Better times are ahead for the big property companies after five tough years according to UBS.
“Retail values have largely bottomed out (as much as 65% down) and we see yield compression on the horizon for quality London offices.
Pipelines are also being strengthened helped by strong balance sheets and driven by new management with returns to be driven by a combination of recurring income, revaluation, and development profit.
UBS is a buyer of two large and two medium-sized developers.
Of the large groups, Land Securities and British Land trade at 15-20% discounts to net asset value but there is scope for a re-rating here as results improve and development profits are booked.
Derwent London (AIM:DLN) and Great Portland trade at tighter discounts but have more focused models and the strongest balance sheets. Of these two, Derwent is slightly preferred by UBS.