I’m a big fan of real estate investment trusts (REITs) as sources of a second income. But there’s one I’ve never really managed to have a positive view of.
That, however, might be starting to change. Things look like they’re starting to fall into place for the business, so I’m taking another look.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
What’s the stock?
The stock in question is British Land (LSE:BLND). The firm owns and leases a mixture of office space and urban logistics properties.
That’s a bit of an odd portfolio and I don’t like the way it came about. It used to be office-focused, before making a strategic shift in 2021.
This, of course, was during Covid-19. So it was almost exactly the high point for warehouse demand and the low point for office buildings.
That meant the timing of the British Land’s move could hardly have been worse. And the stock fell 44% when things reversed.
Since then, I’ve never really looked at the stock. But things are starting to go the company’s way and the latest results look pretty good.
Back to work, the lot of you
Since the end of the pandemic, there’s been a return to offices. It started slowly, but it’s been picking up recently.
The standard concern recently, however, has been artifiical intelligence (AI). Specifically, the worry is that it’s going to result in job losses.
Fewer jobs mean less demand for offices and lower values for buildings. But the firm said something interesting in its latest update:
Demand from AI and innovation-led companies is particularly strong: we have seen this build through the year and we are tracking 2.5m sq ft of active requirements. These occupiers are looking to establish or expand their presence in London, with its attractive and dynamic workforce, often following significant leasing activity in the US, particularly in the San Francisco Bay Area.
In other words, AI labs like Anthropic are becoming British Land’s tenants. So could AI actually be a boost, rather than a risk?
Dividends
I’ve generally taken the view that the AI threat to office REITs is real. But maybe I’ve been a bit too quick to that conclusion.
The estimated rental value (ERV) of British Land’s office campuses grew 6.5% in the last year. And occupancy levels are around 95%.
The firm has returned 23.12p per share to investors in the last 12 months. At today’s prices, that’s a dividend yield of almost exactly 6%.
It takes 5,191 shares to earn a £100 monthly second income. And that costs £19,878 with the stock trading at £3.83 a share.
Is that something to consider working towards? With the firm expecting further growth ahead of inflation in future years, it might be.
Time for a rethink?
I’m sticking by my view that British Land’s attempt to move into urban logistics came at exactly the wrong time. But things have changed since then.
The firm’s office buildings are very much back in demand. And the rise of AI seems to be helping things – at least, for the time being.
Whether that’s the long-term picture remains to be seen. But a 6% yield is enough to convince me to take a second look at a potential income opportunity.
Should you invest £5,000 in British Land Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if British Land Plc made the list?
Stephen Wright has no position in any of the companies mentioned.
