Three-way split

Land Securities, a FTSE 100 company, has recently announced that it will split into three sections, each focusing on individual aspects of business. The company owns and manages approximately 7.6 million sq m of commercial property and provides property services to more than 2,500 private and public sector clients. The company, having completed a structural review made public in September, will split into three separate specialist companies focusing on retail, London and property outsourcing.

The move comes as shares in REITs continue to diminish. Land Securities shares fell a massive 33 percent last year, and is trading at a discount to adjusted diluted net asset value of 30 percent.

Land Securities Chief Executive, Francis Salway said: ‘We have concluded that the development of these businesses and the interests of shareholders are best served by de-merger into three separate, specialised businesses, each of which will be of a scale to be at the forefront of their sectors.’

However, the company did not specify when the de-merger would take place. It said: ‘Extensive and detailed work needs to take place before the company is in a position to seek shareholder approval and effect the de-mergers.

“The de-mergers will be executed when the preparatory work has been completed and only when market conditions are favourable.” A spokesperson for the company said.

Land Securities said that it had decided to de-merge Trillium, its outsourcing and PFI business because of ‘the different characteristics of Trillium’s business and the different valuation metrics.’

It said in a company statement that a split of the retail and London operations would be better for the businesses and investors because they work in different market segments with different characteristics, and that one business would not be affected if the other sector was at a down point in its market cycle.

It said that shareholders would benefit from being able to invest in their preferred market sector, and that the businesses would be better placed to take advantage of significant inflow of capital into funds, which typically favours investment in specialist companies.

Land Securities also said that the London portfolio would maintain ‘material retail assets and also major retail and residential elements,’ as well including its Kent Thameside development.

In its half-year results, Land Securities revealed a 2.3 percent increase in NAV to 2236p a share. It reported a 4.2 percent rise in the value of its London office investments, and a 0.7 percent increase in the value of London shops, but a 1.5 percent drop in the value of its shopping centres and a 3.9 percent drop in the value of its retail warehouses.
Mr Salway said: ‘We expect the current weak trend in property investment pricing to continue, but we believe that the greatest impact will be experienced on secondary properties where, in recent years, yield pricing has not fully reflected the risks associated with lower quality properties.’