LondonMetric says property values flat in six months to Sept despite rate rise

LondonMetric Property said its portfolio value was flat over the six months to end-September despite five-year swap rates rising about 50bps; net rental income grew more than 8% to around £240 million, and annualised like-for-like income growth reached 5.8%. Rent collection was 99.3%, occupancy 97.4%, and annual net contracted rent increased to £452 million from £432 million. The company raised its first-quarter dividend 3.3% to 3.15 pence and said it was on track to meet consensus FY2027 EPS of 13.9 pence.

Analysis

LondonMetric’s case is increasingly about income carrying the valuation, not a clear re-rating: rent growth and leasing appear to have offset higher discount rates, but thin transaction liquidity can delay recognition of property-value declines. Book-value disposals are a useful check, not proof that the wider portfolio is fairly marked. The key near-term test is whether rent growth translates into recurring per-share earnings after financing costs and integration effects; portfolio-level income growth includes acquired assets and should not be treated as purely organic.

Over 1–3 months, the dividend and FY27 earnings outlook may support relative performance, while higher swap rates or weaker property transactions could pressure the sector. Over 6–18 months, continued rent reviews and occupancy gains are supportive, but the 17% average review uplift is not a repeatable growth rate. Acquisitions only create value if funding costs, capex and integration leave an adequate return spread; the cited purchase yields alone do not establish that. Grocery pre-lets could underpin occupancy, while retailer affordability and lease terms remain the relevant counterparty risks for tenants such as Tesco and Marks & Spencer.

Contrarian angle: the high indicated yield may look like a bond substitute, but it is not a bond coupon—leverage, refinancing and property marks can impair both NAV and dividend cover. The article lacks debt maturity, hedging and payout-cover detail, so conviction should remain conditional.

Key Decisions for Investors

• Consider a modest long LMP versus a broad UK-listed property/REIT basket on pullbacks, treating it as a relative-quality and income-growth position rather than a near-term NAV recovery trade. Scale only after checking leverage, debt maturities, hedging and dividend cover.
• Do not annualize the reported rent-review uplift or assume the 7.1% indicated yield is secure. Track like-for-like rental growth, net financing costs and earnings per share against the FY27 consensus path.
• Falsification/watch items: a sustained rise in UK swap rates, disposals clearing materially below book, occupancy deterioration, or guidance indicating weaker dividend cover would invalidate the relative-long thesis; stronger completed sales and earnings delivery would support adding.