- First half earnings increase
- Office and retail market healthy
- Firm happy with earnings consensus
Retail park and office investor British Land (BLND) is the latest REIT (real estate investment trust) to surprise the market with a positive trading update, in a further sign the UK commercial property market is in good health.
The shares added as much as 5% to 329p, continuing their recovery from the October lows of 290p and topping the mid-cap FTSE 250 leader board.
LETTINGS AND EARNINGS GROWING
The company, which owns three office ‘campuses’ in Broadgate, Paddington and Regent’s Place, as well as the UK largest portfolio of retail parks, posted a 3.4% increase in underlying profit for the six months to 30 September thanks to strong rental demand.
‘We are pleased with the performance in the first half with underlying profits increasing on the back of another strong period of leasing and good cost control’, commented chief executive Simon Carter.
‘We have seen yields continue to move out, but as we predicted in May, at a slower pace. Rental growth has accelerated, with lettings 12% ahead of ERV (estimated rental value), and occupancy remains strong at 96% well above levels in the wider market.’
In terms of active management of the portfolio, the company sold an office and data centre portfolio for £125 million towards the end of September, 13% above book value and at a net initial yield of 4.6%, while buying a retail park in north-east Kent for £55 million and a net initial yield of 8.1%.
‘COMFORTABLE WITH FORECASTS’
The firm’s portfolio valuation increased by 3.2% during the period with campuses up by a similar amount, retail parks up 4% and London urban logistics values up 3.1%.
In terms of outlook, the firm said it expected ERV to grow at the top end of market expectations for the year to March and it was ‘comfortable’ with market estimates for earnings, which are currently around £255 million in terms of pre-tax profits and 27.5p earnings per share.
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