Could there be some light at the end of the tunnel for British Land, after a rotten 18 months? The UK’s second-biggest commercial property company said that losses narrowed from £572m to £275m in the three months to June, as values stabilised and yields started to improve on its offices and retail space. So it’s a long way from recovery, but at least it seems to be heading in the right direction – while deep-pocketed bidders are sniffing around some of its assets again. With car dealer Pendragon also reporting an uptake in car sales, thanks in part to the Government’s car scrappage scheme, there’s a bit of optimism around this morning…
Times are undoubtedly still tough for British Land: it’s still deep in the red, with rent income down 12% on last year and the value of its overall portfolio sinking another 3.7%. CEO Chris Rigg also admitted today that it wouldn’t be re-starting any of its unfinished developments for a while yet. But the good news is that almost 40% of its portfolio held its value or even rose in value during the quarter – investors seem to think that BL’s high-quality supply of office blocks, shopping centres and warehouses will be more resilient than most in a downturn (hence the takeover rumours lately - which has also proved a handy way to boost the share price).
And some big buyers clearly do think prices are starting to bottom out: Rigg confirmed today that BL had received a ‘number of approaches’ for a stake in its £2.3bn Broadgate estate in the City of London. He didn’t name names, but the Times reports confidently that the buyer will be private equity group Blackstone (which is rolling in cash after raising a £2.7bn distressed property fund earlier this year). Apparently BL's Leadenhall site is also attracting interested. So although Rigg was cautious about using the ‘r’ word today ('recovery', that is, not 'recession'), things do seem to be looking up.
It’s a similar story over at Pendragon: first-half profits halved to £11.4m (still no mean feat in a tanking market), but boss Trevor Chinn is predicting higher sales in the second half. The scrappage scheme has boosted new car sales, while margins on used cars have apparently ‘improved significantly’ – perhaps because these scrapped cars are being taken out of the market. Pendragon now wants the scheme extended before it runs out of money, arguing that the Government more than makes up for the £1,000 it spends on the old car via the VAT bill on the new car. Otherwise this recovery might fizzle out around October time, as soon as the pot dries up...
In today's bulletin:
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Dell and Sony Ericsson aim for bite of Apple
Worst is over for property and car sales?
Directors got 65% of maximum bonus last year
Jobs at risk as Ryanair grounds 90% of its Manchester flights