November 16, 2009 4:10 am

Property groups to report gains in portfolios

The UK’s two largest property companies will this week report the first gains in the value of their portfolios since the start of the real-estate slump as investors look for confirmation of a nascent recovery.

Land Securities and British Land are to say that property values began to rise again in the third quarter, confirming that a recovery in the market is feeding through to the books of the large real estate investment trusts.

The tail end of the slump in the second quarter is expected to weigh on overall half-year results, however. Harm Meijer, analyst at JPMorgan, said that positive revaluations had started but added that more significant increases would have to wait until the next quarter.

Land Securities is expected to show a fall in its net asset value to about 568p per share, a decline from 593p per share in March. The company does not report quarterly numbers, but is expected to indicate a modest increase in its properties over the past three months.

During the half-year period, analysts expect to see a drop in value of its overall portfolio of about £150m ($250m).

The company’s statement is expected to focus on its development programme. Land Securities stated its intention to develop two schemes in London’s West End in its last set of results.

The group is expected to seek to highlight its cash and debt resources. Francis Salway, chief executive, has said previously that the market is recovering, but that it might be a long and bumpy road.

British Land is expected to be more aggressive in pinpointing market opportunities, with £1bn in its war chest for the next two years. The group will provide a quarterly valuation of its portfolio, which is expected to show a rise of close to 2 per cent.

Overall, net asset value is expected to have moved to close to 370p, from 350p following the partial disposal of its Broadgate office development in the City of London (or 361p without).

With rival Reit Hammerson, the group is on a shortlist to buy a large shopping centre in Scotland for more than £250m, with a decision on the preferred bidder due on Monday. Its interest shows its intent to invest again after bolstering its balance sheet through a rights issue and asset sales.

British Land is also expected to give details on strategy, having appointed two board members to look for opportunities across sectors and in Europe.

JPMorgan will on Monday publish a report saying that UK Reits are more trusted in providing valuations than continental rivals. Two-thirds of investors believe the disclosure of valuations by continental companies is poor against 18 per cent in the UK.

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