British Land confident it can ride out storm

Published on Thursday 29 May 2003 01:00

PROPERTY bell-wether British Land is confident that its diverse portfolio, which includes retail and office assets such as Edinburgh’s Meadowbank retail park, will allow the group to overcome the uncertain conditions currently affecting the sector.

Property stocks, which many investors will turn to in times of market volatility, have lost some of their shine recently as the economic slowdown takes its toll on rental prices.

Earlier this month, Land Securities, which sits above British Land in terms of market value, posted lower annual earnings and warned that rents in London’s financial district were unlikely to pick up before 2006.

However, British Land claimed its mix of retail space such as Meadowbank and office property like the Capital’s Orchard Brae House meant it was well-placed to capitalise on any recovery.

"At present, the investment market remains strong," the company said in a statement accompanying its latest set of annual results.

They showed pre-tax profits inching up to 172.4 million from 171.3m a year earlier, ahead of profit forecasts of between 119m and 155m.

Diluted net asset value (NAV), a key performance marker for property companies, lifted to 860p per share from 803p in 2002. Analysts had forecast a figure in the range 760p to 843p.

But there was a lack of progress on the group’s search for a new chief executive, after John Ritblat decided to split his roles as chairman and CEO. Market watchers said they were not too concerned over corporate governance issues at the firm, though. Selwyn Jones, an analyst at Collins Stewart, said: "Why question the current management team when they’ve achieved such strong results?"

Dutch merchant bank Kempen & Co stuck with its add rating and said it would revise its estimates on the stock upwards.

A British Land spokesman declined to comment on market speculation that it is the front-runner to buy the property portfolio of embattled Scots fund manager Aberdeen Asset Management.

According to the annual accounts, the total value of British Land’s vast portfolio edged up 0.7 per cent, on a like-for-like basis, to just under 9.65 billion. Last year, the group and its joint ventures completed some one million square feet of space at a construction cost of 115m.

It singled out Centre West, a 285,000sq ft extension to the East Kilbride Shopping Centre in the west of Scotland, as a major element of its recent development programme.

The group said the new mall, which opened in March this year, was already 89 per cent let.

At Public House Company, the firm’s joint venture with Edinburgh-based brewer Scottish & Newcastle, British Land said it had made "substantial sales" during the year. It also expects to benefit from Chancellor Gordon Brown’s recent Budget changes on stamp duty.

British Land owns properties worth a total of about 3bn in areas that fall within the scope of Gordon Brown’s proposed stamp duty exemption for disadvantaged areas, and will therefore be in line to pay less duty on any future disposals.

As well as its office and retail assets in Edinburgh and East Kilbride, the 147-year-old company has Scottish property interests in Aberdeen, Dumbarton, Elgin and Glasgow.