ii view: Land Securities to restart dividend payments

Its shares are down 40% in 2020, but its retail properties are reopening and a dividend is promised. 

Operational update

ii round-up:

Office and shop owner Land Securities (LSE:LAND) today announced plans to recommence dividend payments following its half-year results on 10 November. 

Since the recent easing of lockdown restrictions across the UK, all of its shopping centres and retail parks are now back open. Four-fifths of its retail units have resumed trading as of late June, with 16 out of its 18 leisure parks back open. 

In England, footfall across its centres was running at 60% of that seen this time last year, with like-for-like store sales of 80% reported compared to the same time in 2019. 

Land Securities shares rose by more than 2% in UK trading, having fallen by around 40% year-to-date.  Shares for rival shop and office owner British Land (LSE:BLND) are down by a similar amount, while shares of warehouse owner Segro (LSE:SGRO) are now up around 3% in 2020. 

Retail outlets account for around 35% of its near-£13 billion of overall properties by value, with leisure and hotels around 10%. Its Accor (EURONEXT:AC)-managed hotels remain closed. A phased opening is due over the next three months.

Its office properties, accounting for the majority of overall property value, have remained open during the pandemic.

Rent collection rates are currently running at 60% compared to the equivalent 94% this time last year. Office rental payment levels are running at 80%, while retail rent collection is for now just under a third. Some tenant rent deferrals and concessions have been provided.  

Overall, £30 million of rental payments due in late March remain outstanding of which £5 million relates to concessions and deferred payments which have subsequently been agreed. 

At the end of June, it had net debt of £3.92 billion, marginally lower than at the end of March, and £1.20 billion of cash and available facilities.

The amount and timing of its interim dividend will be confirmed at the November half-year results.

ii view:

Changing shopping habits have been shifting the property landscape for some years now. First, a move away from high streets and towards destination shopping centres hit – these offered lots of free parking, restaurants and cinemas. Then, the rise of online shopping has allowed many consumers to bypass the shops all together. 

Now, Covid-19 has arguably reinforced consumer experience of online shopping. Some of its office tenants, having successfully worked from home during the pandemic, could now be re-evaluating their need for office property, or at least the size of property going forward.

For investors, the loss of both the previous third-quarter and final dividend payments was seismic and almost unimaginable this time last year. The outlook for both retail and office property may now be altered forever. But its retail properties are now largely back open, and the return of a dividend payment being made. A 50% share price discount to the March Net Asset Value also arguably prices in the reassessment of prospects with a relatively new chief executive still eager to make his mark. 

Positives: 

• Loan-to-value (LTV) ratio of 30.6% offers further balance sheet capacity
• New CEO now assessing the long-term strategic direction

Negatives:

• Retail assets fell in value by 20% over the last financial year
• The size of the promised half-year dividend is unknown

The average rating of stock market analysts:

Buy