"Some of the discounts to net asset value that UK commercial property shares are trading on would seem to imply a catastrophic fall in property prices of which there is as yet no evidence whatsoever.
Even after yesterday?s rise in the shares of 22p to 618½p, British Land is still on a discount of about 30 per cent. This is despite every sign that both its commercial and retail sides, about half each of the total portfolio, are doing as well as anyone could expect.
A 2.6 per cent rise in net assets per share may not be that startling but it is a lot better than a fall.
The collapse in share prices after the referendum last year ? British Land fell to below 550p, or a discount of about half to net assets ? was understandable in all the turmoil. It now looks overdone.
British Land has two advantages. Its ?campus model?, with properties based on three distinct areas, Broadgate, Regent?s Place and Paddington, means it can help ensure the locations are attractive to tenants and their workforce. The huge Canada Water development, 1.8 million sq ft in the first phase alone, will mean the addition of a fourth.
Meanwhile its retail space is at primary locations such as Sheffield?s Meadowhall shopping centre which, footfall figures from the industry suggest, are holding up better than more secondary locations.
Like Land Securities, British Land has chosen to return the proceeds from a big-trophy sale, in its case the so-called Cheesegrater on Leadenhall Street, to a Hong Kong investor, rather than spend this on further exposure to the property market. The £300 million share buyback has admittedly done the share price few favours but indicates the company?s own view that that discount to net assets is too great.
The market may take a while to come around to that point of view or it may not do so at all. The property market could indeed collapse post-Brexit. If you do not believe this will happen, a yield on the shares approaching 5 per cent gives enough reason to hold them along with others in the sector on high discounts.
Why The shares look cheap and the yield is attractive"