Better yields mean fewer deals for Land

JOHN RITBLAT, chairman of British Land, who has been virtually alone in his optimism about the British property market over the past year, yesterday complained that the improvement in yields means there are fewer attractive deals around.

The group spent pounds 78m on properties in the six months to September, including taking full ownership of numbers 1, 2 and 3 Finsbury Avenue in London, retail parks in Chester and Teesside and offices in Glasgow. John Weston Smith, British Land's finance director, said the yields on these deals were close to 10 per cent. 'But we are seeing a distinct hardening. And we are finding ourselves in bidding wars, which we are not always winning.'

Foreign investors, particularly German, and British institutions, have become more active in the property market. One of the most recent deals, the purchase of MEPC's building in Finsbury Circus by the German group DIFA for pounds 75m, was at a yield of 8.6 per cent - one of the lowest seen in London recently.

Mr Weston Smith said the group did not believe its property values had suffered much, although a formal valuation will not be done until the year-end.

The comments came as British Land announced an 11.8 per cent increase in interim pre-tax profits to pounds 11.4m and a 5.6 per cent rise in earnings to 3.8p. The interim dividend is 2.28p, up from 2.07p.

Acquisitions, mainly those made last year, helped push net rental income up 16.7 per cent to pounds 54.4m. The group will reap the benefits of rent increases on Sainsbury supermarkets, which it has bought and leased back, next year. In total, it will receive an extra pounds 35m from this source in the next seven years.

Unlet property, including incomplete developments, was held at 2.5 per cent of the portfolio. Work on one - the Corn Exchange in the City - may begin early next year.

British Land is the biggest property developer in Dublin and it has just begun improvements at its shopping centre there, which will add 60,000 square feet.

British Land's shares gained 4p to 174p.