Landsec, one of the UK’s largest listed landlords, has swung back to profitability, reversing some of the losses incurred during the pandemic as people gradually return to high streets and offices.
The FTSE 100 company posted pre-tax profits of £875mn for the 12 months to the end of March, swinging from a £1.4bn loss the previous year.
That was largely because Landsec’s portfolio of offices and shops increased in value during the period from £10.8bn to £12bn, marking a 3.6 per cent increase in underlying value when adjusted for investments and disposals during the year.
The turnround comes as workers make a tentative return to offices and investors increasingly show a preference for modern, low carbon-emitting workplaces.
Around 60 per cent of Landsec’s portfolio is offices, mostly in London and with relatively strong environmental performance credentials.
Landsec negotiated £63mn worth of new office leases in the capital during the year, a record amount for a 12 month period, which chief executive Mark Allan said reflected “ongoing demand for the highest quality space in London.”
But Allan planned to sell a number of valuable blocks in the capital, raising cash to invest in a development pipeline which is largely in Manchester.
The company made back to back acquisitions in Manchester last year, taking a stake in MediaCity and buying U+I, a developer with major land holdings there.
Landsec is marketing 21 Moorfields, Deutsche Bank’s new City of London offices, for around £1bn and Allan has said that sale is one of “three or four” London office disposals the company is considering.
The rotation is part of Allan’s strategy to push the company into areas where it can add value either through development or operating buildings. That has involved swapping standing office blocks leased to tenants for a long period for more complex prospects such as shopping centres and large, mixed-use developments.
The value of Landsec’s shopping centres — including a 49 per cent stake in the Bluewater centre in Kent — increased by 2.5 per cent in the second half of the year. “Retail has properly joined the recovery,” said Allan, who added that old, poorly-located shopping centres would still struggle to attract tenants.
Landsec also announced that it had collected the vast majority of rents that went unpaid during the pandemic, a period during which many tenants in the retail sector were unable or unwilling to pay and were protected by a government ban on evictions.
The company said it had collected all but £13mn of the £87mn which was unpaid at the end of the previous financial year, and was in negotiations with tenants over recovering the remainder.
The recovery of rent debt shows that retailers are “willing to clear arrears to hold on to where they want to be: better pitches in prime locations,” said Colm Lauder, an analyst at Goodbody.