Exane upgrades Great Portland as UK commercial property 'oversold'

Analysts at Exane BNP Paribas highlighted potential upside at British property specialist Land Securities, British Land and Derwent London on its confidence that the UK will vote to remain in the European Union in June.

Exane said a maturing UK cycle means this trade will be short-lived, but said the shares of Land Securities and British Land had been oversold in the short-term.

"For investors seeking to avoid these political and cyclical risks, Continental Europe offers more sustainable returns," it added, pointing to Vonovia, Klépierre and Beni Stabili.

The British property sector has been weak recently reflecting fears surrounding a potential ‘Brexit’ and maturing cycle.

On valuations that assume an ‘In’ vote in line with bookmakers’ odds, this points to 18% average upside in Land Securities and British Land.

"Total returns of 10% on a 12-month view look mispriced based on 25% discounts to spot NAV, particularly bearing in mind decade-low LTVs and increased income support for valuations.

"However, we would not want to run UK exposure beyond calendar 2016e given our forecasts for broadly flat NAVs in 2017e.

London office specialist Great Portland is upgraded to 'overperform' from 'neutral', with Derwent London upgraded to 'neutral' from 'underperform', with British Land maintained at 'buy'.