realestate

British Land resumes dividend as London’s office market returns to life


British Land is set to start paying a dividend again, as the London office market on which it relies shows signs of life after coronavirus.

The commercial property company will resume dividend payments in February, but the payouts will be half-yearly rather than quarterly as before, and will be paid at 80 per cent of underlying earnings per share. 

The FTSE 100 landlord said on Friday that it had collected 91 per cent of the rent it was owed by office tenants on its estate, which includes large London campuses in Paddington and Broadgate, for the three months to the end of the year. That was despite office occupancy being at less than 20 per cent of pre-pandemic levels in September. 

Boris Johnson, the UK prime minister, on September 22 urged workers to stay at home. That had set back the return to work, said Simon Carter, who will replace Chris Grigg as British Land’s chief executive next month. “It was looking as though office numbers would increase slowly across the portfolio, then we got the announcement and then [the return to work] tailed off,” he said.

While he was optimistic that more workers would return over the coming months, Mr Carter cautioned that much depended on the course of the pandemic, with fears growing about a second lockdown in the capital.

For now, investor interest in the London office market is strong, according to Robbie Duncan, an analyst at Numis Securities. “The only thing holding back the market is the ability of people to do physical due diligence on a building,” he said. 

Mr Duncan also played down concerns that Brexit might hamper the market. “The UK might be unstable, but put that in a global context: would you invest in the US, Russia, or China right now?”

Suntec Reit, a Singaporean property investor, acquired a 50 per cent stake in Land Securities’ Nova estate in Victoria for £430.6m on Friday, the investor’s first foray into the London market.

Retailers on British Land’s estate have fared less well. With the sector thrown into turmoil by the pandemic, tenants have paid just 50 per cent of what they owe for the current period.

Since April, 16 retailers on British Land’s estate have either entered administration or used a controversial restructuring process known as a company voluntary arrangement to extract rent concessions or close stores, costing the company £11.6m in lost rent on an annualised basis. 

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But the company’s out-of-town shopping centres had performed well, with sales close to pre-pandemic levels. They had benefited because “there are more people in suburban locations because they are working from home and, alongside the growth of ecommerce and the growth of click and collect, it’s easier to do social distancing in the open air,” said Mr Carter. 

British Land has sold off £245m of retail assets since March, with the company looking to pare back its exposure to the sector. It achieved prices 8 per cent ahead of the book value of the assets in March.

“That gives some confidence to others trying to sell, such as [retail landlord] Hammerson,” said Colm Lauder, an analyst at Goodbody.

Shares in British Land were up more than 5 per cent in early trading to £3.87.



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