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British Land's exciting pipeline

British Land has a substantial development pipeline including a 64 acre site at Canada Water
November 17, 2015

Rents and property values may be still heading north, but British Land (BLND) has resisted the temptation to boost its gearing, preferring as far as possible to fund its development arm through recycling its assets. So while expenditure on refurbishment and acquisitions in the first half swallowed up £489m, this was largely offset by £431m of disposals. As a result, net debt was barely changed at £3.6bn, while the loan-to-value ratio of debt as a percentage of the portfolio value, fell slightly to 34 per cent.

IC TIP: Buy at 829p

Headline profits were lower, but that is mostly because the valuation uplift on the portfolio at £397m was down from £511m a year earlier. Even so, adjusted net asset value grew by 7.5 per cent, while chief financial officer Lucinda Bell's preferred metric of total accounting return, which adds dividends paid onto adjusted NAV, rose by 9.1 per cent.

British Land's development pipeline, which started in 2010, is now largely complete, having delivered £1.1bn in profits. The current pipeline is still at an early stage, but includes £825m of committed investments, including Clarges Mayfair and Kingdom Street in Paddington. Near-term projects include 1.3m sq ft in London, but this is without the 46 acre site at Canada Water, which has the potential to provide around 5.5m sq ft of office, retail commercial and residential use.

The current portfolio is split between retail assets on the one side and office and residential on the other. On the retail side, the group has increased its focus on London and the South East, which now accounts for nearly two thirds of the retail portfolio. Its investment portfolio here saw an uplift of 1.8 per cent. Crucially, retail lettings and renewals were 6.6 per cent ahead of estimated rental value, with the entire portfolio was all-but-fully let. Office and residential enjoyed an 8.1 per cent valuation uplift, while lettings and renewals were achieved 5 per cent ahead of estimated rental value.

Analysts at Peel Hunt forecast adjusted net asset value by the March 2016 year-end of 910p (from 829p in 2015).

THE BRITISH LAND COMPANY (BLND)
ORD PRICE:829pMARKET VALUE:£8.53bn
TOUCH:828.5-829.5p12-MONTH HIGH:892pLOW: 719p
DIVIDEND YIELD:3.4%TRADING PROP:£302m
DISCOUNT TO NAV:7%
INVESTMENT PROP:£12.7bn*NET DEBT:39%

Half-year to 30 SepNet asset value (p)**Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)ǂ
20147691.0498.513.84
20158910.8279.814.18
% change+16-21-19+2

Ex-div: 7 Jan

Payment: 12 Feb

*Includes joint ventures **Dividends paid quarterly ǂAdjusted NAV