British Land has announced plans to delay the construction of the Richard Rogers-designed 'Cheesegrater' office development in the City of London by a year or more due to worsening market conditions. The decision coincided with the property group's first quarter results which showed a pre-tax loss of £565m.
The value of British Land's property portfolio, including its share of funds and joint ventures, fell 5 per cent to £12.3bn. City office buildings, which account for nearly a third of the total portfolio, fell 7.2 per cent in value. The group is also exposed to two City developments: 201 Bishopsgate, which is 84 per cent pre-let, and the Broadgate Tower, which has 42 per cent of space secured.
However, rental income grew, and exposure to occupiers in administration is only 0.5 per cent of the retail rent roll, compared with 3 per cent at
On an adjusted basis net asset value (NAV) fell by 10 per cent in the quarter to 1,212p, with underlying EPS flat at 14p. A quarterly dividend payment of 9.375p is a 7 per cent increase on the same period last year.
BROKER VIEWS
JP Morgan
Overweight. British Land is one of the better picks in the sector. The market is too focused on its City office exposure, ignoring its 13.6 years average lease length, 5.3 per cent fixed interest rate on borrowings with average maturity of 12.9 years, plus committed and undrawn facilities of £2.6bn. However, the key positive is that the operational side of the business is performing very well with strong like-for-like income growth of 6.3 per cent in the period, and rent reviews 4 per cent higher than estimated rental value.
Cazenove
In line. Reviewing the timing for the next phase of construction of the Leadenhall Building [Cheesegrater] will secure cost savings, as steel futures are down 29 per cent over the past two months. The recurring profits from British Land will very much depend on the extent to which the company leases developments over the next few years. Following the first quarter results, we have modestly revised down our full-year 2009 NAV estimate to 1,060p and to 1,029p in 2010.
