Retail woes wipe £368m off Landsec portfolio value

Shopping centre owner Landsec has plunged to a half-year loss after taking a £368 million hit on the value of its properties from woes in the retail sector.

The group – whose portfolio includes Trinity Leeds in West Yorkshire and Westgate Oxford – blamed the spate of high-profile retail failures and rescue deals for a 2.8% fall in the value of its properties to £13.4 billion in the six months to September 30.

This saw it slump to an interim pre-tax loss of £147 million, against profits of £42 million a year earlier.

It comes after major retailers such as department store chain Debenhams collapsed into administration, with its lenders seizing control, while major tenants including the likes of Sir Philip Green’s Topshop empire Arcadia have also secured company voluntary arrangements (CVAs) to slash rents and shut shops.

Landsec’s half-year figures revealed like-for-like retail rents fell £2 million or 1.5% to £136 million.

The company – formerly known as Land Securities – warned that conditions in the sector remain tough and said the snap General Election and Brexit delay to January 31 will add to the pressure.

Outgoing chief executive Robert Noel, who recently revealed plans to retire next year, said: “We expect the retail market to remain challenging as it continues to be impacted by structural change, CVAs and administrations.”

He added: “With a General Election next month and the UK’s proposed exit from the EU further delayed, there will be continued uncertainty in the near term. However, we go into the second half of the year with confidence.”

The results show that retail parks took the biggest knock to their valuations – down 11.1% – with a 9.4% drop for regional sites and a 4.3% decline across London retail.

But office valuations edged 0.3% higher, while outlets increased 0.6%.

Landsec is boosting its exposure to the London office sector to offset the retail troubles, with four sites in construction across the capital totalling one million square feet under a £3 billion development programme.

The figures follow July’s announcement that Mr Noel plans to step down in 2020, when he will have served eight years in the job.

Tom Musson, an analyst at Liberum, said Landsec is “navigating the retail pain”.

“Pressure on retail property valuations is likely to continue, although London office demand remains robust with a shift in management’s cautious approach as the on-site development pipeline has increased over the last six months,” he said.