Nick Goodway: British Land pulls off classic piece of property market manoeuvring

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The Independent Online

Outlook The great skill in property investing is to keep the money moving. So British Land's ability to sell one of its largest City offices for £472m and tap its shareholders for £493m looks a classic example.

The property market, particularly in London, is ripe for the plucking. While the rest of the economy is not exactly booming, the demand for the right offices and the right retail sites in the capital remains healthy.

So British Land could sell Ropemaker Place to a bunch of Continental and Far East investors on a yield of 5 per cent, which will rise to more like 6 per cent within a couple of years as the tenants receive their next rent review.

That, of course, is the kind of yield anyone with a few pounds to put into a bank or building society can only dream of.

But British Land shareholders who stumped up for the share issue – even when they had pushed the share price down before they bit – are looking at a dividend yield this year of something like 4.6 per cent. That's still not bad. But can it be sustained?

In effect, the chief executive, Chris Grigg, has released a war chest of anything up to £1bn to lavish on the property scene. He has already spent some of that, but has more to lavish on a "growing pipeline of opportunities".

One of Mr Grigg's skills is mixing the portfolio. He has begun to get the City versus West End balance right. Sell the former, buy the latter. He also has faith that regional shopping centres will come back strong.

It might not seem right that a British company is selling properties to overseas investors at a higher yield than it offers its own shareholders. We are selling the silver and cutting the yield now. But the outcome in a decade might look very clever.