Land Securities Full-Year Profit Increases as Offices Fill

Land Securities Group Plc, the U.K.’s largest real estate investment trust, said full-year earnings increased 10 percent as offices filled up more quickly than expected and interest costs fell.

Profit excluding changes in asset values and one-time items climbed to 362.1 million pounds ($525 million) from 329.1 million pounds a year earlier, the London-based company said in a statement on Tuesday. The dividend will be increased by about 10 percent.

Demand for London offices, which drove up values at the start of the year, slowed in the second half on concern that prices were too high and anxiety about the looming vote on Britain’s membership of the European Union. Land Securities said Tuesday that a vote to exit would lead to falling rental values and less construction, especially in London.

“It is up to individuals -- including those amongst our customers, communities and partners -- to decide what’s best,” on a Brexit vote, Chief Executive Officer Rob Noel said in the statement. “As guardians of shareholder capital, our responsibility is to position the company so it can thrive whatever the outcome.”

Land Securities gained 2.4 percent at 9:09 a.m. in London trading.

Final Dividend

The company recommended a final dividend of 35 pence a share from 31.85 pence a year earlier. That’s after it leased 524,000 square feet (48,600 square meters) in the year through March. The leases, at higher rents than expected, leave 500,000 square feet of space available in London from the 3.1 million square-foot speculative development program the company started in the city in 2010.

Noel said in May 2014 that the company would not commit to more London development without agreeing leases before starting construction, highlighting the risk that supply could exceed demand and lead to falling rents. Construction started on a record number of London office projects in the six months through March, according to a report last week by Deloitte LLP.

Land Securities would be more likely to change its attitude on speculative development if Britain voted to leave the EU next month as the risk of oversupply would fall, Noel said in a telephone interview Tuesday.

“Were we to stay in the EU, we suspect that development pipeline would increase and that will make us less likely to crack on with speculative development,” Noel said. “Were we to vote to leave then I suspect a lot of that development would be impacted so that would make it more likely that we would build speculatively.”

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