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Landsec Back On Acquisition Trail After Hotel And Retail Sales

Inside Landsec's HQ at 100 Victoria Street

Landsec's portfolio value continued to drop in the year to the end of March, but the pace at which it is falling slowed in the last six months.

The UK REIT reported its net assets had declined in value by another £625M to around £6.4B, having dropped by more than £900M the previous year.

Landsec's central London portfolio value declined by 6.9%, with its offices recording a 13.9% drop, with valuations depressed primarily by high interest rates and companies reducing their office footprints.

However, Landsec said about 60% of its portfolio was “effectively stable” in the latter half of the financial period, while overall yields remained steady in the final quarter.

The company has been executing noncore divestments, and earlier this month, Landsec announced the sale of its hotels business for £400M to investment firms Ares Management and EQ Group to “focus its resources on areas where it has genuine competitive advantage.”

It has also sold two small retail outlets, two leisure assets, a retail park and the West 12 Shopping Centre in Shepherd's Bush, bringing total sales to around £600M over the past seven months.

Landsec CEO Mark Allan said the stabilisation of rates and rental growth is “starting to attract increased investor interest for the best assets,” as he said the company was ready to seek acquisition opportunities. It has identified 20 retail opportunities it could pursue, he said.

“Our continued operational outperformance, with rising occupancy and positive rental uplifts in retail and London, is driving robust like-for-like rental income growth and demonstrates the importance of owning and operating the best-in-class real estate,” Allan said in a statement.

“Around 80% of our portfolio is now invested in 12 places with significant scarcity value, where our competitive advantages in shaping and curating these places mean we expect like-for-like rents to continue to grow.

“After a period of proactive capital recycling, most recently with over £600M of non-core assets sold in the past seven months, we have meaningful capacity to invest in high quality assets that add to our best-in-class portfolio at what we believe to be an attractive point in the cycle.” 

Landsec also highlighted a consistent upward trend in office utilisation throughout the year, with unique daily entries across its buildings up 18% compared to the prior year and 81% of lettings resulting in customers taking the same space or more.

The company also said it had seen strong income growth as rental reversions “reach an inflection point and turn positive” across its retail portfolio.

Landsec’s share price slipped slightly after the news and is just over 5% down year to date.