British Land PLC has fallen 0.7% as investment bank JP Morgan reckons City office values could fall 20% this year.
The bank said this puts its financial year 2024 NAV forecast 6% below consensus and results in a new price target of 410p, down from 505p.
JPM pointed out while this still implies more than 25% upside, it is less than lower-levered, West End office focused developers like Derwent London (rated 'overweight') & GPE ('overweight').
Crucially though, sentiment and the value outlook for the City is weak, with British Land’s exposure here standing out, it said, as does LTV at 36%.
“We think this combination will manifest in a miss on NAV at 1H24 results on the 13 November, and if the trend seen in UK values between April 2023 and July 2023 continues to March 2024 then we think British Land could miss FY24 NAV consensus by 9%,” the broker estimated.
While the valuation isn’t stretched, JPM thinks “catalysts for a stock-specific re-rating look hard ahead of a turnaround in City offices”.
The bank has downgraded its rating to 'neutral' from 'overweight' and placed the firm on negative catalyst watch.