Former British Land boss sells down

Former British Land (BLND) chief executive Chris Grigg has sold almost £1.9m in shares jointly owned with his wife Fionna, ahead of his departure from the group at the end of this year. Mr Grigg was replaced in the top job by former chief financial officer Simon Carter in November.

The new chief executive is tasked with reducing the commercial landlord’s exposure to the struggling retail sector, from which tenants paid only 62 per cent of rent due in respect of the final quarter by mid-November. That was in stark contrast to a collection rate of 97 per cent from its office portfolio and forced the group to record a further £44m in provisions for unpaid rent.

It has sold £456m in retail assets since April at an average 6.7 per cent ahead of book value. That was an impressive feat given leases of greater than one year signed during the period were at an average 11 per cent below previous passing rent and 8 per cent below estimated rental values. The value of the retail portfolio declined 15 per cent during the first half of the year, following a rise in company voluntary arrangements and tenants entering administration. 

The newly installed boss is looking to mixed-use “London campuses” to drive rental growth, which will include a 53-acre development at Canada Water, where building is due to start in the spring. 

Asset disposals limited the rise in the group’s loan-to-value ratio to only 35.7 per cent, from 34 per cent at the end of March. Analysts at Numis forecast that the group’s net asset value (NAV) will sink to a trough of 634p a share at the end of March 2022, before returning to growth the following year. 

Yet that will depend on management continuing to offload retail assets and estimated rental values for the office portfolio holding steady. Given the anemic levels of liquidity within the retail investment market and employers yet to determine their future working arrangements, both are highly uncertain. A 24 per cent discount to forecast NAV rightly prices that risk. Hold. 

Last IC view: Hold, 491p, 18 Nov 2020