RBC Capital downgrades British Land, Landsec, Hammerson

British Land, Landsec and Hammerson were all under the cosh on Tuesday after RBC Capital Markets downgraded its stance on the shares, as it took a look at the London office and UK retail property markets.

The bank cut British Land to ‘underperform’ from ‘sector perform’ and slashed the price target to 375p from 475p.

"Our more cautious view of London office and UK retail property markets negatively impacts our forecasts for British Land," it said. "Furthermore, we believe a more negative macro scenario appears slightly at odds with management’s view of their markets, increasing the potential negative impact to British Land's returns.

"While we believe in more demanding tenants leading to wide-ranging trends within certain property markets, our view is it is unlikely to be supportive of attractive development returns near-term and only benefits a proportion of most REITs' existing portfolios."

Landsec was cut to ‘sector perform’ from ‘outperform’ and the target price reduced to 675p from 950p.

RBC said Landsec has made good progress in starting to implement its CEO's new strategy, but that a deterioration in the macro environment will temporarily slow further progress.

"At the same time, we expect Landsec to be negatively impacted by a weaker macroeconomic environment given a relatively high level of variable rents in its retail/leisure businesses and exposure to more economically sensitive London office markets."

RBC cut Hammerson to ‘underperform’ from ‘sector perform’ and reduced the price target to 17p from 32p.

It said economic weakness is likely to hamper Hammerson’s restructuring progress, increasing and extending uncertainty over the future shape of its business and its earnings profile.

"A combination of a relatively high level of variable revenues, high financial gearing, complicated ownership structures for its properties and its potential shift in business mix (to mixed-use urban development) amplifies the uncertainty over Hammerson’s future level of earnings in our view, risking deeply discounted share price multiples for a period of time."

RBC also downgraded Warehouse Reit to ‘underperform’ from ‘sector perform’ and Empiric Student Property to ‘sector perform’ from ‘outperform’.

At 0940 BST, British Land shares were down 4% at 444p, Landsec was off 3.8% at 649.40p and Hammerson was 5.4% lower at 19p.