British Land swung to a loss in the year to March as turmoil in the retail sector dragged down the value of one of the UK’s largest listed property portfolios. The FTSE 100 group on Wednesday reported a loss of £319m for the year, down from a £501m profit a year earlier as retailers’ battle for survival fed through into property prices.
A 4.8 per cent drop in the value of British Land’s properties to £12.3bn was led by an 11.1 per cent slide in the value of its retail assets, which include Sheffield’s Meadowhall centre.
Colm Lauder, analyst at Goodbody, said a 6.4 per cent decline in net asset value per share was the largest since 2009 in the depths of the financial crisis. “While British Land is posting declines at a rate not experienced since the bottom of the last market cycle, the balance sheet remains in a robust and flexible position,” he added.
The drop echoes that posted on Tuesday by the company’s larger rival Landsec. At British Land, underlying profit, which strips out the effects of property price movements, was down 10.5 per cent to £340m. Chris Grigg, British Land chief executive, said retail was “likely to remain challenging as structural change continues”, but he said there were “early signs on parts of our portfolio that some of the short-term operational headwinds impacting retailers are easing”. Footfall and sales have strengthened over the past two months, he added.
Retailer insolvencies stripped £14m from the company’s rental income, though like-for-like rental growth of £15m compensated for the drop. Philip Green’s Arcadia Group, which is expected to launch a company voluntary arrangement — a form of insolvency deal — in the coming weeks, accounts for 1.5 per cent of British Land’s rent roll. The company wants to reduce its retail exposure to one-third of its portfolio, having already cut it to 45 per cent from two-thirds in 2010.
It sold off £1.5bn of properties during the financial year, including £650m in retail. Mr Grigg added, however, that the London office market was “healthy” despite “ongoing Brexit uncertainty”. “We expect the London market to remain active, as occupier demand for the highest quality space continues to be firm and supply is relatively constrained,” he said.
