A better-than-expected update from British Land sent shares in the property sector higher this morning, despite a note of caution from the company on the “challenging” UK economy and its impact on rental rates.
As it published its first ever quarterly report, British Land said pre-tax profits totalled £672 million in the third quarter and £1.4 billion in the first nine months of its financial year.
The company, which owns Sheffield’s Meadowhall development and the Teesside Retail Park in Stockton-on-Tees, said the net asset value of its portfolio grew by 10.7 per cent to 1390p per share in the third quarter.
The figure, a key measure of profitability, built on a strong start to the financial year to leave British Land’s net asset value 23.2 per cent higher in the nine months to the end of December.
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The group’s total properties under management stood at £18.7 billion at the end of December.
British Land shares jumped 25p to 1,211p in morning deals before settling back to 1,198 in mid-morning trade, a gain of 12p or 1 per cent. To track the stock, click here.
Peers Hammerson and Land Securities rose 4.5p to 1,093 and 29p to 1,797p respectively.
Sir John Ritblat, the British Land chairman, told shareholders that the company was in “rude health”, adding it would benefit from its position in the “prime” market.
However, the company also sounded a cautious note, arguing that a “challenging” UK economy was holding back growth in property rental rates.
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Stephen Hester, chief executive, said: “The underlying challenges in the real economy continue to restrain rental growth and take up of space overall ... We see parts of the investment market overpricing property with income risk or without good growth prospects.”
He added that in London “the office cycle is turning up ... We are more cautious than some commentators on both rental growth and yield shift prospects, but positive nonetheless.”
British Land has almost 60 per cent of its estate in the retail sector with the rest being office space.
The company said the preference of shoppers for convenience was driving growth in out-of-town retail assets.
It sold properties for £597 million in the third quarter and £1.3 billion in the first nine months. More disposals are to come, the company said.
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Commenting on the planned introduction of Real Estate Investment Trusts (REIT) in the UK, Sir John said the company awaits publication of the final legislation.
“We have been fully involved in the discussions with HM Treasury, and we are hopeful of a resolution that will be commercially viable as well as serving the public interest,” he said.