Landsec has reported a £192m pretax loss for the first half of the year.
Market yield shift wiped out a respectable growth in earnings, with EPRA earnings per share up 9.5% to 26.6p. Over the previous period the REIT netted profit of £275m.
Landsec said the total accounting return of -2.9%, reflected “softening of London yields due to rising interest rates”.
However, sales of £1bn of mature assets slashed debt from £4.25bn to £3.47bn, reducing LTV to 31.1%, and had put the REIT in a good position, said chief executive Mark Allan.
“The strategy we launched two years ago was underpinned by two key principles of sustainable value creation: focusing our resources on where we have genuine competitive advantage, and preserving our strong balance sheet,” he said.
Sales included the 21 Moorfields development, EC2, which delivered a 25% profit on cost and brought total London office disposals over past two years to £1.8bn at an average yield of 4.35%, and 1% below book value.
The sales, and revaluations, have led the REIT’s total portfolio to sink from more than £12bn in May to just under £11bn, a 2.9% drop.
Allan added: “At the time, interest rates and property yields were very low, so asset values in many sectors looked expensive. Acting on this, we sold nearly £2bn of mature, low-yielding assets while focusing new investment exclusively on opportunities where we saw clear value, or situations which offered long-term optionality.”
Landsec has £110m capex left to spend on its committed pipeline, which is set to generate £38m ERV once fully let. More than a third of that pipeline is prelet or under offer, with lettings over past six months 11% ahead of ERV.
Its near-term, optional pipeline has the potential for 1.1m sq ft of grade-A space.
Allan asserted that the REIT was “well placed” to weather the economic storm. “Our competitive advantages remain our high-quality portfolio, our strong customer relationships, and the ability to unlock complex opportunities through our unique expertise, all of which is evidenced by our strong operational performance in the half year,” he said.
“Our business remains underpinned by a strong balance sheet, with a low 31% LTV, long 9.8-year average debt maturity and no need to refinance any debt until 2026. The successful execution of our strategy therefore means we are not only well placed for more challenging market conditions, but also have optionality to take advantage of new opportunities that will no doubt emerge as property markets continue to adjust to a new reality.”
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