Broker snap: British Land premium to NAV unsustainable

17th Nov 2009 12:58

The increase in net asset value per share reported by property group British Land was slightly less than the market was expecting, Killik & Co. reckons, while the broker still has concerns about the outlook for the UK commercial property market.'Valuation increases are currently being driven by a lack of transactions and those that are occurring are focussed on prime properties, of which there is limited supply,' claims Jonathan Jackson, head of Equities at Killik. 'In other areas, there continues to be a decline in rental values as tenants face increasing financial difficulty and, given the volume of property on banks' books that will need to be sold at some point, we envisage increasing headwinds in future. All told, the longer-term structural issues facing the sector remain,' Jackson reckons.Though the shares offer an attractive yield of 5.2%, the broker believes the premium of the share price to reported net asset value per share, currently running at around 30%, is unsustainable.