British Land set for £500m spree in London and South-East

Property giant British Land is gearing up to splash out another £500 million this year as it bolsters its position in London and the South-East, chief executive Chris Grigg said today.

The company stoked its warchest with a £500 million share placing and the £472 million sale of the Ropemaker Place City office in March.

The developer of the Cheesegrater skyscraper, which bought Ealing Broadway’s shopping centre earlier this year, is aiming for further buys. “I would be disappointed if we had not spent another £500 million by the end of the financial year,” Grigg said.

British Land — the UK’s second-largest real estate investment trust after rival Land Securities — saw the value of its overall portfolio edge 0.5% higher to £10.5 billion in the year to March 31. Pre-tax profits rose 2% to £274 million but the net asset value — a key measure — was virtually flat at 596p, partly because of the fundraising.

The results indicated the extent of the tough times facing the UK retail sector as occupancy fell to 97.4% and rental growth was flat after such tenants as Comet and Dreams fell into administration.

Grigg stressed that its shopping centres are still outperforming the market, but footfall also fell 1.5%. “Generally in retail, in terms of investment and occupancy, we expect to see further weakness,” he warned.

In London, a shift towards the better performing West End market means that more than half of its office space is now there rather than the City so that it can take advantage of Crossrail and a shortage of office space. London and the South-East now accounts for 55% of its UK portfolio. In the City, the Cheesegrater — which has capitalised on the better conditions in the insurance sector — is now 51% pre-let in total with Amlin the latest tenant close to sealing a deal.

The shares rose 4.75p to 625.75p today. Investec’s Alan Carter said: “Preliminary results show anaemic growth in both earnings and overall capital values — albeit with offices outperforming a declining retail portfolio — and with the effect of February’s marginally dilutive equity placing, there is little advancement from one year ago.”