Land Securities 1st-half profit rises on development plan

Staff Writer
Columbus CEO

(c) 2013, Bloomberg News.

LONDON — Land Securities Group, Britain's largest real estate investment trust, said first-half earnings climbed 8.9 percent after it sold properties to invest in development.

Profit excluding changes in asset values and one-time items rose to 156.5 million pounds ($250 million) from 143.7 million pounds a year earlier, the London-based REIT said in a statement Tuesday. Adjusted earnings per share climbed 8.2 percent to 19.9 pence.

Land Securities has been selling real estate and investing in development, betting that building and leasing new buildings will offer better returns. The company last month agreed to sell offices adjacent to London's Tate Modern art gallery on the south bank of the River Thames to an M&G Group Plc unit for 315 million pounds.

"We made a big push into development right after the downturn and we were the first developer to do that, so we got construction costs at the lowest point," Martin Greenslade, chief financial officer of Land Securities, said by phone. The company is now focusing on finding tenants and completing 680 million pounds worth of developments started during the past six months, he said.

Net rental income rose 9.4 percent to 295.4 million pounds from 270.1 million pounds. Spending on development and refurbishment of properties was 158.7 million pounds, most of which was invested in the capital's Victoria area and in the City of London financial district.

"It is likely that sales of assets will exceed capital expenditure and acquisitions in the second half," Land Securities Chief Executive Officer Robert Noel said in the statement. "While this will strengthen our balance sheet further, it is likely that revenue profit will be slightly lower than in the first half as we lose income from sales."

The company's most recently completed office buildings — 123 Victoria Street and 62 Buckingham Gate — had occupancy rates of 86 percent and 57 percent, respectively, according to the statement. Land Securities' 37-story tower in the City of London, nicknamed the Walkie Talkie, had tenants for 56 percent of the space.

Land Securities has been working to reduce a light beam that was caused by the Walkie Talkie's design and the sun's location. In September, it disrupted local businesses and melted parts of a vehicle parked nearby. A black curtain has been draped over the top third of a side of the building.

"We are close to resolving the issue and it will not delay occupation nor inflate budgeted cost," Noel said in the statement.

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