Land Securities stops demerger, names new chairman

Land Securities, the largest real estate investment trust in the UK, has confirmed that it has put its plans to demerge into separate listed companies for retail and London offices on hold. The company has also named Alison Carnwath, (55) as the new chairman to replace Paul Myners who left the post in October to become a minister in the British government.

Announcing the company's half-year results on Wednesday, CEO Francis Salway confirmed widespread speculation that the demerger of the company - which has retail and office assets and outsourcing contracts valued at £14 bn (EUR 17 bn) - had been stalled by the 'unprecedented period of financial instability'. Land Securities, the largest real estate investment trust (REIT) in the UK, on Wednesday announced a net loss for the six months to end-September 2008 of £1.73 bn (EUR 2.1 bn) compared to a profit of £367 mln (EUR 446 mln) in the same period the year before. The company attributed the hefty drop to a decrease of 12.7%, (£1.72 bn) in the valuation of its investment portfolio. Net asset value fell 21% from 31 March to 1,552 pence a share.

'We announced our plans to demerge almost exactly a year ago today, and we then said we would implement the demerger when market conditions were favourable. They certainly cannot be described as favourable at the present time,' Salway said in an interview recorded for the results presentation.

Asked whether the demerger plan was now dead, Salway said the management board still believed in the benefits of having specialist property companies. 'But we don't believe it would now be in our shareholders' interests to implement the demerger so work has stopped.'

'Plans for (the) demerger were about creating shareholder value. If the costs of transitioning debt are so great that it wouldn’t create shareholder value then we should stop, and that is exactly what we have done,' Salway said.

'We don't see an immediate change to market conditions in the short term but nor are we going to spend a lot of time looking at a crystal ball as to what the future will hold. Our focus now is on running the business in these current challenging times.'

Attempts to sell off Trillium, Land Securities' £1.1 bn (EUR 1.3 bn) outsourcing unit, are to continue. 'It is not really surprising in the current conditions that processes like that take longer,' CFO Martin Greensdale said. The board, he said, will continue to evaluate the situation.

Carnwath, who replaces Myners as chairman of Land Securities, is currently chairman of M F Global and has been a non-executive director of Land Securities since September 2004. She takes up her new role with immediate effect.

Land Securities closed on 1,014 pence on Wednesday, 1 pence down on the previous day.