Land Securities Group Plc (LAND), the U.K.’s largest real estate investment trust, reported a 10 percent jump in annual earnings as rental income increased.
Profit excluding changes in asset values and one-time items rose to 319.6 million pounds ($535.3 million), or 40.5 pence a share, in the 12 months through March from 290.7 million pounds, or 36.8 pence, a year earlier, the London-based REIT said in a statement today.
Land Securities has profited from rising values as the U.K. economy rebounds. Adjusted net asset value climbed to 1,013 pence a share from 903 pence. U.K. commercial real estate values rose for the 11th straight month in March, according to Investment Property Databank Ltd.
“We’re now reaping the rewards from our development program,” Chief Executive Officer Robert Noel said on a conference call. “The schemes we’ve completed are now sold or virtually let and the remainder of our London program completes in 2016, right into the sweet spot.”
Land Securities was down 2.4 percent to 1,078 pence at the close of trading in London. The shares have risen about 9 percent in the past 12 months.
The company secured tenants for 87 percent of its 20 Fenchurch Street skyscraper, nicknamed the Walkie Talkie, and leased its 2 New Ludgate office development on the edge of the City of London financial district to Mizuho Financial Group Inc., according to the statement.
Land Securities won’t begin further developments without first securing tenants as rising building costs and competition from other developers has increased the risk of construction, Noel said on the call.
The REIT began many of its large London developments, including the Walkie Talkie and 2 New Ludgate, without tenants, betting on an increase in demand for office space. It owns the Walkie Talkie in a venture with Canary Wharf Group Plc.
Economic growth and higher wages aren’t expected to translate into rental growth across the entire retail market, Noel said in the statement. Rental growth in the retail industry “will be limited to the best locations,” he said.
“We will move more into development on our retail side during the next couple years from our London side,” Noel said by phone.
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