Barclays blighted a trio of property stocks in a sector review on Wednesday, downgrading ratings for blue-chip British Land PLC (LON:BLND) as well as its mid cap peers Hammerson PLC (LON:HMSO) and NewRiver REIT plc (LON:NRR)
In a note to clients, the bank’s analysts said: “Ahead of the upcoming half-year results we take a more pessimistic view on retail, downgrade income and NAV (net asset value) forecasts and reduce ratings. Transaction markets have dried up, tenant failures have increased and valuation declines are evident.”
READ: British Land up on annual profit jump after property revaluations despite challenging market conditions
They added: “We believe the various structural issues – online sales, tenant failures, shortening average lease lengths – support our thesis for a prolonged period of reducing rents, yield expansion and retail asset valuation declines. Not all retail is equal and the impact will be more acutely felt in low-yield, high-rent assets.”
The analysts said they believe the extent of these declines is underappreciated in the market, as consensus still expects flat or increasing NAV for the companies.
They concluded: “We do not know how deep the rabbit hole goes but the retail asset market is experiencing asymmetric downside risk. as a result, we expect further relative share price underperformance from retail-exposed landlords.”
Barclays has cut its stance for Hammerson to ‘underweight’ from ‘equal-weight’, reducing its target price to 410p from 500p, with the stock currently trading at 441.20p, down 0.4% on Tuesday’s close.
It moved British Land’s rating down to ‘equal-weight’ from ‘overweight’, cutting its target price to 580p from 730p, with the stock trading at 605.40p, down 0.1%.
NewRiver REIT also saw its rating cut to ‘equal-weight’ from ‘overweight’, with a target price of 260p, down from 350p, with its shares the most impacted, shedding 3.2% at 242p.
Barclays also reduced its target price for Land Securities PLC (LON:LAND) to 790p from 910p and reiterated an ‘underweight’ stance on the blue-chip real estate stock, with its shares down 0.8% at 847.20p.