Land Securities reckons on £315 mln conversion charge

Land Securities has estimated that it will have to pay a £315 mln (EUR 467 mln) conversion charge to the inland revenue in the UK next July following the company's decision last January to become a real estate investment trust (REIT). The charge represents 2% of the value of its REIT qualifying property assets as of December 31, 2006.

Land Securities is the largest property company in Europe. The results of a property valuation published on Tuesday indicated its assets are valued at £14.8 bn, a 1.6% surplus since the company's interim results were published in September last year.

The qualifying assets for its outsourcing business, Land Securities Trillium (LST), are valued at £931.9 mln. In a statement, Land Securities said these LST properties are not generally classified as investment properties for accounting purposes and so are held in the group's balance sheet at book value (cost less depreciation). The valuation surplus of these assets over their book value of £564.5 mln at Dec 31 2006 amounted to £367.4 mln or 78 pence per share.

Land Securities and eight other UK property companies converted to tax-efficient REIT status at the beginning of the year. Under the legislation, REITs are obliged to distribute most of its income to its shareholders in return for a favourable tax status. Companies must pay 2% of the gross value of its qualifying properties to the tax authorities on conversion to a REIT.