Land Securities PLC (LON:LAND) and British Land PLC (LON:BLND) were hit hard after being cut to ‘hold’ from ‘buy’ at Jefferies.
“We conclude LAND and BLND are under increasing earnings and dividend pressure and downgrade to Hold (Buy) on lower PTs of 725p and 525p respectively,” said the noote.
Analysts at the US broker say they read both FTSE100 giants’ annual reports from cover-to-cover and reckon the pair’s cost of doing business is rising.
The reports reveal much weaker energy performance data than expected ahead of the UK Government's ‘Energy white paper: Powering our net-zero future’, which Jefferies expects to become law.
That will require rented non-domestic buildings to meet minimum energy standards but more than 70% of the LAND and BLND portfolios fall short.
Energy Performance Certificates (EPC) need to be greater than ‘B’ by 2030 and Suntec REIT paid a 5% discount for the Minster Ct, EC3 possibly due to its EPC ‘C’ rating, suggests the broker.
REITs risk becoming forced developers with LAND and BLND facing possible 'Greening' costs of around £700mln-£800mln compared to FY22 dividend costs of £209mln and £147mln respectively.
Shares in Land Securities fell 3.7% to 678.8p while British Land dropped 4% to 501.4p.