With yet more talk that Blackstone is in discussions to buy a 50% stake in British Land's Broadgate office complex, analysts at JPMorgan think British Land should embark on a second equity raising to go on a spending spree.
In his daily update on the property sector, analyst Harm Meijer says despite the significant interest in the rumours surrounding British Land, he thinks it would be more interesting to start a discussion about BL issuing equity.
"If British Land were to raise equity, it could start drawing down its unused credit lines and start a real spending spree. We think that is something more interesting to think about."
On talk of Blackstone buying a 50% stake in Broadgate, Meijer says he wonders whether or not a disposal would be good news for British Land. "First of all, it would be key to know what capex and rent commitments British Land would have to give to a potential buyer," he says.
"Secondly, property stocks appear to be pricing in a strong rebound in real estate prices (we think this is likely to happen, but we doubt how sustainable it is).
"Selling this asset at the latest book value and degearing at this point could send a message that stocks are overvalued.
"Thirdly, we estimate a 50% disposal at book value would reduce British Land's NNNAV by 33 basis points, because of Broadgate's favorable debt structure."
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