Useful yield at British Land

Britain’s second-largest listed property company is resilient mainly because it has large properties in excellent locations, for which demand remains steady among both tenants and institutional investors. Yet the committed development pipeline was also a significant contributor to returns, rising 13.6 per cent in book value over the year.

Pre-let agreements for London offices drove this gain. The company agreed to lease 5 Broadgate to UBS for an inflation-linked annual rent starting at £54.50 per sq ft and lasting 18 years. The 700,000 sq ft building is now under construction and will be finished by the end of 2014. British Land also signed a major pre-let with the insurance company Aon, which will occupy the bottom 10 floors (and possibly more) of the so-called ‘Cheesegrater’, a new skyscraper on Leadenhall Street. Finally, Debenhams will move its new headquarters to 10 Brock St, part of a large complex called Regent’s Place under construction on the Northern fringes of the West End. Together, these three tenants will eventually be worth £34m in annual income.

Net rental income rose by 5.4 per cent over the year, mainly thanks to acquisitions – the like-for-like increase was only 1.5 per cent. That explains the modest but welcome dividend increase, which will be continued into the current year (giving 26.4p of dividends overall). The company's largest acquisition was a £179m portfolio of Virgin Active health clubs, slightly off-piste for British Land but attractively priced. The company later disposed of five smaller clubs for £33m, an 18 per cent premium to the acquisition price.

Brokerage Investec expects adjusted NAV of 596p a share at end March 2013.