REG - Land Sec. Group PLC - Landsec investment and operational update

Land SecuritiesAnnouncement

28/03/2023 07:00

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RNS Number : 3758U  Land Securities Group PLC  28 March 2023

28 March 2023

Land Securities Group PLC

("Landsec")

 

Landsec investment and operational update

 

 
Landsec continues to build on strong operational and strategic momentum

 

Since its half year results, Landsec has continued to build on its operational
and strategic momentum. It has capitalised further on the ongoing customer
demand for prime space across Central London offices and major retail
destinations, while also recycling capital out of mature assets into new
opportunities offering significantly higher future returns. At the same time,
the business has further strengthened its strong capital base.

 

Unlocking complex opportunities at attractive returns

Landsec has secured 100% ownership of St David's shopping centre, Cardiff,
following its purchase of the debt secured against the 50% share of the asset
previously owned by intu plc. Comprising separate transactions with two debt
holders, the overall purchase price represents a meaningful discount to the
£113m September 2022 book value of Landsec's existing 50% share of the
centre, a net initial yield of 9.7% and an equivalent yield of 9.7%.

 

Leasing momentum in St David's has been strong, as the centre benefits from
brands' ongoing "flight to prime". Since March 2022, 36 leases have been
signed or are in solicitors hands, on average 11% ahead of ERV. In the last 18
months, several brands have relocated to St David's from elsewhere in the
city, agreed to open new stores, or upsized their existing stores, including
Zara, Ivy Asia, Gaucho and Footasylum. As a result, occupancy increased from
88.1% in March 2021 to 93.1% at the start of this year, with retail sales for
the financial year to date 15% above the prior year and in-line with
pre-pandemic levels.

 

Via a separate transaction, Landsec has also acquired the adjacent vacant
Debenhams store for a minimal sum. Combined, this unlocks the opportunity to
deliver its future vision for the centre, further enhancing its attraction for
brands and visitors. This will introduce new public spaces, elevated
F&B/leisure concepts and a refreshed brand mix, and is expected to deliver
a high single digit income return on incremental capex.

 

Recycling capital out of mature assets

Aside from the £350m disposal of the fully-let One New Street Square office
in the City in January, Landsec has also sold a fully-let leisure asset in
north London and a small non-core residential asset. The combined
consideration of £49m represents an average yield of 2.9% and a 26% premium
vs the March 2022 book value. With a further reduction in net debt since
September and an increase in average debt maturity to over 10 years via its
recent bond issue, Landsec retains one of the strongest balance sheets in the
sector.

 

Capitalising on continued demand for best in class space

Operational momentum has remained positive across Landsec's Central London
portfolio and major retail destinations, as customer demand continues to focus
on best-in-class space.

 

In Central London, the strong demand for sustainable, modern space means that
Landsec's two largest on-site development schemes, n2 and Lucent, are now 66%
and 67% pre-let or in solicitors hands respectively. As a result, its overall
current pipeline is now 53% pre-let or in solicitors hands, ahead of its
completion by the summer, up from 38% in November, with rents agreed since the
half year well ahead of ERV. Demand across the company's existing office
portfolio remains strong as well, with further lettings ahead of ERV since the
half year. In the West End, where two-thirds of Landsec's London assets are
located, the company's office portfolio is currently more than 99% let or in
solicitors hands.

 

Across Landsec's major retail destinations, like-for-like sales were 3% ahead
of pre-Covid levels for the eleven months to February. Leasing activity has
remained strong since the half year, with rents ahead of ERV and a strong
pipeline of lettings in solicitors hands of £14m, on average well ahead of
ERV.

 

Mark Allan, Chief Executive, commented:

 

"Over the past year we have been decisive in positioning Landsec for a 'higher
for longer' interest rate environment. We have realised capital out of mature
assets through well-timed disposals; reduced net debt to preserve a strong
balance sheet; extended debt maturities while preserving a low cost of debt;
invested selectively in new opportunities that offer a materially higher
return and responded proactively to the continued high demand amongst
occupiers for prime space.

 

"We continue to believe that interesting opportunities will emerge as the
economy transitions to a higher interest rate environment and have positioned
the business to be able to respond accordingly."

 

 

Ends

 

 
About Landsec

 

At Landsec, we build and invest in buildings, spaces and partnerships to
create sustainable places, connect communities and realise potential.  We are
one of the largest real estate companies in Europe, with a £10.9 billion
portfolio of retail, leisure, workspace and residential hubs. Landsec is
shaping a better future by leading our industry on environmental and social
sustainability while delivering value for our shareholders, great experiences
for our guests and positive change for our communities.

 

Find out more at landsec.com

 

 Please contact:

 
 Press                     Investors
 Sara Doggett              Edward Thacker
 +44 (0)7834 431258        +44 (0)7887 825869
 sara.doggett@landsec.com  edward.thacker@landsec.com

 

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