Land Securities (and Hammerson) versus British Land

[MDW1954]

Before the Brexit referendum, I hadn't dabbled in property shares much, finding better prospects elsewhere. Post-referendum, I bought a full holding of British Land, and am ploughing dividends into Tritax Big Box. I purchased Aberdeen Standard Logistics Income (ASLI) in my SIPP, too.

What is striking when people post their HYP portfolios, as we have just seen over Christmas and New Year, is how popular a holding British Land is. Alliance Trust have just put out its monthly list of "most bought" shares, and there's British Land as the seventh-most popular purchase in December. Hammerson and Land Securities hardly ever seem to feature, yet they appear broadly comparable businesses, on broadly comparable yields. In fact, outside of Pyad's HYP1, I can't think offhand of a single regular poster owning up to owning Land Securities.

What am I missing?

MDW1954

[idpickering]

Before the Brexit referendum, I hadn't dabbled in property shares much, finding better prospects elsewhere. Post-referendum, I bought a full holding of British Land, and am ploughing dividends into Tritax Big Box. I purchased Aberdeen Standard Logistics Income (ASLI) in my SIPP, too.

What is striking when people post their HYP portfolios, as we have just seen over Christmas and New Year, is how popular a holding British Land is. Alliance Trust have just put out its monthly list of "most bought" shares, and there's British Land as the seventh-most popular purchase in December. Hammerson and Land Securities hardly ever seem to feature, yet they appear broadly comparable businesses, on broadly comparable yields. In fact, outside of Pyad's HYP1, I can't think offhand of a single regular poster owning up to owning Land Securities.

What am I missing?

MDW1954

Hi MDW1954. I've held British Land (BLND) since 19 Mar 2010, and I went for them, because at that time, the were the highest yielder. I have looked at Land Securities before but decided to stick with BLND. I have been tempted to dump them on occasions as they hardly move, and currently I'm up only 17% in capital value terms, although the dividend/yield has been nice along the way. I am sticking with them now.

Ian.

[kempiejon]

When I bought British Land it was the highest yielder. That's why it's in mine over Land Securities. I also have Segro in the sector bought much later.

[eyeball08]

Have held Land Secs since 08 or 09 and bought British Land later on. Land sex was a PYAD rec some years back. Happy to hold both, hoping that isn’t a “famous last words” scenario.

[NeilW]

Arguably held Land Sec since 1968, since I inherited the shares.

In fact Land Secs is probably what got me interested in investing in the first place. I got to read the annual and interim reports as a kid.

[tjh290633]

My first toe in the water into property was in 1971, when I dabbled in Westminster Property Units at 36.3p. It was one of those "Bond" affairs, where I got some tax relief and was able to encash 5% each year, and did that until 1976. I cashed out in 1982, by which time the unit value was 92.5p, a TR of about 8.9%.

Next was Mapeley in 2007, who had offices leased to HMRC and a Builsing Society. An unmitigated disaster, as they were taken private in 2009 by Fortress. I lost 89%.

Not undeterred, I went into Segro in 2007 at 544p, thinking that warehousing might be a good bet. They had a massive rights issue at 20.25p in 2009 to buy Brixton Estates, followed by a consoldation. I see that my IRR is 6.9%.

Then I went into BLND in 2010 at 472p. Retail and offices seemed a good diversification. Now at 622p, my IRR is 4.5%.

I suspect that LAND was dismissed on account of its yield. Mapeley yielded 5.6% when first bought. SGRO yielded 4.3% and BLND 5.5%. Currently SGRO yields 2.9% and BLND 4.5%. A bit of a trade-off between yield and TR.

TJH

[idpickering]

Then I went into BLND in 2010 at 472p. Retail and offices seemed a good diversification. Now at 622p, my IRR is 4.5%.

TJH

I always liked the fact that my wife used to love going to Meadowhall shopping centre in Sheffield, and I took pleasure in reminding her that the store paid rent to British Land who own the premises.

[MDW1954]

Then I went into BLND in 2010 at 472p. Retail and offices seemed a good diversification. Now at 622p, my IRR is 4.5%. TJH

Hi Terry,

Did you mean to type that BLND is now 672p (not 622p)? That was tonight's closing price.

And that 672p is buying you something like 960p/ share in NAV, which is one helluva discount.

Interesting that no one has commented on Hammerson, though, where the story is very similar, as is the yield -- although marginally lower than BLND, I grant you.

MDW1954

[midgesgalore]

I also purchased Aberdeen Standard Logistics Income (ASLI) at IPO but in my ISA (for the income to come in the fullness of time hopefully at 5%).
Always looked at British Land and Land Securities as so many HYPers include them in their portfolio reports but I never did buy any of them - although I lean closer to British Land than Land Securities as through the years the dividend has been the greater at my sampling points.

Maybe after brexit I'll look again at the sector but I would probably look more at warehouses than London offices or retail malls.

midgesgalore

[Bouleversee]

fwiw I've just read that Land Securities was lifted by an upgrade to overweight by JP Morgan today.

[tjh290633]

Then I went into BLND in 2010 at 472p. Retail and offices seemed a good diversification. Now at 622p, my IRR is 4.5%. TJH

Hi Terry,

Did you mean to type that BLND is now 672p (not 622p)? That was tonight's closing price.

And that 672p is buying you something like 960p/ share in NAV, which is one helluva discount.

Interesting that no one has commented on Hammerson, though, where the story is very similar, as is the yield -- although marginally lower than BLND, I grant you.

MDW1954

Quite possibly, MDW. I don't recall Hammerson coming up on the radar at the time. The yield was no doubt the reason.

TJH

[daveh]

I've just run HTPTUSS and it gives the following data:



Hammerson (HMSO) look quite interesting, might have to take a more detailed look. I own BLND and SEGRO. Both have done well for me, particularly SEGRO, which won't be getting more money as it is sitting at just under 7% of my portfolio and its yield is too low. BLND might, but overall property companies at sitting at ~9% of the portfolio and I wouldn't want to take that much above 10% for the sector.

[teecee90]

I have a small holding in British Land and would be tempted to top-up but am already over my industry limit (20%). However, this is based on REITs being classified as "Financials", which seems a bit odd to me. Do others that apply similar share/sector/industry limits strictly apply the ICB definitions?

[tjh290633]

I have a small holding in British Land and would be tempted to top-up but am already over my industry limit (20%). However, this is based on REITs being classified as "Financials", which seems a bit odd to me. Do others that apply similar share/sector/industry limits strictly apply the ICB definitions?

Definitely not. Look where housebuilders are placed for example. What connection does William Hill have with Marston's?

I choose my own sectors.

TJH

[daveh]

I have a small holding in British Land and would be tempted to top-up but am already over my industry limit (20%). However, this is based on REITs being classified as "Financials", which seems a bit odd to me. Do others that apply similar share/sector/industry limits strictly apply the ICB definitions?

No. I class Reits as Property Companies and have a sector limit of approx. 10%. Financials I class as a super sector (with a 20% limit) and it includes sectors such as banks; Insurance; specialist finance etc each with a 10% limit. I have Legal and general, Aviva and Prudential in Insurance and Lloyds and (unfortunately) RBS in banks.

[BristolDave]

I'm going to come a bit late to the party as I normally prefer to lurk in the background. However your post regarding Hammerson (HMSO.l) interested me as I have also been looking at them recently. Their share price is dropping as they have announced an all share merger with Intu properties. The argument is that this will give Hammerson exposure to Spain. Hammerson currently have exposure to UK, France, Ireland and to some extent Germany. The price is dropping on the merger going through and at time of writing is sub 500 which would give a yield of approx 4.9% so higher than British Land and Land securities. The new group will also (so I understand) be larger than either of these two. Therefore there is an interesting case for Hammerson. However - it is a pure play on retail outlets with such properties as the Bullring Centre, Cabots Circus (Bristol) etc and the decision is if traditional retail outlets as we know them will die due to the impact of internet shopping.

Personally I am still watching to see where the current price drop ends up and may then decide on dipping my toe. The yield is good and the dividend history is good with gradual growth (slow and steady). Management seem to have a good track record. The question is will this be maintained in the new enlarged group.

Well that is my twopenneth worth - back to lurking.

[MDW1954]

Yes: what you say about Hammerson is precisely what interests me. It will be Britain's biggest property company, with significant overseas interests, and is trading on a hefty discount to NAV. Plus, the yield is in HYP territory.

It all depends on the view one takes of the future of retail, though. Going back to the HYP board in the mid-2000s, I remember coming across the HMSO ticker then, but it never seems to get a mention now.

MDW1954

[micrographia]

Definitely not. Look where housebuilders are placed for example. What connection does William Hill have with Marston's?

I choose my own sectors.

TJH

So do I and in my HYP they are in the same sector; "vices"

Tobacco, booze and gambling shares provide nearly 12% of my HYP income...

Regards, EEM

[monabri]

Can anyone see the likes of Sainsburys and Tesco asking for rent reductions with a possible knock on effect to the REITs?

[Gengulphus]

Can anyone see the likes of Sainsburys and Tesco asking for rent reductions with a possible knock on effect to the REITs?

Yes, I can generally see customers of any type asking for price reductions from suppliers, and this is no exception! But asking and getting are not necessarily the same thing: the REITs can say "No"... Whether they will is a matter of whether they think the risk that the supermarket will stop renting the property and go elsewhere or simply close the shop without replacing it is a credible one, and if so, how easily they think they can find an alternative tenant. And if they do say "No", effectively calling the company's bluff, how the company responds then becomes a matter of whether it actually is a bluff, and whether the company reckons the "No" is itself a bluff, and so on... The result is that I can see it becoming effectively a game of high-stakes poker - but I can't see what the outcome is likely to be!

One other thing to bear in mind is that both Sainsburys and Tesco own very substantial amounts of freehold property, for which of course the question doesn't arise. So while the stakes are undoubtedly high, they must be substantially less than one might at first imagine from the number of Sainsburys and Tesco supermarkets and other shops - so any "knock on effects" will similarly be smaller than one might at first expect. How much smaller, I don't know - I've dug a bit into property ownership in their last annual reports, but all that really reveals is what I've said above about owning very substantial amounts of freehold property and that an awful lot more digging would be needed to get a good picture of it...

Gengulphus