British Land Increases Dividend for First Time in Three Years

British Land Co., the U.K.’s second-largest real estate investment trust, raised its quarterly dividend for the first time in three years and indicated that similar payouts will follow.

The company increased the dividend for its fourth quarter through March to 6.6 pence a share and said it would stay at that level in the coming fiscal year. London-based British Land had paid 6.5 pence in the 12 preceding quarters.

“Good results today and confidence about future income” prompted the increase, Chief Executive Officer Chris Grigg said on a conference call today.

Full-year profit excluding one-time items and changes to property values rose 3.9 percent to 265 million pounds ($419 million), or 29.7 pence a share. Net rental income excluding acquisitions gained by 1.5 percent and the company reached agreements with UBS AG, Debenhams Plc and Aon Corp. to lease space in three of its central London office projects.

“British Land is firing on all cylinders,” Jefferies Group Inc. analysts Mike Prew and Robert Duncan said in a note to investors, reiterating their buy rating of the shares.

British Land rose 0.6 percent to 491.4 pence in London trading at 491 pence as of 9:40 a.m. That gives the company a market value of 4.37 billion pounds. The shares have advanced 6.9 percent in the six months through Friday, less than the 11-member FTSE 350 Real Estate Investment Trust Index’s 8.6 percent gain.

The company leased 5 million square feet (465,000 square meters) of space in fiscal 2012, cut vacancies and charged more to renew leases and rent new retail and office space. It also made 371 million pounds of acquisitions, including 17 Virgin Active fitness centers, which generated additional income.

Offices vs Retail

While operating earnings improved, net asset value stagnated in the second half as gains on office developments were matched by a drop in retail property values.

Net asset value rose to 595 pence a share in the company’s fiscal fourth quarter from 593 pence three months earlier, company said in a statement today. Net income for the 12 months through March fell to 480 million pounds from 840 million pounds a year earlier the value of its real estate grew more slowly.

Britain entered a double dip recession in the first quarter, making it harder for landlords to demand higher rents and leading appraisers to lower the estimated values of shopping centers. That was partly offset by rising values for office developments in central London, where British Land plans to build 2.2 million square feet of space through 2014.

Retail makes up 61 percent of British Land’s real estate. Big-box retail warehouses depreciated by 0.7 percent and shopping centers by 0.6 percent in the second half of the company’s financial year, reducing the value of British Land’s retail assets to 6.32 billion pounds, the company said today.

Offices appreciated by 2.1 percent in the fiscal second half, the company said.

Net debt fell to 4.88 billion pounds from 4.91 billion pounds three months earlier. Debt represented 45.3 percent of the value of British Land’s real estate, from 45.6 percent at the end of December.

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