British Land said it would continue to “increase the pace of recycling” to reinvest in higher-growth opportunities after a solid set of annual results.
The REIT followed rival Land Securities to beat stock market forecasts and deliver a 4.9% increase in net asset value to 595p a share in the 12-month period.
The consensus forecast was for NAV of 589p a share.
Its portfolio rose in value by 2.6% to £10.3bn over the 12-month period, despite a slowdown to just 0.4% growth in the second half of the year.
The main driver was a 7.3% hike in the value of its office schemes and development pipeline.
Values in its retail portfolio – which comprises 61% of its business – were up a marginal 0.4%, although they outperformed a difficult retail market where capital returns fell by 0.8%.
The group’s net initial yield remained stable at 5.2%.
The UK’s second-largest REIT posted 2.1% growth in estimated rental value, and delivered a total property return of 8.3%.
During the period, the group completed 5m sq ft of leases, generating £10m of new rent, increasing its portfolio occupancy by 20bp to 98%.
Retail lettings were 6.9% above ERV and offices were ahead by 3.3%.
On disposals, BL said: “As announced earlier in the year, recycling is becoming a more important part of our investment strategy with the pace of disposals likely to increase as we seek to more actively redeploy capital into higher-returning opportunities.”
It spent £371m (gross) on acquisitions during the period, the largest of which was a portfolio of 17 premium Virgin Active racquet clubs.
Since April 2011, it made £100m (gross) of disposals, which included a number of non-core retail and office properties as well as five of the smaller Virgin Active clubs, which were sold at an 18% premium to the original purchase price.
Chief executive Chris Grigg said: “These are good results, and that’s in a tougher environment. Our profits, valuation and NAV are all up.
“We outperformed the broader UK commercial property market on almost all key measures and our balance sheet is strong. I am particularly pleased by our high level of leasing activity and development progress over the period.
“Our results also show we are defensively positioned in today’s more challenging markets, but also well placed to continue to outperform in the future, as a result of the decisions we have taken.”
bridget.oconnell@estatesgazette.com
