The second of the FTSE 100’s big real estate investment trusts to report this week takes the wooden spoon as it reveals falling asset values and pressure on rental income.
British Land’s (BLND) first half results, following on from yesterday’s interims from Land Securities (LAND), show the pain being felt from its exposure to the retail sector.
However, the market appears to be relieved that the news isn't worse with the shares rising 2.8% to 637.2p.
The value of the portfolio falls 1.9%, compared with a 1.4% fall at Land Securities. The retail component, which includes Sheffield’s Meadowhall shopping centre, down 4.5% and offices up 0.7%. Land Securities saw the value of its retail assets down 2.9%.
INCOME SECURITY
British Land’s dividend is up 3% to 15.5p, while Land Securities hiked its dividend up 14.7% to 22.6p, although the former is continuing its £200m buyback.
AJ Bell investment director Russ Mould says: ‘Today’s first half results reveal that a resilient performance from British Land’s portfolio of offices has not been sufficient to spare the property group from the pain associated with its retail holdings.
‘Exposure to retail has seen both the value of its assets downgraded and the level of income fall as a number of the company’s tenants use Company Voluntary Arrangements to trim their rent bills.
LITTLE TO BUY
‘British Land made several disposals in the six-month period but apparently doesn’t see anything material of value to acquire, instead reducing its loan-to-value and continuing to return surplus funds to shareholders through a buyback.
‘The current strategic plan is to maintain its office-based assets at a little more than half the portfolio, trim retail to around a third and boost residential up to around 10%. Whether this altered mix will help restore the firm’s fortunes in the medium-term, only time will tell.’
Liberum comments: ‘In a flat market, British Land continues to successfully balance activity to deliver future value creation, while limiting its overall financial and speculative risk exposure.’
