Centre’s owner stakes £512m on UK recovery

THE owner of Meadowhall shopping centre has invested £512m on property acquisitions since the start of April against the backdrop of a tentative economic recovery in the UK, it said yesterday.

British Land, the country’s second largest listed developer, bought a £470m office complex in the Paddington district of West London after raising almost £1bn for new investments via a share placement and sale of a London office block in March.

In a trading update, the company said: “There are some signs that confidence is strengthening and the UK economy is growing, albeit at very low rates.

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“In property, this improving confidence has been most evident in the investment market which has seen a broadening of investor demand and risk appetite.”

However, strengthening demand from tenants was mainly confined to its London properties and remained weaker at its retail properties around the UK, the company said.

The Paddington deal helped the developer to tip the balance of its portfolio further away from the City financial district, where tenant demand has been patchier since the financial crisis.

There was no guidance on the performance of Meadowhall specifically but British Land said the focus of activity in its UK retail business overall continued to focus on evolving its overall offer including attracting a broader range of retailer, food and leisure operators and upgrading the physical environment.

It added: “We saw encouraging demand for our space, signing 320,000 sq ft of lettings and renewals in the quarter with a further 400,000 sq ft under offer.

“Investment lettings and renewals were signed 3.6 per cent ahead of ERV (estimated rental value) with activity across all sectors including fashion, food and beverages.

“Rent reviews were signed on average 5.3 per cent ahead of previous passing rent led by our superstore portfolio.

“Our UK retail occupancy was modestly ahead in the period at 97.6 per cent, reflecting the letting of units in administration which have fallen from 0.9 per cent to 0.5 per cent of total rent.

Earlier this month, British Land won the right to develop a new Next store in Sheffield.

Next won its appeal against Sheffield City Council’s planners, who refused its proposed £10m Next Home store at Meadowhall on the basis that the 61,000 sq ft store on the British Land-owned site development would be harmful to investor confidence in the city centre’s retail sector.

A spokesman said at the time: “British Land is committed to Sheffield and its future and will continue to support retail development, employment and investment in this dynamic and vibrant city.”

Yesterday, the company said retail markets in Europe remained tough with its retail parks impacted by poor occupier performance and higher incentives.

It said it has increased its pipeline of prospective development opportunities, particularly within London

Following yesterday’s update, British Land’s dividend increased by 2.3 per cent to 6.75 pence for the quarter and to 27 pence for the year, a move the company said reflected “confidence in future cashflows.”

Chief executive Chris Grigg said: “We have had a good start to our financial year and our business continues to perform.

“The economy as a whole is showing some signs of returning confidence, London remains strong and while retail is still challenging, we continue to see encouraging levels of demand for our space.

“Our purchase of Paddington Central plays to our strengths in the management and development of major London estates.”

He added: “This transaction strengthens our ability to deliver income and capital value growth. Our decision to increase the dividend reflects our confidence in the business.”

Welcome for ‘upbeat’ news

Analysts hailed the ‘upbeat’ management statement.

Jefferies said there was “increasing confidence in its medium-term cash flows signalled by an unexpected 2.3 per cent dividend lift”.

Alan Carter of Investec Securities, said: “Management has made a very positive statement about confidence in their business, with strong demand for their London office assets and signs of increasing confidence in the retail market. The March placing cash is fully deployed and more, debt costs have fallen, and the near-term development pipeline replenished.”