British Land / Landsec: Low prices increase the risk of out-of-the-money calls

Keeping up with the neighbors usually includes flashy cars and a tennis club membership. British Land and Land Securities continued their rivalry via the UK office building altcoin. This has become a dangerous game due to the popularity of working from home.

The two listed large owners briefed shareholders on real estate values ​​this week. British Land said on Wednesday that They fell 12.3 percent in the year through March. The day before, Landsec reported a drop of 8 percent. A similar gap separates the duo’s shares.

Commercial real estate is in the spotlight as a potential source of financial contagion. High debt makes real estate companies vulnerable to higher interest rates. Renters are looking for smaller premises as more employees work from home. Fragile economic confidence exacerbates these difficulties.

Both companies raised shares during the financial crisis. Is history about to repeat itself?

The valuation drops pushed the value of the British Land loan to 36 per cent, from 33 per cent last March. Landsec’s debt decreased over the same period with LTV dropping from 34 percent to 32 percent. BT’s LTV was 45 per cent in March 2007 before property prices collapsed.

Office and factory valuations have fallen nearly as low since last May as they did at the 20-month peak that began in September 2007. The pace of the decline should serve as a warning to anyone who thinks the market has hit rock bottom. Any deterioration in the economy could push valuations down 10 to 15 percent, says Peter Papadakos of Green Street Research.

There is already unrest in parts of mainland Europe. Swedish office owner Castellum issued shares to reduce LTV from 44 percent to 38 percent. Social housing owner SBB canceled a capital increase. It is dumping assets to reduce its LTV from 47 per cent. German residential landlords may be making their own cash calls soon.

But skyscrapers in London are a different proposition than apartments in Berlin. Demand remains strong for a quality workspace in the UK’s capital. Both owners report occupancy rates in excess of 90 percent.

Neither company can be complacent. But their disciplined approach to debt and their high-quality portfolios should keep them out of trouble. Never bet on London, even after Brexit.

The Lex Team is interested to hear from our readers. Please let us know if you think UK property companies are trending downward in the comments section below.

Source link

Related Articles

From train mates to incorporated companies

To provide the best experiences, we use technologies such as cookies...



Please enter your comment!
Please enter your name here

Same Category

From train mates to incorporated companies

To provide the best experiences, we use technologies such...

29 Stylish IKEA Lack Table Hacks; From bargain to pretty

Cassity Kmetzsch started Remodelaholic after graduating from Utah...