British Land dividend to double for REIT conversion

British Land will almost double its full-year dividend when it converts to a real estate investment trust (REIT) in 2007, the company announced Tuesday as it published its results for the six months ending 30 September 2006.

Confirming it was on track to become a more tax-efficient REIT on January 1, British Land, the second-largest UK listed property company, said it would pay out dividends of no less than 33 pence per share next year, 94% higher than in 2005/6.

REITs will be obliged to pay out at least 90% of taxable income in dividends to avoid paying most corporate taxes. British Land ceo Stephen Hester said the company would have to pay a minimum of 22 pence per share to meet this requirement. 'We wanted a balance between demonstrating confidence in our future cash flows and needing to retain an amount for future development,' Hester told reporters in a conference call. The company will take a £315 mln charge to become a REIT.

British Land said its net asset value - a key performance measure for property firms - rose by 9.3% to £16,24 per share compared with £14.86 at end-March, as like-for-like rents grew by 2.8%. This was higher than the industry average of 1.8%. Net income fell 3.9% to £578 mln (EUR 856 mln) due to the cost of refinancing its debt, while the total value of properties owned or managed stood at £19.8 bn.

The company increased its dividend for the period to September 30 2006 by 8 percent to 5.6 pence a share, compared with 17 pence for the whole of the last fiscal year. British Land's larger rival, Land Securities, reported an 11% increase in adjusted NVA last week, the Times said.

British Land has profited from the strong property investment market in London and the company echoed the claim by Land Securities last week that the London office rental rates would continue to rise until at least 2008.

On Monday, British Land announced it plans a £1 bn refinancing of the Meadowhall shopping center to cut borrowing costs. Meadowhall, comprising 132,800 m2, in Sheffield, England was the largest indoor shopping centre in Europe when it opened in 1990. Hester said in July that the shopping centre will probably be put in a fund to attract investors when British Land becomes a REIT.