Land Securities First-Half Profit Rises on Property Sales

Land Securities Group Plc (LAND), the U.K.’s largest real estate investment trust, said first-half earnings climbed 8.9 percent after it sold properties and collected more rent in an improving economy.

Profit excluding changes in asset values and one-time items rose to 156.5 million pounds ($250 million) from 143.7 million pounds a year earlier, the London-based REIT said in a statement today. Net rental income rose 9.4 percent to 295.4 million pounds from 270.1 million pounds.

Land Securities has been selling real estate and investing in development, betting that building and leasing new buildings will offer better returns. Britain’s commercial property market is improving as lenders become more willing to provide credit and overseas real estate buyers look beyond the London area, research firm Investment Property Databank Ltd. said in July.

“We made a big push into development right after the downturn and we were the first developer to do that, so we got construction costs at the lowest point,” Martin Greenslade, chief financial officer of Land Securities, said by phone. The company is now focusing on finding tenants and completing 680 million pounds worth of developments started during the past six months, he said.

Development Spending

Adjusted earnings per share climbed 8.2 percent to 19.9 pence. Spending on development and refurbishment of properties was 158.7 million pounds, most of which was invested in the U.K. capital’s Victoria area and in the City of London financial district.

“It is likely that sales of assets will exceed capital expenditure and acquisitions in the second half,” Land Securities Chief Executive Officer Robert Noel said in the statement. “While this will strengthen our balance sheet further, it is likely that revenue profit will be slightly lower than in the first half as we lose income from sales.”

The company last month agreed to sell offices adjacent to London’s Tate Modern art gallery on the south bank of the River Thames to an M&G Group Plc unit for 315 million pounds. U.K. commercial real estate values rose for the fifth straight month in September, posting the biggest gain since April 2010, according to IPD.

Land Securities fell 1 percent to 970 pence in London at 2:15 p.m. The shares have risen about 20 percent this year.

Walkie Talkie

Land Securities’ most recently completed office buildings - - 123 Victoria Street and 62 Buckingham Gate -- had occupancy rates of 86 percent and 57 percent, respectively, according to the statement. Land Securities’ 37-story tower in the City of London, nicknamed the Walkie Talkie, had tenants for 56 percent of the space. Land Securities owns the skyscraper along with Canary Wharf Group Plc.

Land Securities has been working to reduce a light beam that was caused by the Walkie Talkie’s design and the sun’s location. In September, it disrupted local businesses and melted parts of a vehicle parked nearby. A black curtain has been draped over the top third of a side of the building.

“We are close to resolving the issue and it will not delay occupation nor inflate budgeted cost,” Noel said in the statement.

To contact the reporter on this story: Patrick Gower in London at pgower@bloomberg.net

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

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