British Land sees value rise as real estate storm recedes

Published on Tuesday 17 November 2009 20:52

A SIGN that the worst of the commercial property slump is past came yesterday from British Land, the owner of a string of Scottish retail parks and shopping centres.

The property giant – whose assets include Fort Kinnaird in Edinburgh, Inverness Retail Park and Glasgow Fort – said it believed it was pulling free of the "worst storm in real estate history" as it reported the first quarterly rise in the value of its portfolio for more than two years.

The company, whose sprawling portfolio also includes a 50 per cent stake in the Meadowhall shopping centre near Sheffield, said its net asset value rose 3.1 per cent to 372p per share in its second quarter, trimming the fall since March to 6.5 per cent.

The company said 70 per cent of its 8.3 billion of property assets had increased in value since June, underlining a sharp rebound in real estate after two years of plunging prices.

British Land, which tapped shareholders for 740 million earlier this year to shore up its balance sheet, is now ramping up its deal pipeline after confirming interest in 2.5bn of potential investments.

The company remained in the red with pre-tax losses of 113m, but this was significantly better than the 1.3bn loss of a year earlier after hefty property writedowns.

It pointed to "encouraging signs" and said valuations were being helped by a shift in investor appetite combined with a limited number of properties coming on to the market.

Chris Gibson-Smith, chairman of British Land, said: "In charting a course through the worst storm in real estate history, the board has been careful to ensure we use the voyage to prepare British Land for greater achievements."

The group now has the "capacity and willingness to be bold", he added.

As well as seeing its property prices plunge throughout the financial crisis, British Land's retail and office tenant base was also badly affected, with company failures soaring over the past two years.

But the firm said administrations among its tenants had eased from 1.8 per cent to 0.8 per cent of total rent since March.

British Land – which is one of the biggest owners of superstores in the UK, accounting for 13 per cent of its estate – said it had seen continuing strong demand from food retailers.

Broker Panmure Gordon said the net asset value figure was better than it expected.

But analysts cautioned that while property conditions boded well for British Land, the group still faced headwinds as ongoing credit conditions threatened to hamper a bounce-back in property values.

British Land's shares closed down 13.5p at 490p last night.