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British Land: 3Q09 results and another rights issue. British Land announced its 3Q09 results (which were roughly in line with our forecasts) and a rights issue for gross £767m (net £740m).

We welcome the rights issue and reiterate our view that the stock valuations start to make some sense in the UK: It all starts to come together. However, stock valuations are not obviously cheap yet and as we expect other property companies to follow with equity issues, there is likely to be a scramble for capital. In particular at the end of March, we expect pressure on property stocks, as the payments for the rights issues of Hammerson and British Land are taking place.

Our first calculations. Based on our first calculations we estimate an ex-rights dividend yield of around 6.4% (based on payout of 68%) and 10% discount to 2010 NAV. In addition, our March-2010 LTV rises now to 56%, while this would have been 68% without the rights issue. Moreover, we calculate property valuations can fall between 26%-30% before the loan covenants at 175% are breached. However, we are not concerned about a breach and if it were to happen we expect British Land to be able to renegotiate the loan terms. British Land has £2.1bn in unused credit lines, but we believe the company will continue to sell assets, before opening up these lines. We expect to get more clarity on these numbers after the conference call this morning.

The rights issue. British Land announced a 2 for 3 rights issue this morning for a gross amount of £767m (net £740m) at an issue price of 225p, which is 53% below yesterday’s close. The company will issue 340.87m new shares, which are fully underwritten by UBS, Morgan Stanley and Euro Lights Private Ltd (affiliate of GIC). The new shares will be admitted to the stock exchange on 4 March 2009. The latest acceptance date will be 18 March 2009.