Q3 2016 Land Securities Group PLC Interim Management Statement Call
Jan 21, 2016 AM EST
LAND.L - Land Securities Group PLC
Q3 2016 Land Securities Group PLC Interim Management Statement Call
Jan 21, 2016 / 08:30AM GMT
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Corporate Participants
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* Robert Noel
Land Securities Group plc - Chief Executive
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Conference Call Participants
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* Oliver Reiff
Deutsche Bank Research - Analyst
* Oliver Creasey
Green Street Advisors - Analyst
* David Brockton
Liberum - Analyst
* Alison Watson
Investec Bank plc - Analyst
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Presentation
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Operator [1]
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Ladies and gentlemen, thank you for standing by and welcome to the Land Securities Q3 IMS conference call. (Operator Instructions).
I must advise you that this conference is being recorded today, Thursday, January 21, 2016.
I would now like to hand the conference over to your speaker today, Robert Noel. Thank you, sir. Please go ahead.
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Robert Noel, Land Securities Group plc - Chief Executive [2]
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Thank you. Morning, everyone, and thanks very much for dialing in. Now, before we hand over for questions, I'd just like to make some comments on three areas, really: developments, operations, and the balance sheet.
So first development, we've again maintained good momentum on development lettings in London. We let 160,000 square feet of development space during the quarter. We have a further 67,000 square feet in solicitors' hands. Now that compares to the 280,000 square feet we let in the first half and, obviously, 670,000 square feet for the whole year last year. So the momentum is good.
The deals we signed in the quarter, and those currently in solicitors' hands, are ahead of estimates -- the value of estimates, for the September valuation.
Following on from 21 Moorfields, you will have seen that we have gained two planning consents in London over the quarter at 1 Sherwood Street, behind Piccadilly Lights, and at Nova East, as we continue to build our pipeline for the future.
In retail we've also had good momentum at Westgate, Oxford, where excellent progress has been made two years ahead of opening. We're now 45% pre-let or in solicitors' hands; and these deals are also ahead of plan.
We've made progress in the lead-up to schemes in Selly Oak and also an extension to White Rose; and we're on track to start these in the next financial year, so we'll update you on those in May.
The second area I'd like to cover is our operational performance which has been very sound. As you know, we have significantly reshaped our portfolios over the last few years and this is paying off. We're witnessing good demand across the portfolio generally. Voids were down everywhere over the quarter with units in administration broadly flat.
Footfall in our shopping centers was at record levels during the quarter, up 1.7% compared to the same quarter last year. This compares with the national benchmark which was down 2.3%.
For the 52 weeks to January 3, footfall was up 4.2% compared to the national benchmark, down 1.3%.
On a same-center basis, retailer sales were up 1.2% over the quarter. The BRC non-food benchmark was up 1.5%, but don't forget this is not a direct comparison as the BRC benchmark includes online sales.
On a same-store like-for-like basis, retailer sales were down 0.8%.
The third area I'd like to cover is our balance sheet and this remains in a very strong position. Adjusted net debt reduced by almost GBP500 million over the quarter, based on September valuations our LTV at December 31 was 24.3%.
We have a portfolio of fantastic assets now and the business is in great shape.
So with that, let me hand over to you for any questions you may have. And I'd be really grateful if we could keep it brief because there's not much new information here.
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Questions and Answers
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Operator [1]
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Thank you, sir. (Operator Instructions). Oliver Reiff, Deutsche Bank.
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Oliver Reiff, Deutsche Bank Research - Analyst [2]
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I have two quick questions. The first one is just on the investment market, and if you could give a flavor for how you're seeing it at the start of the year?
And the second is on sales, and just how you see the rest of the year in terms of selling more office, or being a net seller at all? Thank you.
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Robert Noel, Land Securities Group plc - Chief Executive [3]
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Sure. It's a bit early to tell, Oliver, for that. You know, we're only, whatever it is, two weeks into the new year, so it's a little bit early to tell. At the moment we've still got it -- from what everyone's saying, there's plenty of interest for assets on -- and I can't really comment further than that. It's just too early.
On the -- on whether we're likely to be a net seller for the remainder of this financial year, probably. Slightly, I would guess, but we've got a big CapEx run rate, as you know, so -- but it's not going to be anything more than slight.
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Oliver Reiff, Deutsche Bank Research - Analyst [4]
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Thanks very much.
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Operator [5]
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Oliver Creasey, Green Street Advisors.
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Oliver Creasey, Green Street Advisors - Analyst [6]
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Just a quick question on the same-store retailer sales, please. I see that they're below the benchmarks that you guys used to compare against. I appreciate that that's got online sales and it's not a great comparison, but we are used to seeing you outperforming those benchmarks. So I'm just querying if there's anything changed particularly in this quarter? Or if you have anything that -- any further guidelines or information you can provide on that, please?
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Robert Noel, Land Securities Group plc - Chief Executive [7]
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Yes, I think the -- it's an interesting question and, of course, footfall is up. So this is people spending less money in bricks-and-mortar stores. But actually, if you think about the story we've been developing over the last three years, it doesn't necessarily come as a surprise.
The way consumers are behaving is changing. Footfall is up in our destination centers, which is why we own them, and it's why we sold all the secondary centers which is where footfall is down. And remember what we've been saying about retailers upsizing, retailers are upsizing in these centers in order to create showrooms. And when people go into these stores, they go in, they buy in the store, but they also buy online.
So, retailers don't really care whether online sales are -- don't really focus just on bricks-and-mortar sales, they're worried about sales, full stop. And in these centers where you can drive online sales as well as -- over and above where you're selling elsewhere, they will remain popular. That's why we own them.
And so I'm not -- the same-store sales hovering around flat is, I'm afraid, part of the retail story at the moment.
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Oliver Creasey, Green Street Advisors - Analyst [8]
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Okay, that's great. Thank you.
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Operator [9]
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(Operator Instructions). David Brockton, Liberum.
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David Brockton, Liberum - Analyst [10]
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I've got a question on cost of debt. As you continue to realize value through disposals, what options do you have to reduce your cost of debt and when could you do it, given the limitations for the Security Group?
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Robert Noel, Land Securities Group plc - Chief Executive [11]
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Well, the limit -- the Security Group, David, it has absolutely no limitation on the cost of debt whatever. The cost of debt is dictated by the fact that the majority -- vast majority of our debt now is bonds. So these have been in existence for many years. We can't control [their] fixed cost, so the only thing we would do about reducing the cost of debt is consider buying-in a bond. But until that becomes an NPV positive trade, there's no point in doing it.
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David Brockton, Liberum - Analyst [12]
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Okay, thank you.
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Operator [13]
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Alison Watson, Investec.
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Alison Watson, Investec Bank plc - Analyst [14]
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Just following on from the last question, I notice that your weighted average cost of debt has risen by 40 basis points over the period. What was the driver behind that, please?
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Robert Noel, Land Securities Group plc - Chief Executive [15]
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That is driven purely by retiring debt on a revolving facility, due to our sales and that's our cheapest form of debt.
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Alison Watson, Investec Bank plc - Analyst [16]
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Okay. Thank you.
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Operator [17]
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(Operator Instructions).
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Robert Noel, Land Securities Group plc - Chief Executive [18]
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Okay. Well, guys, thank you very much indeed for joining the call. We look forward to seeing you in May.
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Operator [19]
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Thank you, ladies and gentlemen. That does conclude your conference for today. Thank you all for participating. You may now disconnect.
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