British Land sees recovery 'right across portfolio'

Britain's second biggest developer says the autumn property recovery accelerated in the last three months of the year

British Land, Britain's second biggest developer, today provided some much-needed confidence to the property market by reporting that the value of its office blocks and shopping centres had risen 8.2 per cent in the last three months to December to £7.9 billion.

The rise in its net asset value per share to 438p – a benchmark measure – amounted to an 18 per cent rise in value over the nine months since its financial year began, and was well above forecasts for a 425p value.

Chris Grigg, chief executive, who replaced Stephen Hester a year ago, said: “The early signs of recovery seen in the second quarter extended right across our portfolio during the last three months of 2009."

The value of its retail portfolio, which includes Meadowhall shopping centre in Sheffield, rose 8.4 per cent in the three months to £5.25 billion while its offices, largely in the City, including Broadgate, and the West End rose by 8.2 per cent to £2.46 billion.

Mr Grigg said: “We’re well-placed: British Land combines a prime portfolio, strong income profile, talented people, and significant financial firepower.”

However, underlying pre-tax profit for the quarter dropped from £63 million to £58 million as rents shrank because it sold off several properties. Its regulatory profit, which includes the valuation of properties, rose to £611 million after a £1.6 billion loss in the same quarter last year.

Britain's battered property sector, although showing signs of recovery, is still beset by worries that the economy may show a double dip, driving valuations back down and forcing banks such as Royal Bank of Scotland and Lloyds Banking Group, which lent to developers at the height of the boom to write off more of their loans.

Rental income has been weak as a series of retailers and businesses have gone bust. British Land managed to grow its like for like rental income by 1.4 per cent in the quarter against a year ago, when the property recession was at its height.

Mr Grigg said rental values from City of London offices were continuing to fall in the period but at a slower rate of 1.2 per cent, making an 11.4 per cent fall in rent over the nine months. Rents from West End offices were flat in the period, making a 12.5 per cent fall over nine months.

The developer is paying a quarterly dividend of 6.5p a share.

Robert Lindsay, Times Online 09-02-2010