Shares in real estate investment trust (REIT) British Land are in the frame this week, with the REIT due to report on Wednesday this week. British Land shares are caught between investor worries over Brexit and the potential impact that has on the City of London, and the other major theme of just how much damage is the internet doing to traditional shopping venues.
Both themes have the potential to do some very severe damage to British Land shares. British Land controls some landmark shopping centres, including Broadgate, Meadowhall in Sheffield and Drake Circus in Plymouth.
Investors will be watching the occupancy rates and average lease lengths like hawks: as of the full year results to March, these figures stood at 98% and 8.3 years.
“Look out for comments on leasing activity in terms of square footage and how the rents compare to the levels at which net asset value was previously calculated,” says Russ Mould, investment direct at AJ Bell.
In its last financial year British Land had leased or renewed 1.7 million square feet with rates an average of 8% ahead of estimated rental value.
Analysts will also be looking at British Land’s NAV per share, which at the end of the last financial year was 967p, up 6% year-on-year. British Land shares currently change hands for 608p, a 37% discount to NAV.
“That discount to NAV suggests the shares may be cheap, but equally it shows that the market is still worried about what Brexit might mean for UK economic activity and therefore the value of commercial property, because investors are pricing in substantial declines in asset values,” adds Mould.
British Land has extended its share buyback program from £300 million to £500 million and has increased its annual dividend, last year to 30.08p per share, via four quarterly payments of 7.52p apiece. In the first quarter of the year, British Land upped its quarterly distribution to 7.75p.
British Land shares have had a poor summer of it – Brexit is obviously having an impact on commercial real estate in the UK, and the stock is down nearly 10% over the last six months. It would look worse, but for the fact that there has been some steady buying activity ahead of the results this week.
That would suggest that the results may be a bit better than the consensus forecasts, or that there are some big buyers out there who have now decided the shares in this REIT look cheap enough to get back in.