The value of the portfolio of one of the UK’s largest listed property companies fell by more than £500 million in a year because of fallout from the troubled retail sector.
Landsec, which owns the shopping centres Trinity Leeds and Gunwharf Quays in Portsmouth, reported a pre-tax loss of £123 million for the year to March 31 after writing down the value of its shopping centres and other assets by £557 million to £13.8 billion.
The FTSE 100 developer lost £10 million of rent from retailers over the year as struggling businesses shut shops or used insolvency procedures to cut rents. Retailers’ failures contributed to an 11.7 per cent fall in the value of Landsec’s shopping centres to £2.6 billion, while the value of its retail parks fell by 15.5 per cent to £636 million. The value of its London offices’ portfolio was flat, at just under £5.3 billion.
Landsec, formerly Land Securities, was founded in 1944 when Harold Samuel, who is said to have coined the phrase “location, location, location”, bought the Land Securities Investment Trust, which owned three houses in Kensington. It became Britain’s largest property company in the 1960s. Last year its market capitalisation was overtaken by Segro, the warehouse investor and developer.
Rob Noel, chief executive, forecast five years ago that the retail sector was “turning a corner” as the British economy bounced back from the financial crisis and real wages were rising. However, like many of his landlord peers, he failed to predict the extent of the shift to online shopping on physical shops, as well as the pressure of higher business rates and a higher minimum wage.
Mr Noel, 54, also signalled the approach of the top of the London office market early, in 2014, when he called time on speculative developments, where a scheme is built before a tenant is secured. He has since admitted demand from office occupiers had been stronger than expected.
Landsec said it planned to “continue to reduce” its exposure to British regions, where it has a portfolio of mainly retail and leisure property assets. It plans to double down on London, which accounts for 65 per cent of its portfolio. Landsec has a £3 billion development pipeline in London, which includes office-led developments and 1,700 proposed rented homes. After a three-year hiatus from speculative office developments it has committed to building 500,000 sq ft on three sites in London.
Mr Noel said he did not regret stopping buying development sites five years ago. “I never regret anything, so no,” he said.
“London has shrugged its shoulders at Westminster . . . Demand has been stronger than we thought and people are building less than we thought.” Landsec shares fell 12½p to 879½p.
Rob Noel, then and now
Offices: Calls top of the London office property market, saying company will look for pre-lets before starting new projects: “The risk profile of future speculative development is changing.”
Retail: “With the economy recovering, we are started to see real wages rising and we can see retail turning the corner.”
Offices: “Demand has been stronger than we thought and people are building less than we thought.”
Retail: “We see no near-term improvement in retail market conditions, with company voluntary arrangement activity set to continue.”
Source: The Times