Landsec, the UK’s largest listed property company by assets, saw the value of its portfolio shed more than half a billion pounds in the year to March as a crisis in the retail sector took its toll.
The company, whose holdings include a stake in the Bluewater Shopping Centre in Kent, said its assets declined in value by £557m to £13.8bn, led by a 15.5 per cent drop in the value of its retail parks and an 11.7 per cent fall for its shopping centres. The value of the group’s assets had slid by £91m in the previous year.
The decline in retail, which makes up about a fifth of Landsec’s portfolio, comes as big retail groups including Debenhams and Arcadia cut down their store portfolios as they battle with the shift to ecommerce and other burdens including higher costs.
The declining values led Landsec, which was formerly known as Land Securities, to a £123m loss for the year, worse than the £42m loss a year earlier. Revenue profit, a measure that excludes swings in property values, was up 8.9 per cent to £442m, however.
Robert Noel, chief executive, said the company was operating against a backdrop of “political gridlock and the well publicised difficulties in the retail market”.
“We see no near-term improvement in retail market conditions, with CVA activity set to continue,” he added, referring to company voluntary arrangements, a type of insolvency deal used to reduce a store’s rent bills.
Mr Noel said Landsec had sold off many of its regional shopping destinations in 2013-15 and would continue to dispose of retail assets. The company’s retail chief, Scott Parsons, resigned in February.
Mr Noel said Landsec faced little impact from Debenhams’ recent CVA and a forthcoming one from Arcadia Group, however. Debenhams accounts for less than 0.5 per cent of its rent roll and it expects to lose £425,000 in annual rent from the department store group; it has 12 Arcadia stores, or 0.9 per cent of its rent roll.
Beyond retail, Landsec plans to start three speculative office developments in London this year, in a break with its strategy of the past three years. It had previously been holding off on new development plans because of Brexit and fears of a broader downturn.
It is also shifting its portfolio in favour of London, which already accounts for two-thirds of its holdings.
“London has shrugged its shoulders at Westminster over the past couple of years. It is absolutely supported by the long-term trends. It’s a global city with a good transport system, a growing population and pressure on land — it’s a market with all the fundamentals that one would want,” Mr Noel said.
The group increased its full-year dividend 3.1 per cent to 45.55p, a slimmer increase than in the previous three years. Landsec’s shares were down 0.5 per cent to 886.8p in early trading.