British Land portfolio sheds £1.4bn in value

UK REIT British Land said it has seen the value of its portfolio plummet by 10.8%, or £1.4 bn, to £11.6 bn (EUR 13.8 bn) in the six months ending September 30, 2008.

City offices were the main sector impacting on the valuation movements with an outward initial yield shift of 78 bps. With the financial and business services sector in London experiencing difficult conditions, London office yields are vulnerable to further outward movement, the company said, but added that consensus forecasts are for the market to pull back and outperform again from 2010 onwards.

'The unprecedented financial turmoil of the last three months has brought home to everyone that the credit crunch is more than just a banking issue. Retailers are reporting difficult trading, reflecting the effects of the economic slowdown, and this will weigh on prospects for rental growth over the shorter term. We have yet to see any significant defaults but the climate is challenging for our customer base,' said chairman Chris Gibson-Smith.

British Land's net asset value dropped by 22% to 1043 pence a share in the first six months. The company said that the maturities of its bank facilities include £170 mln expiring within the next two years and some £1.3 bn maturing within more than five years. No refinancing is necessary before 2013, it added.

British Land expects the turbulent conditions in both the financial markets and the wider economy will impact on the independent valuer's assessment of its property portfolio as well as its resultant net asset value for the third quarter and full year.

Last week, Land Securities, the largest REIT in the UK, announced a net loss for the six months to end-September of £1.73 bn (EUR 2.1 bn) compared to a profit of £367 mln (EUR 446 mln) in the same period the year before. The company attributed the hefty drop to a decrease of 12.7%, (£1.72 bn) in the valuation of its investment portfolio. Net asset value fell 21% from 31 March to 1,552 pence a share.