it. In terms of managing that, I could see a situation where we hired somebody who had some talent who would be reasonably senior in the organization, but I wouldn't see us needing to expand the most senior levels of the company.
What I would say is, as an organization, we feel incredibly proud of the people that we, many of whom you don't see. Just as an example, there was Jonty doing a hard day job, and we just say to him, "Why don't you come and present the results?" We've got people like that in the organization who do lots of things. We did give him more than a couple of days notice. We should maybe pretend not. We have a lot of talent in this business, and we can reuse that talent in different places. That doesn't mean that we would not look outside if we thought it appropriate. Charlie, gross to net?
Just building on what Chris said. A lot of the themes that we see in Build to Rent are similar to the way we run retail places, so the skill sets are transferable. Obviously, you need experts as well, which we can build up that platform. They're actually with the development team, with Roger and Nigel. We're sort of working out plans for that, for the schemes that we've got. The other side is, as you rightly point out, is the operations side. The sort of market norm is 25% gross to net. You need scale to do that, and that means you sort of need at least 1,500-2,000 units to get to those sorts of efficiencies. In all the development pipeline we've got, we've already got that sort of potential baked into the assets.
Okay.
Good morning. Sander van, Barclays. Two questions on retail, actually. First one on the valuation. Perhaps a bit surprising to see the retail valuation up given that one of your peers just recently wrote down three of his assets and sold them and other retail. What was going on currently in the market? Can you give a bit more
feeling on why that valuation was up and perhaps more bluntly, if you were to put the whole retail portfolio up for sale today, would you achieve book value? The second one would actually be then on Sainsbury's, knowing it's one of your largest tenants and the recent merger announcement with Asda, have you had conversations with them, and are you aware of any store closures, or are they quite comfortable where they are at this moment?
I'll get Charlie to answer some of the questions. Look, I would say at the outset, we take a lot of pleasure in some of the decisions we've made over the last year. That's the overall environment. Charlie, if you just want to talk about valuations, I think that might be useful.
I mean, first off, we're confident on the valuations, independently valued. As a sort of a side note, this year, we did a valuer rotation, so nearly half the portfolio has been valued by a new valuer. I think the main thing on the valuations, we created the 1 million sq ft of lettings, and all the physical works to assets that Chris has talked about. The GBP 400 million-plus in sales have been largely ahead of book, which is valuation. Meadowhall valuation. Meadowhall's had a fantastic year, but also we've done a huge volume of lettings over the year, 30 lettings, nearly 30 new retailers to the center. Meadowhall's only 240 units. Bluewater's 330, Westfield's 450. That supply-demand tension we've got is strong.
You've got over 50% of the rent at Meadowhall is on Zone A, is of less than GBP 300, you've got a very wide spread of rents at Meadowhall. From a performance basis, nearly 50% of the retailers at Meadowhall have their Meadowhall stores as one of their top two performers in the U.K. It's a very strong perform, the operating metrics are very good. I suppose the last part on Meadowhall for me is, we've got the planning consent for the extension. Effectively, a very pretty metal box, and we can upsize and downsize units very effectively, which is why we've been able to accommodate so many new retail faces. Okay. What they'll do, we've actually only got GBP 360-odd million of standalone stores left in the portfolio, after all the disposals.
We've actually had a very good run rate on selling standalone investments, we've just sold another couple in the last three months, about GBP 70 million gross asset value, which were yields of sort of 5.2%-5.5%. There's a lot of investor demand for it at the moment.
Mike Prew from Exane BNP Paribas. I just had one on retail. It doesn't appear that units of administration are a significant factor for you at the year-end. I was just thinking more specifically, though, looking forward about your exposure to Debenhams. The equity market seems to be quite worried about Debenhams at the moment, I just wonder how you see it.
Yeah. The number I gave was the current number rather than the year-end number. We've done what we can in terms of disclosure at this stage. Debenhams specifically, remember that quite a big chunk of that exposure which we disclosed is their head office. Tim, it wouldn't be a disaster, would it, if you got that office back?
No. God bless them, they're paying a rent in the mid-50s. Facebook have just taken one of their floors, paying a rent of 70 GBP a square foot.
That helps to offset.
Then, a couple if I may on Canada Water. You've put planning in now, maybe you could just let us know what you see as the milestones for that now, sort of between now and the end of the next financial year. Could you explain the Master Development Agreement to us? These things are complicated, and it would just be nice to understand your relationship.
Sit down.
It doesn't look like a lot's changed, an update there would be useful.
For sure. Look, just to put it in perspective for you, in terms of the planning document, Roger is sitting over there. Well, half of the team are dotted around. We delivered 10,000 pages in that planning application. Giving you a précis of that is going to be a stretch in the few minutes available. What I can tell you, it's very detailed work. We feel very good about it. The way that these things work with local authorities is you kind of only submit it when they want you to submit it, because obviously, it's a lot of work for them. You can take from that, in conjunction with the signing of the NDA that all is very consensual, if you see what I mean. Your point about the elections is right.
Same team in place, it's been consistently Labour, same leader in place, same chief executive in place. In terms of the broad brush of the NDA, if you cast your mind back to how we assembled the site, there were several bits of ownership, and some of those were freehold, some of those were leasehold. As you can imagine, to make that work, it had to be equitable to both sides. We basically took all aspects of that, figured it out, valued it, and then had a bit of a haggle at the end, as you can imagine, which was a pleasant conversation between me and the Chief Executive, which came to a satisfactory conclusion for both of us. That's how it worked. Is that a reasonable summary, Charlie?
Yeah. They don't want, it can't slow us down for our aspirations. We're in control of our own destiny. Very much working in partnership with Southwark, and they really want to invest with us, which is great for us to have sort of the largest stakeholder as part of the plans.
Bart Gysens from Morgan Stanley. A first question on build-to-rent. It's something that gets a huge amount of attention from the press, from a huge amount of capital chasing it. The barriers to entry are significant, or in one, three, five years' time, will this become a meaningful part of your business in the investment portfolio? Should we expect it to be 10% plus in three years' time, five years' time?
I think those are the numbers to think in terms of. If you use 10%-15% over three, five, I tend towards the five years. Just to be clear, we see this as strategically important. We see it as very additive and complementary, as I tried to make clear in my comments. Having said that, we will drive the same financial discipline through acquisitions of sites, build-out of rental versus other forms of home ownership at places like Canada Water. We'll continue to be disciplined about it, and those are the sorts of numbers we use. To be honest with you, one of the things we like about our model is that we can flex these things a reasonable amount if we get the opportunities at a different price.
From our perspective, we have a bunch of advantages in this space about history, about how we can run mixed use. That's why we think we can be meaningful in this space. Our approach to customers, again, is very complementary to this thing, creating communities. Those are things you've been hearing from us.
That you think are potential CVA candidates. Obviously I don't want you to give any names, can you?
I'd try anyway.
Do you have kind of, what do you think, what percentage of your portfolio is at risk of a CVA in the next 12 months, and what kind of discount?
First off, I don't think any of the businesses that have gone into CVA are a particular surprise to anybody. To date, the impact for us is actually 0.6% of the rent roll, is the rent that we've lost. If you look at a lot of the CVAs at the moment, our assets are in the sort of the category A assets, because typically a retailer comes and has sort of three or four different categories they put them into. Yes, we do have a watchlist. I wouldn't, as you quite rightly say, name the retailers and it's commercially sensitive, so I wouldn't actually give you a percentage of what sort of managing that space when it comes back to us. We start from a very strong position of 98% occupancy.
If you look at, say, BHS last year, we've now filled or sold all of that space, and in aggregate, we're at a higher rent passing than the previous rent passing for BHS. As you'd expect for us, every asset has an asset plan, target list of retailers, et cetera. We sort of deal with them as and when they come up.
Hi, guys. Mike Bessell from Bank of America. One very quick one on Build to Rent, please, which is, given sort of the shift in the portfolio towards London, can I make the assumption that your Build to Rent will be exclusively London-focused rather than a national play? The second question from me is on the ongoing shift towards being a more operational service business. Can I see this as sort of a further trend to be leaving NAV aside slightly, or how are you seeing that asset value versus cash flow trade-off going forward?
A couple of great questions. I would say on the important measure, but we also know that for many of our investors, both are important in terms of sense of value. We all know that that trade-off between income and capital in both directions can be quite complicated. I think the idea of just running it in terms of FFO is kind of weird in this business, to be honest with you. We look at it in a total return context. I do think that at the end of the day, this business around being able to offer a better service is likely to manifest itself in growing rents above all else, and we can see that with Storey, if you like. People are effectively paying that premium that Tim talked about. That's kind of how we look at it.
In terms of BTR and where we would go, I think we start with a natural view that as we've already pointed out, the existing sites that we have are solidly in this part of the world. I don't think over time we would absolutely take the view it had to be in London. There are clearly some signs that the economics are different in different parts of the country. That I'd see more towards when we've grown a business before we start doing that absolutely immediately. Charlie, I don't know if you want to add anything or Tim to those comments.
I think, just on the, you all probably know this with the macro, 23% in the U.K. market is in institutional grade at PRS. That grows to 10% with very few people doing it, which is why we see a lot of opportunity.
Yeah. The only other thing I might say is that we've obviously got a big advantage because we own Broadgate Estates. Broadgate Estates is well-versed at dealing with buildings, both offices. Really decided to do is to focus that business purely on British Land's portfolio. Cool. No, it looks like not. Very good. Thanks very much for your time. Good to see you.