British Land sees signs of early recovery despite portfolio value dip

UK property giant British Land said on Thursday that it sees signs of an early recovery on the property markets, with falling values sparking renewed investor interest in the sector. The company said its portfolio value fell by 8.9% to £ 12.5 bn in the third quarter to 31 December.

'Macro-economic uncertainty and the global credit crunch have depressed property values. However, the worst should now be behind us, though uncertainties remain on timing and extent of the correction. The exceptional quality of prime property cash flow is again representing clear value. We are optimistic about British Land's inherent strengths and ability to create value over the course of the business cycle,' chairman Chris Gibson-Smith said in a statement.

CEO Stephen Hester was cautiously optimistic, noting that the property sector had done well in facing up to the need to correct values, but added that that economic uncertainty was still a concern. 'There are important signs of markets adjusting to new realities and affected parties taking the resultant pain, although significant uncertainties remain,' he said. 'Property values have been hit largely in response to broader financial market declines though the extent to which economic slowdowns occur and impact future rental growth is still a question.'

Underlying pretax profit for the period came in at £72 mln (EUR 96.1 mln), up 12.5% on the year-earlier period. The company also reported gross rental income of £174 mln, down slightly on the £ 180 mln reported in the year-earlier period, as a significant number of asset sales were largely offset by like-for-like rental income hikes. Net rental income also fell slightly to £ 167 mln, from £169 mln in the same period in 2006. Undiluted earnings per share for the third quarter rose by 16.7% to 14 pence.

British Land said it had sold assets worth £ 596 mln since end-September 2007, taking total assets sales for the nine months to end-December to £2.5 bn.

The firm said it will pay out a third-quarter dividend of 8.75 pence per share, totalling £45 million, which added to the 8.75 pence per share for the first and second quarters takes the total dividend for the first nine months to 26.25 pence, in line with the expected total dividend for the financial year of 35 pence.