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British Land losses soar as retail values plummet

The commercial landlord is hoping to make further disposals, but a lack of liquidity in the retail market will make progress slow
May 27, 2020

The magnitude of the decline in British Land’s (BLND) retail portfolio comes as little surprise given the dire set of full-year trading figures from close rival Land Securities released earlier this month. The value of the commercial landlord’s retail assets fell by more than a quarter, with the impact of store closures responsible for a decline of between 6 and 7 per cent alone, and estimated rental values were down 11.7 per cent.

IC TIP: Hold at 411p

The steep decline in shopping centre and retail park values also offset a 2.3 per cent rise in the office portfolio and a 6.5 per cent uplift from developments, which are now 88 per cent let. The group will incur a further £76m in costs by spring when the final of the two committed office developments complete. 

It was a tale of two portfolios on the rent collections side,  too, as 97 per cent of office rent due for the March quarter was collected and just 48 per cent for retail. After collecting an aggregate 68 per cent of rent, deferrals of £35m have been agreed. However, a darkening macroeconomic outlook seems likely to weigh on demand for office space in the short term, according to chief financial officer Simon Carter. “A lot of them are still working from home, we expect them to come back but it will take time,” he said. 

Management has lowered its target retail exposure to between 25 and 30 per cent of the portfolio by value, but a lack of liquidity within the market will mean further progress on asset disposals is slow. However, since the end of March sales totalling £140m have been agreed, including a 25.5 per cent stake in a portfolio of 26 supermarkets.

Peel Hunt lowered its adjusted NAV forecast for the end of March 2021 by 4 per cent to 690p a share.

BRITISH LAND (BLND)

    
ORD PRICE:411pMARKET VALUE:£3.81bn
TOUCH:410.9-411.6p12-MONTH HIGH:649pLOW: 309p
DIVIDEND YIELD:3.9%TRADING PROPERTIES:£20m
DISCOUNT TO NAV:47%NET DEBT:46%
INVESTMENT PROPERTIES:£10.5bn**  
Year to 31 MarNet asset value (p)*Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20169191.3313128.36
20179150.2018.829.20
2018967-0.5048.730.08
2019905-0.32-30.031.00
2020774-1.12-11015.97
% change-14---48
Ex-div: na   
Payment: na   
*EPRA NAV **Includes investments in joint ventures and funds