BRITISH LAND will intensify the gloom surrounding the commercial-property market this week when it reports the net value of its assets has declined by as much as a quarter in only six months.

Sector watchers are convinced half-year figures from the FTSE 100 giant could be even worse than arch-rival Land Securities, which last week unveiled a savage 20% drop in its net asset value. That is because British Land has bigger debts and a greater exposure to out-of-town retail warehouse parks, which have been hard hit by the market turmoil.

Analysts expect British Land’s net asset value per share will have dropped to around £10 from £13.44.

The company, which is facing the downturn without a chief executive following Stephen Hester’s departure to Royal Bank of Scotland, will attempt to put a brave face on the results. It is expected to tell the City it has few voids in its portfolio, no refinancing issues and strong income generation.

City analysts fear that if values continue to plunge sharply, British Land – the most heavily indebted of the big property groups – could risk breaching its covenants in the next two years. Analysts at JP Morgan estimate that values would need to fall by 30% from June levels before British Land tested its covenants.

Property values fell by 4.3% during October alone, according to Investment Property Data-bank - the biggest monthly drop in 22 years. British Land is expected to provide a detailed explanation this week about why it believes its finances are in good shape and there are no current covenant issues.

– Orchard Street Investment Management, the specialist commercial-property investment manager run by veteran Chris Bartram, has secured a £100m banking facility from Royal Bank of Scotland for its UK Special Situations Fund. The fund, launched on March 10 with £100m of equity already subscribed, is aiming to pick up bargains in the stricken commercial real-estate market over the next few years.

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