Property giant takes £1.4 billion values hit

The developer, which owns most of the Broadgate estate in the City and is building some of London's most ambitious office developments, said the value of its estate tumbled 8.9% in the last three months of 2007 to £14.6 billion.

Its net asset value per share - a key performance indicator for property companies - crashed 16.7% to 1401p in the worst fall inmemory.

Chief executive Stephen Hester said: "That is a straight reflection of what is going on in the property investment market."

The grim news from British Land comes just days after figures from the Investment Property Databank showed that total returns on property, including rental income and capital growth, fell 7.6% in the final quarter of last year - the biggest drop IPD has ever recorded.

However, Hester was in bullish mood today. "The worst is behind us," he said, although he warned of further valuation falls across the business and the wider market, adding: "It depends on what happens in the global markets."

Shares in British Land rose a modest 18p to 980p, having crashed from as high as 1721p early last year to just 820½p in November.

The massive writedown in value of its properties plunged British Land into a loss of £1.33 billion for its third quarter, although underlying pre-tax profits rose 12.5% to £72 million. It will pay a third-quarter dividend of 8.75p against 6.5p for the same period last year.

British Land said rents continued to rise between October and December despite the collapse in property values. The value of its Broadgate estate fell 9.3% to £2.8 billion.

Hester now expects to "see a pause" in rental growth in the coming months as demand wavers and new office space opens across the City.

The group is behind the Broadgate Tower and 201 Bishopsgate development in the Square Mile - the largest speculative development ever built in the City. The offices open in a few months but British Land has so far only managed to let just over half the space.

However, Hester expects the building to fill when the market improves "If this year is slow, then next year will be better," he said. "I'm totally relaxed about it.

"At present, the occupier markets from which our cashflows derive remain in better health than investment markets are discounting."

Chairman Chris Gibson-Smith said: "Macro-economic uncertainty and the global credit crunch have depressed property values. However, the worst should now be behind us, though uncertainties remain on timing and extent of the correction.

"The exceptional quality of prime property cashflow is again representing clear value. We are optimistic about British Land's inherent strengths and ability to create value over the course of the business cycle."