British Land (BLND.L) shares jumped more than 5% on Friday morning, as it announced it had collected the majority of rent owed by office and retail tenants and would resume paying out dividends.
The company, one of the largest property firms in Britain, announced it would reinstate dividends twice a year at 80% of underlying earnings per share, including an interim payment in November.
It told investors rent collection had been “encouraging” for September, with 69% of rents owed already collected. It continued to collect money owed in June, with 74% of rent now paid.
Collection rates were much stronger for offices than retail tenants, with 91% of office rents paid for September but only 50% among retailers, with many hit hard by the pandemic.
It said physical occupancy at its offices were just 18% of pre-coronavirus levels from mid-September, though it marked an improvement on earlier levels. Its standalone office buildings have remained open and “fully operational” throughout the last six months, but many firms have kept staff working from home throughout the pandemic.
“It’s quite something when being underpaid by 25% is considered a success, but the fact British Land’s shares have bounced this morning is testament to the state the commercial property industry is in,’ said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
He said improved retail rent collection, continued asset sales “not at fire sale prices” and a balance sheet in “reasonable health” lay behind the resumption of dividends.
“However, there’s an undercurrent of uncertainty and fear running through the statement,” he said.
“Bankruptcies and rent negotiations among retail clients have increased, and that’s a trend we expect to gather pace. The group’s filling empty shops as fast as it can, and while occupancy remains high the rents new tenants are paying are significantly below what the group would have expected before the crisis.”
Hyett also questioned whether current rental rates could be maintained while so few companies’ staff were using the buildings. “Given that much of the group’s development pipeline is centred around premium London office space that would be a blow.”
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