British Land makes 'active start' to year, though retail still a struggle

Investors in British Land heard how the company made an “active start” to the year on Monday, with the board saying that along with its joint venture partner, it completed on the sale of 5 Broadgate for £1bn, in line with book value.

The FTSE 100 firm also told shareholders ahead of its annual general meeting that it had commenced a £200m extension to its share buyback programme, which apparently reflected its continued commitment to effective capital management and its focus on shareholder returns.

Its financial position reportedly remained strong, with the company further reducing is loan-to-value ratio to 26% while continuing to progress the “attractive opportunities” it had created across its development pipeline, focused on enhancing its central London campuses.

“Leasing activity in offices has continued to be good, our portfolio is 98% occupied and 64% of our total development pipeline is now let or under offer, up from 55% at the time of our preliminary results in May,” the British Land board said in its statement.

“This is a clear endorsement of the quality space we are delivering and the attractiveness of our campuses to a range of occupiers.”

British Land said its pre-letting success, along with the fact that the vast majority of development costs to come were covered by residential sales receipts, was “key” to its approach.

It said it reduced the risks associated with development, meaning its speculative exposure remained low at 4.4%.

“In line with the strategic priorities we outlined in May, we are progressing the roll out of Storey, our flexible workspace business.

“Storey is already operational across all our central London campuses and last month we exchanged on a standalone building in Haggerston, north of Shoreditch.

“We will take ownership of the building when it completes later this year to house Storey across 41,500 square feet in this exciting part of London.”

In retail, British Land said that - as it communicated at its preliminary results in May - the market remained “challenging”.

It said the impact of long-term structural change driven by the internet was being compounded by short-term trading headwinds.

“As a result, there have been well publicised retailer failures and further CVA's from those operators with more challenged business models.

“Across our portfolio, the combined impact of administrations and CVAs since 1 April 2017 is 1.6% of total group contracted rent, up from 1% at the time of our preliminary results in May, and accordingly retail occupancy now stands at 96.4%.

“We are seeing increased polarisation but continue to believe that British Land assets are on the right side of this trend.”

Since year-end, the company said it had let 128,000 square feet of retail space, and placed a further 97,000 square feet under offer, overall 6.0% ahead of estimated recovery value.

On the dividend front, British Land said the first interim dividend payment for the quarter ended 30 June would be 7.75p per share - an increase of 3.0% on the first interim dividend last year.

Payment would be made on 9 November to shareholders on the register at close of business on 5 October.

The dividend will be a property income distribution, and no SCRIP alternative would be offered.