Landsec and British Land are medium-sized companies at best, respectively employing 385 and 356 direct staff in the year to March 2023. Yet Landsec is in the FTSE 100, British Land not far outside.
This exalted status is gifted by holding billions in mute property assets, and used as thin justification to pay FTSE 100-level fees of £375,000 a year to part-timers chairing their boards. Landsec’s £10bn portfolio cost £84m to administer. BL’s bill for running £9bn of its own stock and £3.7bn for others was £89m.
Questions are being asked about these Premier League costs, sparked by comparing those of LondonMetric, which merged with LXi REIT last month and brought over just 10 staff. City analyst Mike Prew says the £6bn of stock will be run by 45 staff, with all-up admin costs of £23m.
A direct comparison is unfair. LondonMetric is now in property’s Premier League, but its model is League Two, with little development and expenses borne by tenants.
But investors are making comparisons. The yardstick is the EPRA ratio: admin costs as a percentage of gross rents. Landsec’s stood in ‘the low 20s’ last March, BL reported 19.5%, LondonMetric is aiming for 7% to 8% next year. Whose shares would you buy?
Peter Bill is author of Planet Property and Broken Homes
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