Home Landsec defies Brexit uncertainty with big development push
November 12, 2019
Landsec is pushing ahead with substantial London property developments even though tougher conditions in the retail market have knocked the value of its portfolio.
The company, formerly known as Land Securities, recorded a £147m loss for the six months to September, down from a £42m profit a year earlier, as £368m was wiped off the value of its portfolio.
Nevertheless the UK’s biggest listed property company by portfolio value said it had workers on site at four London schemes totalling 1m sq ft of new buildings, part of a £3bn programme of potential developments.
The push to build comes despite previous reticence on the part of Landsec, which had earlier said development schemes would be held back until the UK reached a divorce deal with the EU.
Robert Noel, chief executive, acknowledged “unsettled market conditions” but added: “We had a big development programme starting in 2011 and that one turned out to be well timed. I think this one is going to be well timed as well.”
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The total value of the company’s portfolio was reduced to £13.4bn. Retail parks were the worst hit, with an 11.1 per cent fall in value, followed by regional retail with a 9.4 per cent decline, after a series of retailer failures cut into landlords’ rental income. However, office property values rose slightly by 0.3 per cent.
Landsec’s developments under way are office-driven, such as Deutsche Bank’s new London headquarters at 21 Moorfields in the City of London, and schemes in Victoria and Piccadilly.
Another 800,000 sq ft of developments are expected to start in 2020, with a total of £3bn of schemes ready to go if conditions are right, said Mr Noel.
Falling values pushed up the group’s loan-to-value ratio by one percentage point to 28.1 per cent. Alan Carter, managing director at Stifel, said: “The direction of travel for [loan-to-value] will be meaningfully upwards as development capex occurs, so letting success is really what will drive the business and the shares for the foreseeable future.”
Shares in Landsec have risen more than 20 per cent since August, but trade at a discount of more than 30 per cent to net asset value, in keeping with steep discounts on most property companies, according to figures from Liberum.
London office property has proved more resilient than expected since the Brexit vote, however, with strong demand against limited supply of new offices keeping capital values steady.