The Investment Column: British Land

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The Independent Online
BRITISH LAND, the UK's second-biggest property company, yesterday suffered a 2 per cent slip in its share price after reporting a disappointing value for its office properties in the City of London. But the company may yet return to favour.

The shares tumbled from 558.5p to 550p as the group turned in a net asset value figure at the bottom end of analyst's expectations. The crucial number - diluted net asset value - rose by only 5.6 per cent to 625p. The range was 614p to 675p.

The group, led by entrepreneur John Ritblat, is the biggest landlord in the City, where it boldly bought commercial property when everyone was selling out. In the second half of last year, City property was depressed by events such the sacking of hundreds of staff by investment bank Merrill Lynch. Yields were high, so asset prices were low, and Mr Ritblat bought.

British Land's investors had expected yields to fall. However, the recovery of the City's property market has been slower than expected, largely because of the increasing popularity of Canary Wharf.

On the upside, British Land is easing concern that it is too heavily geared towards the City - part of the reason that, unlike most of its peers, it trades at a discount to net assets. Last month it announced the pounds 1.54bn sale of asset-backed securities based on its Broadgate Estates development. It is also in talks to buy Sheffield's Meadowhall shopping centre for pounds 1.2bn, marking a move from office to retail property.

Analysts expect flat earnings this year. But if the Meadowhall deal is financed by equity rather than debt, the group, now worth pounds 2.89bn, will return to the FTSE 100. For that reason, it is worth buying into the present weakness.

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