Landsec: A tale of two portfolios

 
Sebastian McCarthy
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Landsec is the owner of Piccadilly Lights (Source: Getty)

Investors trying to work out what the future holds for property giant LandSec, which delivered a dismal set of results to the City this morning, could do worse than take a stroll through its Square Mile development.


The complex, aptly named One New Change, is a fitting example of how the FTSE 100 real estate group has been looking to adapt its portfolio to the modern day: prime London office space, independent food vans, grooming salons and a rooftop bar are all part of the slick offering that lies just a stone’s throw from St Paul’s Cathedral.

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The mixed-use site is one of many investments that Rob Noel has made in the capital, as he looks to chase growth in areas away from traditional retail parks and shopping centres. It is a move that looks all the more logical given the grim annual results that the firm released today, when it posted a whopping £500m writedown in the value of its property empire.

Like the wider market, Landsec is a tale of two portfolios: enjoying gains from London’s office sector rental boom while nursing serial losses from a collapse in the value of regional retail assets.


But with its £500m writedown, the portfolio pivot has come too late for many shareholders, who have watched their holdings dive 35 per cent in value since the summer of 2015.

Other retail landlords have delivered even worse returns for their investors: fellow shopping centre landlords Intu and Hammerson have suffered 71 per cent and 57 per cent drops in their share price respectively over the last four years.

Given such downward trends on the stock exchange, it is no wonder that there has been frustration at the listed retail landlords, not helped by a lack of enthusiasm for other potential avenues amid mounting retail troubles.

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Last year Hammerson was forced into an embarrassing U-turn over a bid it made for rival Intu after shareholders grew concerned at the idea that the firm wanted to invest more, not less, in retail during an already tough market. And LandSec’s Neal is no longer singing the same tune as five years ago, when he declared that retail was "turning the corner".

His One New Change development might look like a shopping centre, but it calls itself "an office and leisure destination". It’s the office part of the title which is pointing the way forward.

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