British Land (LSE: LBND) is one of the UK’s largest property developers and investors. It has a long pedigree, having been around since 1856. As a real estate investment trust (REIT) listed in London, the group must distribute 90% of its tax-exempt profits from rents to shareholders. This steady income once made BLND a core holding of many UK income funds. But the British Land share price has struggled in 2020/21. Could it recover as Covid-19 infections recede?
The British Land share price slides
At its five-year peak, the British Land share price closed at 738p on 3 June 2016. On 11 May 2018, the shares closed at 694p, down just 6% almost two years later. But BLND declined further in 2019 and the stock slid to just below 478p on 16 August 2019. On 31 December 2019, before the Covid-19 crisis, the shares had recovered to 638.8p. But then coronavirus swept the world, sending stocks into meltdown.
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At its 2020 low, the British Land share price crashed to an intra-day low of 309.4p on 3 April. It had more than halved (-51.6%) in just three months. BLND’s 2020 closing low of 313.8p came on 1 April. Although the shares recovered to hit 460p in early June, they fell back again. On 25 September, they closed at 322p, down more than £3 in 2020.
BLND soars on vaccine hopes
Along with the wider FTSE 100 index, the British Land share price has soared since Halloween. This followed news in early November of several effective Covid-19 vaccines. These announcements boosted BLND, which skyrocketed as vaccination programmes were rolled out. On 10 May, the shares closed at their 2021 high of 544.8p. On Thursday, the British Land share price closed at 507.2p, up 3.7% in 2021.
British Land lost £1.1bn in 2020/21
This week, the British Land share price has weakened, down 4.3% in five trading days. Most of this decline came yesterday, when the group released its latest full-year results. Covid-19 wiped more than £1bn of value (10.8%) from the group’s portfolio of shopping centres and offices. This decline lowered the portfolio’s value to £9.1bn at end-March 2021. Office values fell by 3.8% in the year ending March, while shopping-centre values collapsed by more than a third (36%).
Furthermore, the property giant expects London office rents to fall by another 5%, given weaker demand from tenants. However, British Land’s stock consists of many modern, high-quality developments, including the huge Broadgate site in the City of London. Thus, the company collected 99% of its office rents in 2020/21, but only 71% of rents from retail tenants. It also wrote off £30m in rent arrears from ailing or failing tenants. This reduced underlying profit to £201m, down more than a third (34.3%). This decline, together with the massive write-down, produced a whopping loss of £1.08bn. Hence the 3.7% slide in the British Land share price on Wednesday.
What next for the British Land share price?
The British Land share price currently trades at a discount of over a fifth (21.7%) to net asset value of 648p a share. But commercial-property values could well fall further. The 2020/21 cash dividend of 15.04p equates to a dividend yield of 3%, slightly below the FTSE 100’s yield. Net debt of 38% is modest for a large property firm. But it remains to be seen how much tenant demand will pick up in 2021/22.