Landsec trebles provisions for unpaid rent

A 10 per cent decline in rental income and further rise in provisions for unpaid rent did not stop Land Securities (LAND) coming good on its pledge to reinstate dividend payments. Heavy shortfalls in rent collection from retail and leisure assets during the first half meant the commercial landlord was forced to write off around 45 per cent of rent owed from tenants in these sectors, resulting in an £87m provision. However, management said rent collection rates had started to improve.

As ever, the portfolio was one of two halves. Around 99 per cent of rent due for central London offices was collected, while a valuation decline of 1.9 per cent was manageable compared with the 20 and 17 per cent falls recorded by the regional shopping centre and London retail portfolios, respectively. Those reductions pushed the loan-to-value ratio up modestly to 33 per cent.

Unsurprisingly, only one disposal was made during the period – an office in Soho Square – but investors will be most eager to see evidence that newly installed chief executive Mark Allan can execute on plans to sell underperforming retail assets. While progress here is likely to be slow, given the exceptionally low level of activity within retail investment markets, the shares 35 per cent discount to net asset value at the end of March next year seems well justified. Hold.

Analysts at Numis forecast an adjusted net asset value of 99op a share at the end of March next year, falling to 983p the same time in 2022.