British Land has swung back into profit at the half-year mark on the back of “strong” leasing activity and recovering values in its campus and retail park portfolios.
IFRS profit after tax grew to £370m in the six months ending in September, from a loss of £730m during the same period last year. Underlying profit has grown by 12% to £120m, rebounding from a decline to £107m in the previous year.
The value of the REIT’s portfolio rose to £9.8bn, 2.9% up from £9.1bn, in the six-month period ending March. However, this was still down from an equivalent of £10.3bn at the same time last year.
Campus values increased by 3% to £6.9bn. Retail and fulfilment was up 2.7% to £2.9bn, boosted by a 7% uplift in retail parks.
EPRA net tangible assets per share was up 5.1% at 681p, compared with the period ending March. Its loan-to-value ratio rose to 33.4% during the six months.
The firm noted “significantly improved” rent collection levels and yield stabilisation for shopping centres.
The REIT made £501m of acquisitions during the period, and sold £196m of assets this year. The former includes £189m of acquisitions with potential for urban logistics in London, with total gross development value for the urban logistics pipeline totalling around £600m. Its overall development programme covers 1.6m sq ft.
Notably, the firm also said it secured a 254,000 sq ft pre-let to magic circle law firm Allen & Overy at 1 Broadgate after the half-year period ended. Around 330,000 sq ft of its campus locations is under offer.
Elsewhere, the REIT estimates that it will spend around £100m on retrofitting its standing assets over the next eight years to improve energy efficiency in its portfolio. It aims to recover these costs through service charges.
Chief executive Simon Carter said: “Current market trends reinforce the conviction we have in our strategy, and we are already seeing the benefits of our decision to focus on our unique campus proposition, the value play in retail parks and urban logistics development in London.
“Innovative growth businesses are focused more than ever on the highest quality, most sustainable workspace, which we deliver at our campuses. We expect the value opportunity in retail parks to continue, with rents stabilising and yields moving in. The fundamentals for urban logistics development to support last-mile delivery in London remain excellent.”
The firm noted that while the economy strengthened “significantly” in the period, with consumer confidence improving over the summer, rising fuel and food prices have affected confidence, increasing inflationary expectations. Nonetheless, it broadly expects recovery to continue “well into 2022”.
However, its political risk outlook remained “high” on the back of the wider response to the pandemic, potential tax rises for businesses and government intervention, including the rent moratorium and the introduction of a binding arbitration scheme for certain arrears built up during lockdown.
To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews
