British Land agrees record City rent for Cheesegrater, 'buy' says Liberum

30th Oct 2014 10:43

Broker Liberum reiterated its 'buy' recommendation for British Land after reports the company let one floor of the 'Cheesegrater' building in London's Leadenhall Street for a record amount.British Land and Oxford Properties agreed a deal to let the 41st floor of the 122 Leadenhall St building to insurance company FM Global at "almost £85 per square feet", according to Property Week, which reported this was a record rent for the City of London.Liberum said the deal underlined British Land's "success in bringing West End rents to the City core", with the building becoming a hub for insurance companies.As of July 2014, the Cheesegrater was 53% pre-let based on an assumed estimated rental values (ERV) of £62 per sq ft, with the Leadenhall Building website suggests floors 14 and 35 are now also under offer.Net of existing pre-lets to insurers AON and Amlin, the remaining space in the building is currently valued off an average ERV of £65 per sq ft.A development appraisal by analysts implies an ERV of £71 per sq ft on the remaining space and £66 per sq ft overall, which they said underpinned "7p of further NAV upside"."An additional £2.50 on rents across the scheme adds 1p to development profits."British Land trades at 0.96 times spot net asset value (NAV) and offers a 4.0% dividend yield on calendar 2015 expected results.Liberum's 788p target price implies a 1.0-times multiple of March 2015 expected NAV, which analysts said they believed "is justified by our forecast for a 13.4% total return from NAV growth and dividends on a 12-month view".