Bloomberg News

Land Securities Reduces Vacancy Rate After Winning Tenants

July 19, 2011

(Updates with CEO’s comments in fourth paragraph.)

July 19 (Bloomberg) -- Land Securities Group Plc, the U.K.’s largest real estate investment trust by value, cut its vacancy rate after attracting tenants including Primark Stores Ltd., Supergroup Plc’s Superdry and Hugo Boss AG.

The vacancy rate fell to 3.9 percent at the end of June from 4.2 percent at the end of March, according to a statement released by the London-based company today. The rate includes 1 percentage point of temporarily leased space and excludes 0.4 point of space for which tenants agreed to lease.

Chief Executive Officer Francis Salway has focused on attracting more tenants to newly opened buildings such as its partly owned St. David’s mall in Cardiff and One New Change in the City of London financial district, to lower the vacancy rate from 5.9 percent at the end of September 2010. He also sought enough tenant commitments to partially fill the company’s development projects before starting construction.

“We have a clear plan, we are executing it successfully and it’s delivering,” Salway said on a conference call, adding that the company was looking forward with “continuing confidence and delivering more of the same.”

Land Securities was unchanged at 866 pence at 8:17 a.m. in London trading, valuing the company at 6.7 billion pounds ($10.8 billion). The shares have risen 28 percent this year.

Eastern Quarry

The additional rental income generated by Land Securities compensates for the revenue lost by divesting properties. The 177.1 million pounds raised from asset sales in the three months to June 30 helped Land Securities finance development projects, mainly in central London and certain shopping centers, such as the Trinity project in the city center of Leeds in northern England.

While the bulk of Land Securities’ projects center on London, a pickup in demand from food and fashion retailers led Land Securities to plan investing in out-of-town big box retail warehouse projects, valued at about 275 million pounds.

An additional 1 million square feet of space (92,900 square meters) is planned, either by extensions to existing properties, or through new construction, Salway said. Land Securities is also seeking a partnership with a large homebuilder to develop the Eastern Quarry area at Ebbsfleet in Kent, he said.

Debt fell to 37.5 percent of the value of the company’s assets, compared with 39 percent three months earlier. Land Securities will pay a quarterly dividend of 7.2 pence a share.

Land Securities is the best-performing U.K. REIT since it released full-year earnings May 18 that showed stronger-than- expected gains in the value of its properties. Its shares have climbed almost 16 percent since the eve of its full-year earnings through yesterday, compared with an average gain of 4.2 percent for the 11 stocks in the FTSE 350 REIT Index.

--Editors: Jeff St.Onge, Andrew Blackman

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net

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


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