A Good Time To Kill Debt, But Landsec Borrowing Creeps Up
Landsec bounced back from pandemic-inspired woes, turning 2020’s £1.4B loss into an £875M profit.
However, debt grew as Landsec swerved from defensive asset sales to new purchases. During 2021 these included a suite of assets in Manchester, including MediaCity Salford and Mayfield Piccadilly.
The annual results came as inflation heads toward 10% and the Governor of the Bank of England Andrew George warned of “apocalyptic” price rises. Landsec's debt rose by 20% to £4.16B. This represents a rise in loan-to-value ratio from 32% to 34%. And it is likely to stay that way.
The new strategy will see Landsec sell assets to the value of around £4B but pledge to recycle £3B of the funds raised. The balance may go to investing in the existing retail portfolio.
"Landsec is selectively exploring further investment opportunities in retail, in line with our view that major retail destinations could grow to 20% to 25% of the portfolio. The group is aiming to keep the LTV below the mid-30s percent," a spokesperson told Bisnow.
The results document amplified the plan.
“We said we intended to sell c. £4B of mature London office assets and assets in sectors which were sub-scale over the next six years,” chief executive Mark Allan wrote. "To date, we have sold £1.1B. … Over the coming years we plan to recycle a further c. £3B of mature, low-yielding London offices and assets in sectors where we have limited scale, such as retail parks or hotels.
“As we reinvest our capital into our pipeline and selective retail acquisition opportunities, we expect delivering on our strategy to drive a meaningful increase in earnings and, on average, a mid-to-high single digit total return over time, whilst keeping LTV below the mid 30% level.”
Speaking at Tuesday's results launch, Allan revealed that the regional investment programme would also take a further step forward.
A £110M investment in Salford’s Media City complex will include a 330K SF office building, the first new offices at the popular location for several years. It will replace a masterplanned block of 100K SF, Place North West reported.
The office building is the first stage of a £400M investment at Media City. If planners agree, work on the site could begin in spring 2023.