Profits on the rise at Land Securites Group
LAND Securities Group, the UK's largest real estate investment trust, said first-half earnings climbed 8.9pc after it sold properties to invest in development.
Profit excluding changes in asset values and one-time items rose to £156.5m (€175m) from £143.7m a year earlier, the London-based REIT said in a statement. Adjusted earnings per share climbed 8.2pc to 19.9 pence.
Land Securities has been selling real estate and investing in development, betting that building and leasing new buildings will offer better returns. 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 £315m.
"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," said CFO Martin Greenslade.
The company is now focusing on finding tenants and completing £680m worth of developments started during the past six months, he said.
Net rental income rose 9.4pc to £295.4m. Spending on development and refurbishment of properties was 158.7 million pounds, most of which was invested in the UK 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 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's most recently completed office buildings – 123 Victoria Street and 62 Buckingham Gate – had occupancy rates of 86pc and 57pc respectively. Its 37-storey tower in the City of London, nicknamed the Walkie Talkie, had tenants for 56pc of the space.
Land Secs 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. (Bloomberg)