Land Securities Group Plc (LAND), the U.K.’s largest real estate investment trust, said first-half profit declined 9.8 percent after it sold buildings to finance developments.
Profit excluding changes in asset values and one-time items fell to 143.7 million pounds ($230 million) from 159.3 million pounds, the London-based company said in a statement today. Adjusted earnings per share fell to 18.4 pence, missing the 18.7 pence average of four analyst estimates compiled by Bloomberg.
Chief Executive Officer Rob Noel is betting that developing and leasing new buildings will offer better returns than purchasing existing income-producing properties. Land Securities is building an office tower known as the Walkie-Talkie in the City of London financial district with Canary Wharf Group Plc after deciding to proceed without lining up tenants in advance.
“The returns we’re getting from our development program are far higher than we would find in the investment market or in other buildings in our portfolio, which is exactly why we’re doing it,” Noel said in a telephone interview.
The company leased about 29,500 square feet (2,740 square meters) of the Walkie-Talkie to London-based Ascot Underwriting Ltd., it said today. The completed building will have 682,000 square feet of space.
Land Securities was down 2 percent at 794.5 pence at the 4:30 p.m. close in London, paring this year’s gain to 25 percent.
Adjusted net asset value rose to 864 pence from 863 pence in May. The values of the company’s development sites rose 8.2 percent, compared with a 6.6 percent increase a year earlier.
Net income fell to 131.4 million pounds, or 16.8 pence a share, from 386.9 million pounds, or 49.9 pence, after the value of the company’s assets declined. Revenue declined to 303.6 million pounds from 339 million pounds a year earlier.
The company’s London portfolio rose 2 percent in value through the first six months, while retail assets fell 2.5 percent.
Development of New Ludgate, an office building near St Paul’s Cathedral in the City of London, may begin early in 2013 and be completed two years later if demand from businesses for new space continues, Noel said.
“It’s looking to us like there will be a lot of people who require new space in 2015,” Noel said by telephone.
To contact the reporter on this story: Neil Callanan in London at firstname.lastname@example.org.