British Land posted an 18% rise in third-quarter net asset value (NAV) today, providing ballast to a rebounding UK property market still haunted by worries over loan defaults and tenant failures.
The blue chip investor, one of London's largest office landlords, said its NAV rose to 438 pence a share in the three months to December 31, above the 425 pence analysts were picking, as demand for commercial real estate rallied.
The value of its total investment portfolio grew by 8.2% to £7.9 billion in the period. It reported a 1.4% rise in like-for-like rental income compared with the corresponding quarter last year.
Chris Grigg, Chief Executive, said in a statement:
"Our third quarter performance saw a continued recovery with strong valuation growth right across the portfolio. The significant increase in our property valuation reflects the quality of the portfolio and focus on asset management. Our retail estate is virtually 100% let and characterised by prime locations and strong customer relationships. Our office portfolio is well positioned as London letting activity picks up. We have over 250,000 sq ft of space under offer, including nearly 220,000 sq ft to Macquarie, and have over 650,000 sq ft of additional new space available from recent development activity.
"During the quarter we commenced the Broadgate JV with Blackstone, an important part of our long-term plan to re-balance the portfolio. We are investing in high quality opportunities such as Surrey Quays, where we can add considerable value, and we expect further attractive assets to emerge over the next 18 months. We're well placed: British Land combines a prime portfolio, strong income profile, talented people, and significant financial firepower."
BL has made £240 million of new investments in the 2009 year to date, buying a 50% stake in Surrey Quays and Clifton Moor (York) shopping centres for £87 million on initial yields of 8.5% and 8.2% respectively and also including £31million to buy a Sainsbury's superstore in Macclesfield at a 5% net initial yield. The leases in all cases have generous upward only rent reviews which will strengthen yields further.
The improved valuations will encourage lenders Royal Bank of Scotland and Lloyds Banking Group, which are battling to cut property impairments after a 45% pricing plunge between June 2007 and August 2009.
British Land declared a 6.5 pence Q3 dividend, but British Land and peers Liberty International and Segro were among the biggest FTSE 100 fallers yesterday as the market digested news of a slower-than-hoped 0.9% rise in average values last month, after a record 3% hike in December.
Fears of a "double-dip" in commercial property values loom large over the market following a rapid 10% turnaround in values in the second half of 2009, against a backdrop of grim economic forecasts and continued pressure on rents.
Data from the Association of Real Estate Funds yesterday showed a record £3.2 billion flooded into unlisted pooled property funds in the final quarter of 2009, but many key investment experts predict a turbulent 2010 for UK real estate.
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