British Land in shape for snapping up rivals

BRITISH Land, which owns half of the Meadowhall shopping centre near Sheffield, yesterday said it was well-placed to make acquisitions as it reported strong income and capital growth.

The company posted 25 per cent growth in third-quarter net asset value (NAV) as Britain experienced a “muted” economic recovery.

British Land, whose portfolio is dominated by prime retail sites and offices, said third-quarter NAV per share was 548p.

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Its portfolio value was £9.3bn ($14.9bn) at December 31, 2010, an increase of 13.1 per cent.

Chief executive Chris Grigg said: “From our perspective we feel we’re well placed to take on acquisitions ... so it really depends on the rate at which good value acquisitions emerge. Although I think that rate will be higher than it’s been.”

He added: “This is a strong financial performance from British Land which reflects the good progress we have made right across the business during what has been a busy quarter.”

The company committed about £330m to deals in the third quarter. It said it was seeing an increasing number of assets coming to market from banks and other vendors.

Mr Grigg said: “We should do more (deals) than we’ve seen.”

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He did not expect fourth-quarter deals to dramatically alter British Land’s loan-to-value ratio, which was 23 per cent at group level on December 31 and at 45 per cent if the company’s exposure to joint ventures and funds was included.

Last month, British Land played down suggestions that it was planning to carry out a major retail expansion on land next to Meadowhall.

A British Land spokesman said in January: “We do not intend to extend the Meadowhall shopping centre. We continue to look at development of the land surrounding Meadowhall but do not have any firm plans at the current time.” A British Land spokesman said yesterday that nothing had changed with regard to its plans for Meadowhall since the statement was issued last month.

Panmure Gordon analyst Mark Hughes said British Land’s results were ahead of his expectations from a NAV perspective. He increased his target price on the shares to 555p, from 548p. Mr Hughes retained a “buy” rating on the stock.

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“We would expect capital value growth from yield re-compression to now slow. Our full year NAV forecast is upgraded to 551p per share,” Mr Hughes said in a note.

Nomura analyst Robert Duncan said he was looking for a “game-changing” deal from British Land.

He added: “This (the third-quarter results) was not it.”

Mr Grigg expected the UK economic recovery to be muted, but he said the company was well placed to benefit from occupier and investor demand for high-quality space in retail and central London offices.

In February, IPD’s monthly index showed UK commercial property capital growth slowed to 0.1 per cent, confirming that the recovery in prices had lost steam because of concerns about the economy and Government spending cuts.

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British Land said in a statement: “We have focused our business on those sectors of the property market where we believe the underlying demand dynamics – high quality retail and central London offices – are expected to remain positive.”

In the three months to the end of December 2010, British Land delivered an underlying profit before tax of £64m, up 10 per cent from £58m a year earlier.

Its dividend for the period was flat at 6.5p a share.

British Land’s occupancy averaged 98.1 per cent across its portfolio, with average lease lengths of 12.1 years.

Its estimated rental values (ERV) for offices was up 1.4 per cent at the end of December, while its retail ERV was up 0.4 per cent.

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In London, building works are underway at the Leadenhall Building, NEQ and Baker Street. A detailed planning application has also been submitted for a 700,000 sq ft development at 5 Broadgate in London.