British Land sees portfolio value drop

PROPERTY firm British Land, which shelved the sale of its Meadowhall shopping centre last year, said today that the value of its £18bn property portfolio has fallen by 8.9% because of the global credit squeeze.

In a third quarter trading statement the group said that its quarterly net asset value fell 16.7% to £14 per share, but chairman Chris Gibson-Smith said: “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 group, which is the UK's second largest real estate investment trust (REIT) – a property investment vehicle which pays the majority of profits to shareholders in exchange for certain tax privileges – said the sharp revaluations seen across its £18.4bn portfolio in the nine months to the end of December were “largely indiscriminate”, raising prospects for a shorter property market slowdown.

British Land said it had completed £600m of property sales since September at prices in line with valuations, which it said suggested appetite for UK real estate investment was slowly recovering.

The company reported like-for-like rental growth of 5% for the nine months to December 31, versus an Investment Property Databank benchmark of 3.4%.

“At present, the occupier markets from which our cash flows derive remain in better health than investment markets are discounting,” said British Land chief executive Stephen Hester.

The company posted underlying earnings per share of 14p for the quarter, up 16.7% on the third quarter 2006.

Underlying pre-tax profit also climbed to £72m, up 12.5% against the corresponding period in 2006.

Last October the group saw its shares drop after it pulled the sale of the flagship shopping mall at Meadowhall blaming uncertain financial markets.

It had wanted to sell a stake between 50%and 75% in the 1.5 million square foot centre, which was valued at around £1.64bn.