British Land keeps its head down

However, despite all the Brexit-related hype, the London property market refuses to lie down, and British Land managed to achieve 1.3m sq ft of lettings and renewals at 6.8 per cent ahead of estimated rental value. Demand remains robust, and British Land took advantage of this by disposing of £992m of assets at an average premium to book value of 13 per cent.

Given the strong demand, the committed development pipeline was more than doubled to 1.5m sq ft, with 57 per cent pre-let or under offer. Notable successes included an agreement on 1 Triton Square covering 310,000 sq ft, the largest pre-let in the West End for 22 years. A planning application is expected to be submitted early next year for the first development phase at Canada Water for 1.8m sq ft of mixed-use space.

On the retail side, occupancy levels remained high at 98 per cent, with 578,000 sq ft of lettings and renewals at an average 11.9 per cent ahead of estimated rental value.

Net rental income was down 5 per cent at £297m, mainly as a result of disposals and lease expiries, although these were partly offset by a one-off surrender premium of £15m paid by Royal Bank of Scotland. A year earlier, the portfolio suffered a £257m devaluation, but this was replaced with a £141m uplift, which helped to push adjusted net asset value per share to 939p at the period-end, up from 915p six months earlier. This and early debt repayments meant that the loan-to-value ratio fell from 29.9 per cent to just 26.9 per cent.

Development spending totalled £84m, most of which related to the refurbishment of 100 Liverpool Street at Broadgate, Crucially, 85 per cent of the £446m of costs tied to the committed pipeline will be funded through £381m of receipts still to come from residential sales.

Analysts at Peel Hunt expect to upgrade their forecast for adjusted net asset value at the March 2018 year-end by 2 per cent to around 920p per share, up from 915p a year earlier.