The Investment Column: Questions over Reits temper good news from British Land

Click to follow
The Independent Online

British Land only recently started giving results presentations to the City. Now it has started quarterly reporting - an innovation for a major property player - with the first such report released yesterday.

The new investor-friendly British Land seems to have come about through shareholder pressure and the appointment of a new chief executive, Stephen Hester.

As for yesterday's third-quarter figures, they made pretty impressive reading, with the company's net asset value registering a 10.7 per cent rise on the quarter to 1,390p.

The reason? The industry has been going through an artificial uplift, as rental rates - which dictate the level of property yields - catch up with the astonishing low interest rates we have seen.

That process will soon run out of steam, according to British Land's Mr Hester. And his message is that the company will be in "rude health" even when the yield shift phenomenon goes.

In recent times, the company has made one sizeable acquisition - Pillar Property. It has also sold property worth £1.3bn so far this year. The company has focused on areas of growth and applied more intense management in its chosen sectors of office and retail property.

The big question hanging over British Land and the rest of the sector is the introduction of Real Estate Investment Trusts (Reits) by the Government.

This provides a tax-efficient vehicle for the property industry but the sector is concerned about some of the details in the draft legislation.

Top of British Land's worries is the proposal on the allowed level of gearing in a Reit - profits must cover interest payments two-and-half times. Mr Hester says this is "unworkably tight".

Other gripes include the plan that no single shareholder will be allowed more than 10 per cent of a Reit.

The industry hopes the Treasury can be persuaded to change its mind before the Budget in March. If it cannot, British Land shares, along with others in the sector, will suffer. At 1,198p, the stock is a hold.

Lavendon gets lift from acquisition of Panther

Lavendon leases lifting equipment to anyone from building contractors and cameramen at major sporting events to tree surgeons. Yesterday, the group unveiled the purchase of the privately owned Panther Work Platforms - a deal that seems to be quite a coup for Lavendon.

It is paying £10m for Panther, £3m of which will be handed over at a later date, depending on the businesses performance, for a company that made a pre-tax profit of £2.5m last year. In this way it swallowing the group on a rating of just 7 times historic earnings.

Panther specialises in smaller platforms, an area in high demand at the moment due to new legislation that calls for greater safety procedures for jobs where there is a risk of injury from a fall, no matter how small. Under this new regime, ladders are increasingly frowned upon, leaving many builders knocking on Panther's door for an alternative.

The acquisition adds 1,300 units to Lavendon's UK fleet, taking it to 7,300 units, and although the combination will produce little in the way of synergies it will boost the company's earnings by 26 per cent in 2006.

And it is likely to be the first of many for Lavendon which is the UK's largest operator in what is a fragmented market crying for consolidation. According to estimates from Evolution Securities, the group trades at a substantial discount to Speedy Hire and Ashtead - its nearest listed peers. Buy.