Property company Slough Estates reported a 7.4 per cent half-year rise in net asset value per share, spurred by strong capital inflows into the property market and increased lettings.
Slough, which specialises in industrial property and has a number of West Midlands sites, also said it would turn itself into a low-tax real estate investment trust (REIT) from January 1. The news saw shares end 24.5p down at 636p.
Chief executive Ian Coull said in yesterday's interims statement: "In the UK, good progress has been made in securing new customers during a period of improved demand.
"Looking to the second half and beyond, a more balanced investment market seems inevitable. Rentals are likely to continue to be constrained, although there are some signs of rents edging up."
Slough, which also manages property in the US and Europe, said it benefited from a strong revaluation surplus and healthy growth in rental income, nearly trebling half-year profit before tax to £338.1 million.
Adjusted diluted net asset value (NAV) per share rose to 730.8p in the six months to June 30 from 680.4p a year ago.
Stockbroker Hargreaves Lansdown said: "Overall, improving economic prospects for Europe combined with the conversion to an REIT should see shares retain favoured market consensus opinion."
Slough said it had a development pipeline with the potential to add £215 million to rental income but said the UK commercial property market was set to peak in the second half, keeping a lid on rental growth.
Slough said it saw signs of growing occupier demand in Europe, singling out Germany. It added a stronger outlook for the biotechnology industry in California - a key customer base - would offset slowing growth in the US economy.
The value of Slough's UK assets, nearly 80 per cent of its total £4.5 billion, rose by 6.7 per cent.
The portfolio includes the Kings Norton Business Park in Birmingham, the Meteor Park estate in Nechells and the joint-venture Lymedale Cross Business Park in the Potteries.
Slough entered the blue-chip FTSE 100 index in late July at a market value of £3.1 billion, saw its shares trading yesterday at a ten per cent discount to the 2006 projected net asset value.
Property company shares normally trade at a discount to NAV - a key performance gauge valuing properties net of debt - because of companies' debt structures, management costs, and corporate governance issues.
The additional tax a property company has on profits, which investors can avoid if they hold property directly, is also cited as a factor which some hope will be removed with the introduction of UK REITs next year.
A REIT is a company with a property portfolio paying little tax on rental income as long as it distributes profits in dividends. A one-off charge is paid.
