Land Securities’ chief executive Mark Allan has set out the company’s future strategic direction that will see it “benefit from long-term macro trends”.
Having completed a strategic review of the business since joining in April 2020, Allan said four strategic priorities have been identified.
- Optimise central London business. Through targeted capital recycling to crystallise significant value already created and fund investment into growth opportunities, and by making the most of our proven development and asset management expertise.
- Reimagine the retail business. The group’s outlets portfolio has good growth potential. However, there is an opportunity for a significant reimagining of the model within its six regional shopping centres.
- Recycle capital from “subscale” sectors. Recycle capital from the disposal of subscale sectors over time, including hotels, leisure and retail parks.
- Grow through urban opportunities. Seek enhanced returns through significant investment in mixed-use urban opportunities, from within existing portfolio and through new investments in London and potentially other major UK cities.
Allan said: “Our four strategic priorities make clear the roles played by the different parts of our portfolio. Our central London portfolio is a long-term driver of value for shareholders as well as a source of capital for reinvestment; our regional retail assets are an opportunity to further enhance our outlets and reimagine our regional shopping centres; our subscale sectors represent capital which can be better deployed in areas where we have competitive advantage; and urban opportunities will be a significant source of growth and enhanced returns over time.
Findings of strategic review
Allan said there were six key findings that underpinned the future strategic direction of Land Securities.
- The quality of the central London portfolio, which represents 64% of the portfolio by value. They are let on long term leases to a strong tenant base, underpinning the financial strength of the company. London remains one of the world’s gateway cities, he said, and this portfolio represents a good source of liquidity over time, with clear potential to recycle capital out of some assets and reinvest into new growth opportunities.
- Talent. Allan said there was considerable experience, expertise and capability throughout the business that could drive value creation.
- Strength of the balance sheet. With low leverage and a liquid portfolio, Land Securities can face the short-term challenges resulting from the pandemic and ensure it is well positioned to capitalise on the opportunities which will arise over time, he said.
- Retail. Whilst the sector is facing clear structural challenges as a result of the emergence of online shopping, and these have been accelerated by COVID-19, not all retail is the same, he said. Regional shopping centres have been most impacted by these challenges, which represents 13% of its portfolio. Outlet centres remain an attractive subsector, he added, while many of its suburban shopping centres offer significant repurposing potential.
- Portfolio mix. Allan said the review had highlighted certain elements of the portfolio were “subscale”, where it has little or no competitive advantage, while some structural growth areas are under-represented. This presents an opportunity to refocus the portfolio over time.
- COVID-19. Allan said the company was focused on proactively managing the short-term impacts of COVID-19 and working to ensure it was positioned to take advantage of the significant opportunities that he expects to arise from the pandemic.
LAND : Land Securities sets out new strategy