May 12, 2020 / 7:00 AM / 15 days ago

UPDATE 2-Bluewater owner Land Securities losses mount as offices, malls sit empty

* Landsec’s asset value declines during the year

* Co reports $1 bln annual loss

* Shares down 10.6% (Adds details on market conditions, share move)

By Samantha Machado

May 12 (Reuters) - Property developer Land Securities on Tuesday reported an annual pretax loss of more than $1 billion as coronavirus-driven shutdowns left office and retail space empty, resulting in defaults on rent payments.

The results add to growing signs of stress for property companies which are facing widespread resistance over rents from commercial tenants whose businesses have been virtually closed and are now facing a sharp downturn.

Land Securities’ shares, which have fallen 36.1% so far this year, were down 10.6% to 565.2 pence by 0822 GMT.

The company, which manages the Bluewater Shopping Centre in southeast England, said its loss widened to 837 million pounds ($1.03 billion) for the full year ended March 31, compared with a loss of 123 million pounds last year.

Land Securities, one of Britain’s biggest commercial landlords with a portfolio of more than 13 billion pounds, said only 10% of the office space it owns and rents out to corporations in London and other cities was currently being used.

Retail property owners and tenants have been working together to defer rent payments and find other solutions that will help shops, businesses and landlords to ride out the crisis stemming from coronavirus shutdowns.

Land Securities took a 23 million pound provision against unpaid March rents, and said that it had collected an average of only 63% of rents in March and April within 10 days of their falling due.

“The immediate impact of Covid-19 has been particularly significant on our Retail and Specialist segments,” the company said.

“Only essential services like supermarkets and pharmacies remain open at our retail destinations, with four of our retail assets shut completely.”

The group’s EPRA net asset value (NAV) - which reflects the value of a company’s buildings - was down 11.6% to 1,192 pence. On its retail properties, which include the Bluewater Shopping Centre, it was down by more than 20%.

Even before the COVID crisis, Land Securities was taking a hit from the strained state of Britain’s retail landscape, hammered by the political uncertainties of the past few years and a shift to online trade.

Land Securities said it expected reduced rental payments to continue into the new financial year and had introduced a number of options for its tenants from monthly rents, rent deferrals and a recently established 80 million pounds rent relief fund.

In one “severe but plausible” scenario for the next year considered by Land Securities for planning purposes, it said it had sufficient reserves to handle a 75% reduction in rent receipts from its retail and specialist tenants and a 20% reduction from its office tenants.

British retailers suffered their biggest fall in sales since the 2008 financial crisis in the first half of April, data from the Confederation of British Industry showed, as COVID-19 kept shoppers at home and forced store closures.

Many retail firms are also shutting stores to cut costs and focus on online space, dealing a blow to real estate firms that get a large chunk of their business from retailers.

$1 = 0.8112 pounds Reporting by Samantha Machado in Bengaluru; editing by Uttaresh.V and Jane Merriman

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