British Land shares have fallen 1.2% today, outpacing peer Land Securities, which put out figures this morning.
Part of the reason is a note from Goldman Sachs, which has downgraded the property group from 'Buy' to 'Neutral'.
Analyst Julian Livingston-Booth said:
We downgrade British Land to Neutral, from Buy, following its recent share price outperformance. Since being added to the Buy list on July 15, 2010, British Land's shares are up 34.7% vs. our coverage universe up 20.2% and FTSE World Europe up 10.1%.
We believe that the strong performance of the shares over this period can be largely attributed to British Land's exposure to a recovery in Central London office rents and ongoing strength of investment markets for prime UK commercial real estate.
We believe that British Land's shares are likely to benefit on a relative basis from any ongoing European macro uncertainty given its long lease lengths, strong financing position and lower risk development pipeline, justifying the current valuation of its shares (7% premium to last reported NAV, 4.3% 2012E dividend yield).
At the same time we see an increasingly diverse portfolio for British Land as increasing the demands on management in terms of successful asset management at the micro level. For example, British Land has acquired 17 racket clubs mainly in South East England, London residential property and an office/leisure complex in Maidenhead for £310 mn in aggregate since late June.
Our unchanged 12-month EVA-based price target of 650p implies 8% potential upside versus 11% for our European coverage universe. Our price target is in line with our end-March 2012 NAV forecast of 649p.
We see the key risks to our view being a stronger/weaker than expected performance by the retailers operating in the stronger UK retail locations.
British Land shares are down to 597p, while Land Securities is 3.5p down at 862.5p.
Meanwhile, as we head towards the US opening bell, the Dow Jones is expected to open 76 points ahead.
The FTSE 100 is 22 points up at 5,775.
