The FTSE 100 Listed, Land Securities Group’s deal worth £650 million with PE firm collapse

Real estate giant Land Securities Group PLC is facing a tough challenge as its plan to offload the leisure empire seems to have collapsed. The property giant hoped to build a war chest for deals in London’s real estate market from the estimated proceeds of £650 million, which it anticipated against the sale of a portfolio of cinemas, restaurants and indoor ski slopes. The property group was looking forward to selling assets including bars, restaurants and cinemas which shall result in a cash inflow of about £650 million and which could have been utilised in snapping up office spaces in London.

According to some media reports, the deal between the property group and the Private Equity firm CIT partners has been called off; CIT partners was supposed to buy the 95 per cent share of X-Leisure unit trust which was controlled by Land Securities Group. The share of X-Leisure unit trust which was available for sale included a village with a casino, restaurants & bars, bowling complex, a leisure estate in Brighton Marina, music studio and gymnasium.

CIT partners are active in the residential and commercial, real estate assets in Europe and the United Kingdom. The company looks forward to adding intensive and intelligent assets to its portfolio and unlocking value across London. The company invests directly, or with joint ventures/ partners as well as through fund structures. Currently, the company has more than £2 billion of assets under management.

This development is a setback for the property group as it was looking to invest the proceeds in its London portfolio. Furthermore, with investor sentiment in the sector worsening amid a crisis on the high street, the Group has suffered a sharp decline in the value of its retail property. The real estate sector overall has faced a downturn. Many tenants are renegotiating rent agreements and closing shops. Though, according to a press release by the property giant in mid-January, the company has signed deals with retailers such as Decathlon, Zara and Radley and some other brands totalling 139,900 sq ft in its retail portfolio.

Business overview: Land Securities Group PLC (LON:LAND)

United Kingdom Domiciled Real Estate Investment trust (REIT), Land Securities Group PLC operates with two business verticals London portfolio and Retail portfolio. The retail portfolio division was conceptualised for commercial activities, the group owns and rents spaces to facilitate business activities like shopping complex, hotels, leisure & entertainment spaces along with other such businesses which are not a part of the London Portfolio.

The Group’s London Portfolio division is into the business of creating and offering office spaces in London and rents them to drive revenue growth. The shares of the Group are quoted on the main market of the London Stock Exchange under the ticker symbol LAND. The Group is a constituent of the FTSE 100 index.

Land Securities Business performance for H1 FY20

The Group generated good first half, resilient results for the period ended 30th September 2019 in unsettled market conditions. Though, the Group is still prone to market risks as UK’s exit from the European Union got further delayed. However, the company remains in a strong financial position with a pipeline of development opportunities worth £3 billion.

(Source: Company’s filings, London Stock Exchange)

The Group’s Revenue profit was up 0.4 per cent to £225 million in H1 FY20 from to £224 million in H1 FY19. The Group recorded a loss before taxation of £147 million for the period against £42 million in H1 FY19. The Group’s Adjusted diluted earnings per share were up by 0.3 per cent to 30.4 pence in H1 FY20 as against 30.3 pence in H1 FY19. The Group’s dividend per share was recorded at 23.2 pence in H1 FY20 as against 22.6 pence in H1 FY19. The company’s net assets per share were down by 3.2 per cent to 1,298 pence in H1 FY20 as against 1,341 pence in H1 FY19.

The group’s development activity was on track to deliver 3.5 million sq ft spaces in the United Kingdom. The Group’s net rental income was up by £4 million on Like-for-like basis. The company aims to become a zero-carbon emitting business by 2030. The company ranks first in the United Kingdom and Europe for mixed office and retail spaces in the Global Real Estate Sustainability Benchmark.

The retail market is impacted by structural changes, CVAs and administrations, hence it will continue to be challenging. The best performers in this sector are Outlets and Retail spaces which attract a greater share of retailer demand. The company looks forward to substantial development pipeline and shall continue to seek further opportunities.

Land Securities Group PLC’s share price performance

(Source: Thomson Reuters) Daily Chart as on Jan-31-20, before the LSE market close

At the time of writing at 10:07 AM Greenwich Mean Time, on 31st January 2020, the shares of Land Securities Group PLC were trading at a current market price of GBX 945.20 per share, which were down by 0.51 per cent from the last closing price on the previous day. While writing, the group’s market capitalisation was approximately GBP 7.00 billion.

The shares of Land Securities Group PLC traded at a high-price mark of GBX 1,019.50 on 13th December 2019 and at a low-price mark of GBX 731.80 on 15th August 2019 in the last twelve-month period. The Group’s shares were trading at 29.16 per cent higher than the last twelve-month low-price mark and at 7.29 per cent lower from the last twelve-month high-price mark as can be seen in the price chart at the current trading level.

While writing, the stock’s traded volume stood at 143,731. The stock’s 5-day daily average traded volume of the Group was 1,490,120.80; 30 days daily average traded volume- 1,825,148.83 - and 90-days daily average traded volume – 2,348,267.67. The beta of the Group’s stock was recorded at 0.96, which indicates lower volatility along with a dividend yield of 4.86%.Â

The Group’s shares have generated a positive return of 0.76 per cent in the last quarter. Also, from the start of the year to date, the Group’s stock was down by 4.04 per cent. Since last month, the Group’s stock has given investors a negative return of 3.94 per cent.Â