Property developer British Land (BLND) gained 6.3% to 403.8p despite reporting wider losses on lower rental income as the Covid-19 pandemic heaped further pressure on struggling retailers and forced them to enter administration. Dividends remain suspended for now too.
For the 12 months ended 31 March, pre-tax losses widened to £1.1bn from £320m on-year as net rental income fell 10.1% to £478m.
‘Retail like-for-like net rental declined 5.1% in the year, primarily reflecting the impact of CVAs and administrations,’ the company said.
‘The offices portfolio saw like-for-like growth of 0.8% which is lower than the historic run-rate due to lease expiries,’ it added.
Looking ahead, British Land said that in the near term, it was expecting the offices market to be more cautious.
In retail, given current valuations and the lack of liquidity in the investment market, the company's focus was on delivering value though asset management, working to keep its places full and exploiting demand for assets which supported an online offer.
‘ROBUST’ FINANCIAL POSITION
‘Our financial position is robust with debt low, significant covenant headroom and access to £1.3bn of undrawn facilities and cash so we are well placed to weather today’s challenges and succeed in the long term,’ British Land said. It added that it could effectively withstand a further 45% fall in valuations.
AJ Bell investment director Russ Mould said: ‘For now the value of its offices are holding up and most of its tenants are paying rent on time.
‘However, this may change as recession begins to have a more widespread impact. In the longer term demand for offices may be affected as working from home habits built up over the pandemic prove hard to break.
‘Already corporate leaders, including the CEO of Barclays (BARC) Jes Staley, are publicly noting they might not need the same level of office space in the future as they eye the savings that could be achieved by reducing their footprint.
‘It remains to be seen whether home working will pose the same existential threat to office real estate as online retail has to physical shops but it is a clear risk facing British Land, given offices account for substantially more than 50% of its holdings.’
