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Wednesday, December 12, 2023

Britain's biggest property company in three-way split

Having completed a structural review made public in September, LandSecs will split into three separate specialist companies focusing on retail, London and property outsourcing.

The move comes as shares in REITs continue to languish. LandSecs shares have fallen 33% this year, and its is trading at a discount to adjusted diluted net asset value of 30%.

LandSecs chief executive Francis Salway said: "We have concluded that the development of these businesses and the interests of shareholders are best served by demerger into three separate, specialised businesses, each of which will be of a scale to be at the forefront of their sectors."

However, the company did not specify when the demerger would take place. It said: "Extensive and detailed work needs to take place before the company is in a position to seek shareholder approval and effect the demergers.

"The demergers will be executed when the preparatory work has been completed and only when market conditions are favorable."

LandSecs said that it had decided to demerge Trillium, its outsourcing and PFI business because of 'the different characteristics of Trillium's business and the different valuation metrics'.

It said a split of the retail and London operations would be better for the businesses and investors because they work in different market segments with different characteristics, and that one business would not be affected if the other sector was at a down point in its market cycle.

It said that shareholders would benefit from being able to invest in their preferred market sector, and that the businesses would be better placed to take advantage of significant inflow of capital into funds, which typically favours investment in specialist companies.

LandSecs said that the London portfolio would maintain 'material retail assets and also major retail and residential elements', as well including its Kent Thameside development.

In its half-year results, LandSecs revealed a 2.3% increase in NAV to 2236p a share. It reported a 4.2% rise in the value of its London office investments, and a 0.7% increase in the value of London shops, but a 1.5% drop in the value of its shopping centers and a 3.9% drop in the value of its retail warehouses.

Salway said: 'We expect the current weak trend in property investment pricing to continue, but we believe that the greatest impact will be experienced on secondary properties where, in recent years, yield pricing has not fully reflected the risks associated with lower quality properties.'