Land Securities has £500m investment warchest

UK property group Land Securities issued an upbeat assessment of its future trading prospects in a third quarter statement on Tuesday. The largest real estate investment trust in the UK said that it had made good profits out of recent building sales and announced that it plans to take advantage of the downturn in the property market with a war chest of at least EUR 670 mln (£500 mln). Plans for a three-way demerger of its holdings are also proceeding.

The company said it sold EUR 680 mln (£507.8 mln) worth of property in Q3 to 31 December at a yield of 4.9%, leaving it well placed to exploit the current weaknesses. Sales in the three months reaped 5.6% more than the commercial properties’ estimated value at the start of the quarter. The company has banked about EUR 1.6 bn (£1.2 bn) from property sales and an equity raising for a new fund under Trillium, although part of this will go to capital expenditure, which leaves about EUR 670 mln for new acquisitions.

Commenting on the third quarter, Group CEO Francis Salway said: 'We anticipated a weakening in the pricing of property investments, and in the 2007 calendar year sold over EUR 2.7 bn (£2 bn) worth of properties. In the quarter, we maintained our programme of property sales through the sale of good properties at good prices in line with our plans for the year.'

Salway added: 'This gives us an opportunity to take advantage of situations as they arise. The re-pricing has surprised us with its rapidity but this just means that we will be looking for opportunities in the next few months, slightly earlier than expected.'

The statement added that the company has already leased 93% of the 241,700 m² of development space due for completion in fiscal 2008. It expects to complete 148,600 m² of office developments in central London in fiscal 2008. Tenants have been found for 94% of that space. But it plans to cut back on central London developments, completing a total of 25,400 m² of office space in the area over the coming two years.

The company said it is continuing with plans to split its business into three parts - retail, central London offices and the outsourcing arm Trillium - but played down the possibility of an early partial demerger. The company has an option to float Trillium first if market conditions prove difficult, but it reiterated its commitment to a full business restructuring as soon as possible.