The UK’s largest property company Land Securities delivered an £880m surplus to the valuation of its property portfolio as NAV grew by 11.5% in the six months ended 30 September.
Updating the market this week, the REIT said that it had seen values rise and yields fall across every category of its combined portfolio. Overall values increased by 7.5% to £13.2bn, with the like-for-like portfolio up by 7.1%, equivalent yields coming in by 27 basis points and rents increasing by 2.2%.
Retail warehouses and supermarkets were the only asset classes in LandSec’s portfolio to report declining rents, down by 1.7% owing to continuing challenges in the sector.
Despite the decline in rents, values continued to rise, up by 4% to £1.2bn, and yields sharpened by 27bps to 5.5%.
Other retail subsectors performed well, with shopping centres showing a 7.2% increase in value to £2.2bn, yields moving in by 33bps to 5.5% and rents up by 1.4%. Central London shops delivered a 6.9% value rise, 1.6% increase in rents and 25bps yield shift.
But the star performer was the REIT’s London offices portfolio. Rents increased by 4.5% and yields sharpened to 4.8%, boosting values by 8.5% to more than £4bn.
Chief executive Rob Noel said the business’s focus was on transforming its retail portfolio and delivering its 2.4m sq ft London development pipeline, some 1.4m sq ft of which remains unlet, and having “better assets let on longer leases and lower gearing as we move through the property cycle”.
The REIT’s drive to improve its retail portfolio led to a £770m increase in net debt to £4.1bn during the period, caused mainly by its acquisition of a 30% stake in the Bluewater shopping centre in Kent.
The group bought the stake in the 1.8m sq ft mall, plus management rights and 110 acres of surrounding land, for £697m in July, a reported £60m ahead of rival bids.
Goodwill of £36.5m, some £30.5m of which has been written off, arose on the transaction due to a difference between the value of the investment property by LandSec’s external valuer and the price paid.
