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.