Ritblat shrugs off slump fears

JOHN RITBLAT, chairman of British Land, yesterday shrugged off fears of an impending property slump and declared his intention to carry on expanding Britain's largest and most successful property group.

"Our long-term view remains positive, particularly in the City of London, where we are continuing to take advantage of good investment opportunities," he said as British Land reported a slight fall in interim pre-tax profits to pounds 50.1m.

That view is at odds with much of the City, which believes that British Land's exposure to the Square Mile makes it vulnerable to a downturn. These worries have driven shares in the company down from their peak of 803p in March. Yesterday, they closed down 11p at 475p.

"It's interesting that he is talking about long-term confidence in the City, but says nothing about the short term," one analyst said.

The main concern is that Mr Ritblat splashed out heavily on two projects just before the stock market dived in August. First, British Land bought the building occupied by the European Bank for Reconstruction and Development for pounds 206m. It then signed a joint venture with Railtrack to develop a new 65,000-square metre building in Broadgate next to Liverpool Street station. The complex project involves British Land building a raft over the railway tracks before it can start building.

Those deals, and others around Broadgate, mean British Land's exposure to the Square Mile now accounts for almost half its portfolio. "You've got competition from developments such as Canary Wharf and you've got some good second-hand space coming on to the market in a few years' time," says one observer. "Where will the growth come from?"

John Weston-Smith, British Land finance director, says the group is buying property because it is available. "You've got to grab things when you can." He adds that the City market is not overwhelmed with space, and that British Land will not start building the new developments until it has found occupants.

However, British Land is believed to be trying to sell some of its City properties outside the Broadgate development, suggesting that it is not quite as bullish as it sounds, and the issue has overshadowed British Land's other projects. The company's property joint ventures with Tesco and Great Universal Stores, the retail giants, are performing well: in the six months to September, British Land's share of profit from joint ventures jumped 19 per cent to pounds 29.4m.

Then there is the question of what British Land plans to do with its 6.3 per cent stake in Selfridges, the troubled Oxford Street department store. City observers suggest that a joint venture with a bidder or a sale-and-leaseback would be two possibilities.

Forecasts put British Land's net asset value for the year to 31 March 1999 at about 600p per share. This means that the group's shares, which dropped 6p to 480p yesterday, are hardly overvalued.

But, while investors praise British Land's management, its blue-chip customer base and strong cash flow, they see little prospect of the market changing its sentiment towards the company.

It is just as well that Mr Ritblat is taking a long-term view, because in the short term British Land shares are showing few signs of making up the ground they have lost.