Occupancy markets are now beginning to reflect the effects on customers of the economic
slowdown. However it's still relatively early in the cycle with limited impact to date. There will be
sharp contrasts in the resilience of prime versus secondary property, not yet priced into the
market fully. In Offices, subdued new leasing activity is leaving prospective rents to drift
downwards somewhat while in Retail rental growth remains positive but slowing. British Land's
prime assets, strong customer base, high occupancy and long lease lengths provide comfort in
the face of these trends.
Investment markets are thin, nervous and negative in tone. Generally long-term value for UK
prime property is seen at yields in the range 5-6%. However, as with all market cycles, assets
are likely to need to be 'priced cheap' before tempting much of the substantial capital waiting on
the sidelines. In that context, British Land values highly its asset and liability strengths and
consequent ability to hold assets for the long-term where merited. At the same time we keep
closely in touch with investor sentiment and seek to capture consequent opportunity whether as
buyer or seller.
Sector and Asset Selection
Sales
3 months to 30 June 2008
|
Price
£m |
BL Share
£m |
Gain/
(Loss) %1 |
| Offices: |
|
|
|
| Willis Building, Lime Street, EC32 |
400 |
400 |
(7.9) |
| Two Moorfields, Liverpool |
11 |
11 |
(6.5) |
| Retail: |
|
|
|
| Peacocks, Woking |
116 |
116 |
(1.4) |
| 10 High Street Shops |
95 |
95 |
(2.0) |
| Colne Valley Retail Park, Watford3 |
45 |
16 |
(14.4) |
| Other: |
2 |
1 |
(5.1) |
| Total |
669 |
639 |
(6.1) |
Average net initial yield on disposals 2.2%, 5.8% assuming top up of rent free periods.
1 sale price versus last year end valuation, March 2008
2 contract provides for top up of rent free period to minimum uplift (NPV £60m) – loss calculated net
3 HUT (Hercules Unit Trust)
The sale of the Willis Building realised a healthy development profit and underlined our record of
successfully delivering and letting significant development projects. The Peacocks sale achieved
an attractive price for a disposal in line with our strategy to focus the retail portfolio on those assets which will continue to show growth from our asset management efforts. These disposals also allowed us to recycle capital and manage gearing.
There were no purchases contracted in the quarter.
