British Land banks on Broadgate; The Investment Column

British Land was feeling understandably pleased with itself yesterday. The Jeremiahs were lining up last year to warn about the acquisitive property group's wisdom in paying pounds 120m for the half of the prestigious Broadgate development in the heart of the City of London that it did not already own.

Their main concern was the adverse impact Broadgate might have on the group's balance sheet. In taking on Broadgate's pounds 800m of debt, British Land's gearing was forecast to reach 135 per cent, prompting fears that asset sales and debt refinancing would be needed to pay the onerous interest bill and keep both the dividend covered and shareholders happy.

With hindsight, the timing of that deal - at a low point in the interest rate cycle - looks good. Thanks to new bank facilities, some 83 per cent of debt is fixed, mainly for terms of at least five years at under 8 per cent. British Land also raised pounds 223m in a share placing last November to fund the purchase of seven Tesco superstores and three Scottish retail parks. All told, British Land has raised or renegotiated pounds 1.5bn in new money since September 1994.

The net result was to limit net debt at the March year-end to 115 per cent of shareholders' funds. True, interest and dividend cover remain thin. A pounds 138m interest bill made a sizeable dent in operating profits of pounds 204m last year, while earnings per share a third higher at 11.9p were just 1.4 times the dividend total of 8.55p, up from 8.12p before. However, these ratios still compare favourably with many elsewhere in the sector. And the period of hectic corporate activity has left British Land in a strong strategic position. Some 89 per cent of its portfolio has been acquired in the last seven-and-a- half years, limiting exposure to obsolete properties, while about a fifth of rents have built-in rises guaranteed.

British Land is also highly geared to any recovery in the property market. Net assets per share increased to 426p from 417p last year, but the company calculates that every 10 per cent rise in the value of its property portfolio translates into growth of over 100p in net asset value per share.

Broadgate, which is fully let to a blue-chip tenant list of leading international banks, now makes up about a quarter of the revalued property portfolio, which rose by pounds 84m to pounds 4.4bn, while City of London sites, including the Ludgate development, equal 40 per cent of assets.

Sticking to Britain and Ireland also seems to make sense given the difficulties of managing properties overseas, especially in the US.

The shares, up 13p to 420p, fully reflect the growth prospects and are nudging the revised net asset value figure. But the premium rating is deserved. Hold.

Suggested Topics
Life and Style
The new Windows 10 Start Menu
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete today
Arts and Entertainment
There has been a boom in ticket sales for female comics, according to an industry survey
comedyFirst national survey reveals Britain’s comedic tastes
Arts and Entertainment
Ed Sheeran performs at his Amazon Front Row event on Tuesday 30 September
musicHe spotted PM at private gig
Arts and Entertainment
Mystery man: Ben Affleck and Rosamund Pike in '‘Gone Girl'
films... by the director David Fincher
Arts and Entertainment
Hilary North's 'How My Life Has Changed', 2001
books(and not a Buzzfeed article in sight)
Kim Jong Un gives field guidance during his inspection of the Korean People's Army (KPA) Naval Unit 167
newsSouth Korean reports suggest rumours of a coup were unfounded
ebooksAn unforgettable anthology of contemporary reportage
people'I’d rather have Fred and Rose West quote my characters on childcare'
Life and Style
stoptober... when the patch, gum and cold turkey had all faied
Bruce Chatwin's novel 'On the Black Hill' was set at The Vision Farm
travelOne of the finest one-day walks you could hope for - in Britain
Arts and Entertainment
Gay and OK: a scene from 'Pride'
filmsUS film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?