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British Land and Landsec: is there a path to rerating?

Shares in the commercial property giants are languishing at near-10-year lows as lockdown measures have cast a huge degree of uncertainty over the prospects for rental income
British Land and Landsec: is there a path to rerating?
  • British Land and Landsec trading at 50 per cent discount to net asset value
  • The commercial landlords have suffered substantial shortfalls in rent collection this year
  • Both management teams aiming to dispose of retail assets and invest in office-led, mixed-use developments

British Land (BLND) and Landsec (LAND) are among a sliver of commercial real estate investment trusts (Reit) to have signalled that they will reinstate dividend payments. Yet those announcements have been met with a raised eyebrow by the market. Ahead of the release of interim figures later this month, shares in the Reits continue to languish at near-10-year lows as expectations abound that asset values will fall further as rents are rebased, threatening the scale and security of shareholder returns.

For the newly installed bosses of the commercial property giants – both of which were appointed during the past 12 months – the task at hand is driving growth from the more stable London office estate and reducing exposure to the retail sector. In keeping with the split of that portfolio, the shares' valuations – a 50 per cent discount to March NAV – sit above those attached to troubled retail property groups such as Hammerson (HMSO), but below pure-play office landlords such as Derwent (DLN) and Helical (HLCL). 

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