LONDON (Reuters) - Britain's biggest listed property company Land Securities (LAND.L: Quote, Profile, Research, Stock Buzz) is banking on share buybacks and a London-focused development program to prop up its share valuation after a poor first half to the year.
Chief Executive Francis Salway said shareholders would be able to vote on a resolution at an annual meeting on July 17 that would enable the firm to buy back its shares without diluting its earnings, after Land Securities converted into a low-tax real estate investment trust (REIT) this year.
But he declined to comment on the likely scale of any buyback program.
Shares in Land Securities have fallen 26 percent so far this year after a 40 percent surge in 2006.
On some measures the shares traded at a discount of 20 percent or more compared with the net asset value (NAV) of the property it already owned -- and that was without taking into account an office development pipeline of about 1 million square feet, 70 percent of it in the booming London area.
Speaking at the Reuters Real Estate Summit in London, Salway also said the company would stick to a diversified business model, with its emphasis on both office and retail property, despite a view among some fund managers that REIT shareholders were better served by firms which specialized by property type.
But he would not rule out spinning off some of its units, including its property outsourcing Trillium business, whose contribution to group earnings was likely to grow to 20-30 percent from around 16 percent now.
"We've got no immediate plans on that front but we always have to consider what is the right structure to create value for shareholders," Salway told Reuters.
He said Land Securities had the required scale and depth of management in all 3 of its core areas.
"I think we are very concentrated; we are just concentrated in 3 areas not 1."
But he warned that the success of Trillium was partly a function of the financial backing it received from Land Securities.
That gave it the necessary scale to compete effectively and to exploit new opportunities, he said, citing the group's $1 billion buy in February of the Secondary Market Infrastructure Fund, a specialist in public private partnerships.
"We have the ability to move very quickly on a very large acquisition," he said.
HIGHER RATES
Salway said the market was adjusting to higher interest rates after a period of exceptional property market performance but was confident the expected downturn in property returns was manageable.
He said data from REIT markets with longer track records -- in the United States, Netherlands and Belgium -- showed the market could trade at discounts to NAV for long periods. Continued...
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