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Land Securities NAV slips post the referendum

Land Securities has published interim figures covering the six months ended 30 September 2016. Adjusted diluted net assets per share fell 1.8% to 1408p. The adjusted diluted earnings per share rose by 4.7% to 24.3p as revenue profits rose 4.5% to £192.5m. The main drivers of increased revenue profits were lower interest costs (which fell by £12.2m) and developments. The interim dividend has been increased to 17.9p from 16.3p.

They say that, post the referendum, occupational demand for office space in London is hesitant and the vacancy rate has continued to rise. In retail, they expect consumer spending to be affected by growth in prices exceeding that of pay, which will put increased pressure on retailers. Like for like, values fell by 2.4% as yields increased. Within the like-for-like portfolio, shopping centres fell in value by 2.2% as rental value growth was insufficient to offset an 11 basis points increase in equivalent yields. The value of retail parks was down 4.2% predominantly due to a 22 basis points outwards movement in yields. Leisure and hotels reported a small increase in values as rental values moved up slightly, while London offices saw values fall by 3.6% as yields moved out by 15 basis points and rental values were broadly unchanged. The development programme saw values increase by 2.3% largely due to Nova, SW1 where the valuer recognised the reduced construction risk as the project nears completion. In contrast, completed developments fell in value by 1.7% as yields increased by 7 basis points.

They made a total profit on disposal (on a proportionate basis) of GBP10.9m, compared with GBP9.6m in the same period last year. Disposals included the sale of a 50% interest in 26-32 Oxford Street, W1 and Ealing Filmworks. Earlier sales of Thomas More Square, E1, Holborn Gate, WC1 and Times Square, EC4 in London and three retail parks in Gateshead, Dundee and Derby all affect comparisons with earlier periods. Their developments generated GBP14.7m of additional income following completion of The Zig Zag Building, SW1 and 20 Eastbourne Terrace, W2, alongside further lettings at 1 & 2 New Ludgate, EC4 and 62 Buckingham Gate, SW1. Like-for-like net rental income growth of GBP5.0m was due to new lettings, rent reviews and higher turnover related rents, together with a reduction in bad debts.

They say that the development programme which started in 2010 is now in its final phase of activity. The completion in October of a 275,000 sq ft development at 1 New Street Square, EC4, which was pre-let in its entirety to Deloitte, means they have delivered 1.3m sq ft of space in the City and mid-town since 2010. Having let the last remaining floor at 1 & 2 New Ludgate, EC4 this month, all this space is now let at an average rent of GBP64 per sq ft and on an average lease term of 18 years.

In Victoria, SW1, they say they have made further progress. The Zig Zag Building is now 90% let or in solicitors’ hands. At Nova, 35% of the 480,000 sq ft office space is pre-let or in solicitors’ hands, on an average lease term of 15 years. Nova’s food quarter is fully pre-let or in solicitors’ hands. The first phases of the scheme have completed and the majority of retailers and office occupiers are fitting out. The remainder of the scheme is now due to complete in the new year. At Kings Gate, our residential scheme, they sold a further three apartments taking the total sold to 89. At The Nova Building, 139 of the 170 apartments have been pre-sold, an increase of one in the period.

Elsewhere in the West End, 20 Eastbourne Terrace, W2 completed in May 2016 and is already 90% let. They says they are making progress with a 1.2m sq ft pipeline of future development. At Nova East, SW1, they are now securing infrastructure approvals from TfL. At 21 Moorfields, EC2, demolition and enabling works continue, giving them the option to start construction next year and they have recently submitted a planning application for a 134,000 sq ft development at our Southwark estate, SE1.

During the period, they completed GBP7.9m of investment lettings and GBP20.0m of rent reviews. At Dashwood House, EC2, 86% of the income was due for review by 31 March 2016 and they have now completed these reviews, increasing the passing rent by 26%. At One New Change, EC4, 87% of the rent is due to be reviewed over the next two years. They have already reviewed 60% and seen a 2.5% uplift on the office passing rent and a 25.0% uplift on the retail passing rent. At Cardinal Place, SW1, recent transactions mean there is now good evidence for the upcoming rent reviews.

The weighted average unexpired lease term in London offices, including completed developments, is now 10.1 years. Voids remain low at 3.9%, rising from 2.9% in March.

LAND : Land Securities NAV slips post the referendum

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