British Land sees valuation decline slow

British Land, the second-largest REIT in the UK, saw the pace of portfolio valuation decline slow markedly in the first quarter to end-June to an average 3.7%. The UK portfolio shed 3.1% of its value, outperforming IPD by 1%, the company said in a press release on Tuesday.

Some £3.2 bn - or 39% - of company assets either increased in value (£1.7 bn) or remained unchanged (£1.5 bn) since March 2009, the company said. Even so, NAV per share was down 9% at 361 pence as the value of its office and retail portfolio fell by £447 mln to £8.17 bn..

CEO Chris Grigg dispelled rumours that the company was a takeover target and that it was in advanced talks to sell its flagship Broadgate office complex in London's City financial district. 'We've seen no untoward (takeover) activity of any type so we're relaxed,' Grigg told a conference call.

Several parties have reportedly looked at buying the Broadgate asset but, according to newswire Reuters, Grigg said British Land was more predator than prey, and had up to £3 bn of undrawn credit facilities to deploy in the weakened real estate market.

The company reported like for like rental income growth edged up 1.2% compared to the year-earlier period, with retail 3.5% higher. The company reported £5.5 mln in additional annual rent from rent reviews and lease renewals. The portfolio is 94% let, with only 6% of rent subject to lease breaks or expiry over the next three years.

Evidence of strengthening in yields has continued into second quarter and there is clear improvement in investor sentiment with renewed bidding competition, it added.

While rental value deflation is prevalent across most sectors, the company's operating performance underlines the qualities of its assets, chairman Chris Gibson-Smith said. 'These results demonstrate that British Land remains in a relatively strong position with resilient income from a well-let, prime portfolio. Our financial flexibility and scale give us competitive advantage to capitalise on opportunities.'

Of the undrawn credit lines, £1.6 bn has a maturity of more than four years. The committed development pipeline now only represents 2% of the total portfolio, the company said.