British Land reports first NAV hike since 2007

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The Independent Online

British land has reported its first increase in net asset value for three years, reinforcing the view the UK's commercial property sector is finally over the worst of the financial downturn.

The Reit, which develops some of the UK's largest office and retail space, reported a 27 per cent increase in NAV in the 12 months to March, a better performance than had been predicted by a number of analysts. The group's property portfolio was valued at £8.5bn, a 13.5 per cent jump. UK commercial property has put on an average of 14 per cent since the market hit the floor in the early stages of last year.

Investors remain nervous, however, especially with governments across Europe expected to make savage cuts to public spending in the coming months, to tackle the gaping holes in most countries' public finances.

Chris Grigg, British Land's chief executive, acknowledged the concerns, pointing out that the market is likely to slow.

"We continue to expect demand for prime real estate in the areas we are in to be strong both from investors and occupiers, although we don't expect the degree of yield compression we have seen in the next six months," he said. "The market has bounced very quickly... and the process of recycling real estate out of the hands of what we call involuntary holders into longer-term hands has only just started."

Despite the cautionary comments, British Land's shares put on 4.3 per cent in trading. The results also encouraged industry analysts, with several upgrading the group.

"This is a company whose portfolio includes good quality, well-let prime assets, let on long leases to a strong and diverse group of tenants with few near-term breaks [and] expiries – therefore a resilient income stream," said Mark Hughes of Panmure Gordon. "The balance sheet is in good shape with a relatively low loan to value [and] manageable gearing, and debt duration that matches the long lease profile."

British Land's shares closed the day at 452p.