Developer says it will proceed with caution on its development pipeline
British Land has slid to a total pre-tax loss of £205m in its half-year results after a 2.8% drop in the value of the developer’s portfolio.
The company behind the Cheesegrater attributed the valuation loss to a slowdown in estimated recovery values, particularly following the Brexit vote. The loss compared with a pre-tax profit of £823m for the same period last year.
However, underlying profit for the six months ended 30 September 2016 was up 15% to £206m, from £179m.
British Land also posted a drop of 3.6% in total revenue to £297m, down from £308m last year.
The company said that since the EU referendum it had conducted a review of its development pipeline and capital expenditure plans.
This has resulted in British Land deciding to proceed with the redevelopment of 100 Liverpool Street at Broadgate in the City of London and plans to start work next month once Swiss bank UBS has vacated the building.
British Land said it was still assessing its options for 1 Finsbury Avenue at Broadgate with its partner GIC on the venture, but it was now likely a lower cost refurbishment than previously planned would happne at the building to deliver the space back to the market by late 2018. Plans for the building include a mix of retail and leisure on the lower floors and less corporate and more flexible office space on the upper floors.
Meanwhile, having obtained planning permission last month for the redevelopment of 2-3 Finsbury Avenue Square, British Land confirmed that it was not likely to proceed with the scheme without a significant pre-let as revealed by Building last month. The building is due to be vacated by UBS in late 2018.
British Land’s largest development opportunity in its pipeline is at Canada Water and the firm said it was continuing to progress with the masterplan for the site and speak to potential occupiers with a view to still put in for planning approval next year.
The developer said it had a medium term pipeline of over 8 million sq ft of potential development opportunities, of which 1.9 million sq ft has planning permission secured. This includes its Blossom Street plans at Norton Folgate in Shoreditch.
Earlier this month the Court of Appeal ruled that the planning permission for British Land’s proposed development could not be legally challenged, bringing the planning process to conclusion.
The company said it would now continue discussions with potential occupiers to secure a sufficient level of pre-lets before committing to the scheme.
Brexit has significant consequences which will result in a period of uncertainty, which British Land said meant it will particularly with its development pipeline proceed more cautiously.
British Land chief executive Chris Grigg said: “We’ve delivered a good set of results with a significant increase in underlying profits reflecting our actions and continued leasing momentum. We’re mindful of future uncertainty but are confident that our secure income streams and strong finances will ensure our business remains resilient.
“As occupiers become more discerning we expect our high quality portfolio to benefit from increasing polarisation. The evolving environment will be reflected in our tactical decisions, particularly on development where we expect to proceed more cautiously. We have modest speculative development commitments currently, even following our decision to redevelop 100 Liverpool Street. This is a great example of the opportunities within our portfolio which provide a source of future value.”
Yesterday, Land Securities said the UK’s decision to leave the EU hit the firm’s numbers with the firm racking up a £95m pre-tax loss in the six months to September from a £708m pre-tax profit in the first half of last year.