Land Securities suffers £4.74bn decline in portfolio value

The fall knocked 34% off LandSecs’ portfolio to £9.4bn, which caused its net asset value to drop a massive 66% to 593p a share.

Its pretax loss, including the non-cash effect of the revaluation decline, was £4.77bn; in the previous year the portfolio fell by £1.3bn in value and the pretax loss was £988m.

Although the results were only slightly worse than analysts’ average forecast NAV of 601p a share, LandSecs’ shares took a beating in response on Wednesday, dropping 12% to 475p.

‘While the market may see some pockets of stabilisation for certain asset types, we expect conditions to remain challenging in a weak economic environment, with vacancy rates rising and rental values weakening,’ chief executive Francis Salway said.

The reduction in property values was driven by yield ‘repricing’. However, as the economy moved into recession in the second half of the year, LandSecs also saw weaker demand from occupiers and pressure on rental values. Rental values dropped 9.3% during the year, ranging from a 3.8% drop in the retail assets to 19.8% on London offices.

The portfolio underperformed the Investment Property Databank’s Quarterly Universe in terms of ungeared total property returns - -29.7% versus IPD’s -25.5%. It is valued on a gross initial yield of 7% with retail at 7.4% and offices at 6.5%.