British Land, the second-largest listed property company in the UK, posted a 9.9% jump in pre-tax profits to £256m, driving net asset value per share up 12.5% to 567p.
The strong performance was the result of a 6.9% increase in the value of its portfolio, to £9.6bn, and follows rival REIT Land Securities last week which posted a 14.8% rise in profits to £1.2bn, delivering an 18% rise in NAV per share.
Shares in the UK’s leading property companies all rose on the back of Land Securities bumper results last week, prompting analysts to expect “a neutral impact” from today’s results on British Land’s share price.
British Land’s total accounting returns were 17.7% for the year, outperforming the IPD benchmark by 180 basis points, while capital returns were 7.3%, reflecting a 240 basis points increase on the IPD benchmark.
Rental values across British Land’s portfolio increased by 2.7%, significantly outperforming the IPD benchmark, which rose by 10 basis points.
British Land has proposed a fourth quarter dividend of 6.5 pence, bringing the total dividend per share for the full year to 26 pence.
British Land has £1.1bn committed to its ambitious central London office development programme. The REIT said “restricted development finance and a growing shortage of quality space will underpin above average returns”.
British Land has six City and the West End-located office buildings, which will deliver 2.2m sq ft of space into the market between 2012 and 2014.
All three City office building developments are in joint venture.
British Land expects to find out, possibly as early as Wednesday, whether English Heritage is to recommend for listing its approved development of a 700,000 sq ft headquarters for UBS at its Broadgate Estate, which it owns in a 50:50 partnership with the Blackstone Group.
Leasing activity across the portfolio generated additional gross rental income of £14.2m on an annualised basis with rents agreed at 2.0% ahead of estimated rental values (ERV).
Office leasing activity generated additional rental income of £8.4m on an annualised basis and included 270,000 sq ft of new lettings at 11.6% ahead of ERV.
Last week, British Land confirmed insurance giant Aon had prelet a third of the 610,000 sq ft “Cheesegrater” Leadenhall Building, for a rent thought to be in the low £50s per sq ft.
Occupancy was also strong across the portfolio. In its retail portfolio, occupancy remained at 98.5%, while rental values was 0.7% ahead for the full year, driven by a 6.8% growth in the second half.
Its office portfolio occupancy jumped 5.2 percentage points over the year to 97.8%, while rental values rose by 7.7%, compared with 2.1% for the IPD office benchmark.
Acquisition activity contributed modestly to the year’s income but is expected to add £20m in annual rent in a full year, net of asset disposals. During the year, British Land acquired properties with an aggregate value of £511m, of which British Land’s ownership was £474m.
British Land expects “restricted development finance and a growing shortage of quality space will underpin above average returns” for its central London’s largest office development programme.
Chief executive Chris Grigg said: “British Land has had a very active year. We have again outperformed the market and made a significant commitment to London office development and also continued to build on our high quality retail portfolio. Our strong letting performance across our portfolio shows clearly that there is still demand from occupiers for the well-located prime retail and London office assets we provide and we expect this to continue. With our strong asset base, management expertise and financial strength we are well placed to continue our strong performance.”
In its results published this morning, the REIT said an expected increase in the volume of properties coming onto the market, has driven up competition for prime assets. As a result “we have tended to find more attractive opportunities in good secondary properties and assets requiring a broad range of financing, risk management and asset management skills”.
British Land’s loan to value ratio remained comfortable at 24% at group level and 45% including its share of debt in joint ventures and funds.
Over the last 18 months, British Land has refinanced £1.1bn of drawn and undrawn facilities, as well as two of its Tesco joint ventures.
Both of the joint ventures were also extended by a further 10 years. A further £560m of maturing group facilities were also refinanced, increasing the total facilities over three years to £1.5bn.