British Land, the UK’s second largest real estate developer, today reported a pre-tax loss of £205m ($255m) for the six months to the end of September, which it blamed on a fall in the value of commercial property in the wake of June’s vote to leave the EU.
That is a significant drop from a profit of £823m in the same period last year, and comes as a result of a 2.8% fall in the value of its property portfolio.
The UK’s decision to leave the EU marked the start of a prolonged period of uncertainty for the country, for our industry and for our occupiers– Chris Gregg, British Land chief executive
However, British Land’s underlying pre-tax profit – a measure that strips out movements in property asset values – was up 16.4% in the six months, to £199m, prompting the firm to claim "a good set of results".
Shares in the group fell 0.7% on this morning, to 603 pence.
The company – which developed the "Cheesegrater" tower in the City of London (pictured) – generated revenue of £297m for the half year, slightly down from the £308m reported for the same period the prior year.
"The UK’s decision to leave the EU marked the start of a prolonged period of uncertainty for the country, for our industry and for our occupiers," said Chris Gregg, British Land’s chief executive, in a statement to the London Stock Exchange.
"Ahead of the referendum, we positioned the business for a range of outcomes with modest development exposure, high occupancy with long leases, and robust finances.
"These features and our continuing actions mean that the business has proved resilient in the first few months following the referendum, evidenced by our improved underlying profit and the continuing volume of leasing activity."
He added: "The evolving environment will be reflected in our tactical decisions, particularly on development where we expect to proceed more cautiously."
The company said that it had noted "transactional evidence" in the period since the referendum that had indicated some softening in investor demand for UK property.
It also noted that uncertainty in the occupier market may "be reflected in lower investment volumes, although the continuing gap between property yields and interest rates suggest that UK property will continue to appeal to certain investor groups".
The company announced a quarterly dividend of 7.3 pence, bringing the half-year dividend to 14.6 pence.
In the retail sector, British Land said the Brexit vote had not had a discernible impact on occupier demand, although the group said it had been a challenging period for some areas such as fashion and department stores, where sales were weaker, partly due to unseasonal weather.
Image: The London "Cheesegrater" is one of British Land’s best known projects (Diego Delso/Wikimedia Commons)