British Land can be such a rich investment
BRITISH LAND’S mixture of retail and office properties has left it painfully exposed to the coronavirus outbreak.
In theory, the group is still entitled to collect rent from its closed retail tenants, but whether it would be forthcoming is another question.
In any case, management have clearly decided that helping tenants through tough times is more important. As much as 44 per cent of March and April retail rent has been either deferred or forgiven.
That’s a sensible decision, ensuring retailers can reopen comes above a few months’ rent.
It doesn’t help that retailers were already struggling, as online competition grows.
Last year saw several high-profile bankruptcies, while CVAs mean other retailers have cut tenancies unexpectedly short.
Lower rents and empty shops have seen the value of British Land’s retail properties fall by 26 per cent.
British Land isn’t sitting on its hands while the retail world changes around it, though. Asset sales are streamlining the retail estate, shifting the focus to larger sites with the potential for mixed use, including offices. By comparison, property values and rents are still growing in the far larger London office portfolio.
New projects should contribute to growth over time and establish a moderate residential business.
British Land’s balance sheet was in pretty good shape going into the crisis, but that hasn’t stopped the group suspending its dividend.
That’s very unusual for a Real Estate Investment Trust like British Land, but management believe preserving cash is in the long-term interest of investors.
We think British Land could prove an interesting value opportunity for investors prepared to take a higher level of risk and a longer-term view.
The road to recovery isn’t smooth though, and there’s no guarantee the share price will ultimately recover.
“This article is designed for investors who make their own decisions without advice, if unsure whether an investment is right for you, you shouldseek advice. Shares can rise and fall in value so you could get back less than you invest.”