Land Securities Asset Values Rise on London Property Gains

Land Securities Group Plc (LAND), the U.K.’s largest real estate investment trust, said the value of its properties rose 4.5 percent in the year through March on demand for shops and offices in central London.

Adjusted net asset value increased to 863 pence from 826 pence a year earlier, the London-based company said in a statement today. Adjusted earnings per share gained 8.5 percent to 38.5 pence, exceeding the 38 pence average of 17 estimates compiled by Bloomberg.

Properties in central London are the only U.K. commercial property type rising in value, Investment Property Databank Ltd. said yesterday. Land Securities has 1.2 million square feet (111,200 square meters) of retail and office projects under way in the British capital and the largest is the 250 million-pound tower at 20 Fenchurch Street nicknamed the Walkie-Talkie. Chief Executive Officer Robert Noel is betting on capturing higher rents and values from the shortage of new space under development.

“The Noel plan is to develop value rather than ride the cycle and it’s working,” said Mike Prew and Robert Duncan, analysts at Jefferies Group Inc., in a note to investors that repeated their buy recommendation.

Land Securities shares declined 11 pence, or 1.5 percent, to 723.5 pence at 9:20 a.m. in London trading. The decline mirrored the drop in U.K. stocks and lowered the company’s market value to 5.65 billion pounds.

Walkie-Talkie

The company said today that it’s negotiating contracts with a prospective tenant to lease 8 percent of 20 Fenchurch Street in the City of London financial district, which is known as the Walkie-Talkie because its rectangular-block shape. The tower, which Land Securities is developing with Canary Wharf Group Plc, will have 696,000 square feet of space and is scheduled for completion in 2014.

“We are in advanced negotiations for significantly more than that,” Noel said on a conference call with journalists today, declining to identify the potential tenant. “It reinforces confidence in our plan. People are realizing that their choices are evaporating” for new office space to lease.

Land Securities in February signed a joint-venture deal with Canada Pension Plan Investment Board, the country’s second-biggest retirement fund, to build the 900,000 square-foot Victoria Circle development of offices, shops and housing near Buckingham Palace in London.

Lowered Vacancies

Revenue profit increased 9 percent to 299.4 million pounds as Land Securities lowered its interest payments by paying back more expensive loans, lowering vacancies and lifting rents by 1.2 percent before the impact of acquisitions and disposals.

Net income dropped to 522.9 million pounds from 1.24 billion pounds as the value of the company’s properties increased more slowly than a year earlier.

Net debt dropped to 3.55 billion pounds, or 38 percent of the value of its real estate. That figure will fall to 33.4 percent of its assets once asset sales are completed, the company said.

Land Securities increased its final dividend to 7.4 pence a share from 7.2 pence a year earlier, taking the total payout for fiscal 2011 to 29 pence a share.

To contact the reporters on this story: Simon Packard in London at packard@bloomberg.net; Neil Callanan in London at ncallanan@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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