British Land Share Discussion Threads

[jonwig] 14/11/2018 09:11

@ CC2014 - funnily enough, the word 'warehouse' doesn't appear in the RNS and hardly figures in the 2017 AR either! (No actual numbers.) Where does Peel Hunt get its information? Maybe here ...

[cc2014] 14/11/2018 08:46

Thanks Jonwig. I found your post really helpful.

I'm not sure about the retail warehouse comment. I assume these are warehouses in good transport locations. Basically rectangular boxes I guess, which could be re-purposed very easily. I better go read the annual report.

[jonwig] 14/11/2018 08:27

FT's 'Morning Quote' email:

British Land half-year results

British Land may pay more attention to today’s draft Brexit agreement than the Little Englanders in Theresa May’s cabinet. As owner of the City of London’s Broadgate office development and the Meadowhall shopping centre in Sheffield, the property group arguably has more invested than any of them in the future of financial services - and of consumers’ finances.

And it is the consumer exposure that is the big worry. Retail warehouses and shopping centres account for 23 per cent and 17 per cent of British Land’s portfolio respectively. In fact, Peel Hunt analysts point out that British Land’s retail warehouse portfolio is not only the largest of the listed landlords, at £3.2bn, but is also held at the lowest equivalent yield: 5.3 per cent.

This morning, the FTSE 100 company revealed the impact: it reported a 2.9 per cent drop in net asset value for the first half of the year, as retailers invested less in physical stores amid increased online competition. EPRA net asset value, the key industry metric, fell to 939p per share, down from 967p per share in the six months to March 31. This was mainly driven by a 4.5 per cent drop in the value of the company’s retail properties.

British Land said it had lost an annualised £14.7m of rent to retailer administrations and insolvency arrangements over the past 18 months, despite seeing fewer store closures than the wider market.

As a result, underlying profit fell to £169m from £198m a year earlier, and the group swung to a pre-tax loss of £42m on a statutory basis.

However, British Land said more retail assets were being sold off: some £634m of properties were sold or under offer in the last 12 months, taking the total to £2.8bn since April 2014.

But, unlike the British electorate, at least British Land shareholders have something appealing to look forward to. British Land raised its half-year dividend 3 per cent to 15.5p.

Key numbers:

Net asset value down 2.9 percent tp 939p

Total accounting return in the first half of -1.3 per cent

As the City expected? Worse. Peel Hunt forecast decline of -0.8 per cent in net asset value and a total accounting return of 2.4 per cent for the full year

What was said: Chief executive Chris Grigg said, “Looking forward, demand for the highest quality London office space is expected to continue, but we remain alert to potential uncertainties as the Brexit process unfolds. We expect retail to remain challenging in both the occupier and investment markets as the impact of long-term structural change is compounded by short-term headwinds. ”

OQ verdict: British Land shares trade on a 37 per cent discount to NAV and a 5.1 per cent dividend yield. To some, that discount to NAV suggests the shares may be cheap. But the fall in NAV suggests it correctly predicted this deterioration. And, as AJ Bell points out, equally it shows that the market is still worried about what Brexit might mean for UK economic activity and therefore the value of commercial property. Investors are still pricing in substantial declines in asset values.

[jonwig] 14/11/2018 07:19

H1 results:



NAV is down 2.9%. Discount to NAV is 34%, retail part of portfolio down 4.5% LTV reduced to 26.7%.

It looks like the share buyback programme (half way through) has added 2p to NAV.
There may be a subtle reason why buybacks are better than returning capital direct to shareholders. (?)

EDIT.
Doing the math:
Special dividend reduces NAV
Repayment of debt doesn't change NAV (unless there's an early payment penalty)
Share buyback increases NAV provided shares are bought at a discount to NAV.

Is that the only reason?

[skyship] 12/11/2018 08:47

eeza posted this today on the LAND thread:

British Land and Land Securities are due to report half-year results this week, with investors expecting Britain's biggest landlords to slash the valuation of their retail assets. Analysts at Numis expect both companies to devalue their retail portfolios outside London by more than 6%. - Sunday Times

[eriktherock] 17/10/2018 08:54

my ta 548 lower target. We're in buy territory.

[cwa1] 16/10/2018 08:15

British Land Downgraded to Hold at Stifel; PT 5.70 Pounds

[essentialinvestor] 15/10/2018 12:08

Jon, yes, however that's the future rather than with legacy retail holdings.

Their Eden Walk redevelopment plans heavily feature mixed use,
know that one well.

[jonwig] 15/10/2018 09:26

One of BLND's strategies which I found appealing, was mixed-use development:



Within a single development such as Canada Water it may well be that planning restrictions are quite flexible. So would a condition be imposed stating precisely x% retail, etc?

[eriktherock] 15/10/2018 09:18

Yeah.The Planning Act. User Classes Act will need some updating for sure otherwise High streets will be primarily made up of empty units, Eateries, Charity Shops and Barbers.

[essentialinvestor] 13/10/2018 11:48

Change of use is easier in small regional retail.
If you consider High Street locations, then more difficult.

[eriktherock] 11/10/2018 08:28

Thanks for that jonwig.
I've closed short positions.
I'm wondering whether High Street landlords will go for a change of use under the User Classes Act from Retail to Residential. Could add significant value in lieu of a depreciating asset. hmm

[jonwig] 11/10/2018 07:20

Telegraph. The notion of a bid is interesting (possible merger with LAND not mentioned):

Questor share tip: British Land's 5.3pc yield means that we can afford to be patient – and bidders may scent value

This column’s suggestion to buy British Land in the early spring has yet to shower readers in riches because the shares, which looked cheap at the time, have fallen further.

In other words, they are now cheaper still, trading at a 39pc discount to the company’s stated net asset value, or “book” value, of its properties of 967p a share.

And judging by a second bid for Intu, the shopping centre group, someone else seems to think Britain’s “Reits” (real estate investment trusts) may have fallen too far.

A three-way consortium is considering a cash offer for Intu. The presence of Brookfield, a Toronto-quoted business, in the consortium is particularly interesting, since it has already swooped for New York-based Forest City and taken full control of an American shopping mall owner called GGP – both multi-billion-dollar deals.

This is not to say Brookfield or the other consortium members will turn their attention to British Land. But it does show that there are buyers of real estate assets out there who presumably share this column’s view that lowly share prices and a weak pound mean that there could be long-term value to be had in Britain’s Reits.

The trick now is finding a catalyst to unlock the value that may be there. Otherwise, the stock could fall further. Such are the frustrations (and dangers) of value investing.

Interim results due on Nov 14 will update on trading and the all-important net asset value. In all honesty they may not be that inspiring so it could take more merger and acquisition activity (or greater clarity on Brexit) before the share price moves. But the 5.3pc yield means we can afford to wait patiently.

Questor says: hold

Ticker: BLND

Share price at close: 582.6p

[Author Russ Mould is investment director at AJ Bell, the stockbroker.]

[porsche1945] 10/10/2018 17:50

March 2009 these hit 3.30.....w ith this brexit madness, door open to Corbyn, these could well re visit the 3's.

[eriktherock] 10/10/2018 08:11

Expect 608 soon enough for the gap-fill (and to make things good) but not today !

[eriktherock] 09/10/2018 08:18

No. This is in the hands of JPM's mopping-up the sellers is it not ?
They didn't partake in the buy-back on Monday, Tuesday, Wednesday last week which is the reason for the drop, nothing to do with political or other fundamental reasons.

[essentialinvestor] 09/10/2018 07:35

Erik, have you got a downside target on LAND? thanks.

[eriktherock] 09/10/2018 07:17

It was a short at the red hourly candle below 625p. This reinforced with the back-test of this level on 21st Sept. (700-624=76) (624-76=t548)
short target 548p

[essentialinvestor] 08/10/2018 23:17

If you think the wider economic cycle is about to roll over, financials
are the last place you should be, unless a long term buy and hold investor.

[1nf3rn0] 08/10/2018 22:53

I don't buy that. If asset prices are tanking best to stay clear of financials. Even better have a cash pile at the ready.As has been said BLND and LAND are already at a significant discount to NAV. They are most likely being valued based on the markets view of the size and reliability (which investors need to make their own judgements on) of their dividend yields relative to 'risk free' rates (bond proxies if you will).

[essentialinvestor] 08/10/2018 12:34

Was Thursday PM a buying low for land, blnd?.

[essentialinvestor] 08/10/2018 08:13

The other options was just to hold the cash and wait.

Now perhaps that was the better option.

[eriktherock] 08/10/2018 08:12

Maybe The Board are buyers as a drop from 693 on the day of announcement to 580ish must represent even better value. What has changed in the High Street recently (House of Fraser, Debenhams possible defaults) was factored-in was it not?

[essentialinvestor] 08/10/2018 08:10

That's not the full context of the statement though, is it?.

British Land's rationale was/is their shares represented better value than...
new asset acquisitions.