Big valuation boost for Land Securities

The group's construction activity in London has now reached a peak, and the focus now is to secure tenants for the 1.1m sq ft in the development programme. All developments are expected to be complete by 2017. Finance director Martin Greenslade reiterated that future developments would proceed, but only on a pre-let basis.

This seems a sensible stance to adopt given the cyclicality of the London property market - and particularly the City office market. There is little sign of an abrupt slowdown in either capital growth or rental income, but the supply of buildings now coming through will possibly help to moderate future gains.

As a result, Land Securities has been careful to finance its development programme through asset sales rather than taking on more debt. Disposals during the year amounted to £1.08bn, against acquisitions of £951m. But the longer-term trend in the loan-to-value ratio is more telling. In 2010 adjusted net debt stood at £4.2bn, against a portfolio valued at £9.5bn. In March this year the level of debt was the same, but the portfolio valuation had shot up to £14bn. Including subsidiaries and joint ventures, the loan-to-value ratio is now just 28.5 per cent.

Disposals made during the year contributed £47.6m to net rental income, which explains the modest £5.5m increase in overall rental income. Much of the improvement came from the 30 per cent stake acquired in Bluewater in Kent, where void rates eased from 5.3 per cent to 4.9 per cent.

The analysts at Investec are currently forecasting adjusted net asset value of 1,326p by March 2016, but are likely to upgrade their numbers.