Bumper NAV growth at British Land

The record rise, following on from one of the bleakest years in the company's 154 year history, reflects the investment portfolio's bias towards out-of-town shopping parks and central London office markets, which have enjoyed the strongest rebound. In the last quarter, its assets outperformed the industry benchmark IPD Index by 4.3 per cent, but management concedes that growth going forwards will be "muted" as property values stabilise.

Stripping out the valuation increases, underlying profits fell by 7 per cent to £249m, reflecting the impact of recent property disposals, the most significant being the £1.1bn sale of a 50 per cent stake in City office complex, Broadgate, to Blackstone. This impacted gross rental income, falling 14 per cent on a consolidated basis, but on a like-for-like basis, rents are up 1.4 per cent on last year and have risen an impressive 2.1 per cent on retail property.

British Land enjoys the best income profile of the major Reits, with average lease length to break of almost 13 years. Encouragingly, new lettings are being achieved above estimated rental values (ERV) due to "competitive tension" on popular retail parks where tenants are vying for space.

With occupancy up to 97 per cent, future growth will come through development-led expansion. Chief executive Chris Grigg confirms he has committed nearly £500m of firepower to development plans, including a new headquarters for UBS at Broadgate, and two West End developments in Baker Street and Regent's Place. The group is expected to dust off its planned City office tower, the "Cheesegrater", confirming it is now in talks with potential occupiers and equity partners, attracted by the "gap in the market" emerging in 2013 due to the thin central London development pipeline.

Broker KBC Peel Hunt has increased forecast March 2011 NAV to 553p from 527p.

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