The possible break up of the UK’s largest retail developer, Land Securities, has dominated the business pages over the past week. Some shareholders are wholeheartedly supportive, while others are completely dismissive.
While no decision has been made yet, the formal review of the business structure is thought to have started back in spring. Despite the enthusiasm that was shared with many other property companies about converting to a real estate investment trust (Reit) earlier this year, Land Securities, along with its contemporaries, has seen its shares fall.
Chief executive Francis Salway said: "It became evident in the run-up to and following Reit conversion that we should test our existing business structure against alternative options to ensure that we have the optimal structure for creating long-term shareholder value.”
Any possible break-up would mean separating the group into retail, London offices and Trillium – its outsourcing business. And while many bemoan that breaking up the company could lead to the abandonment of plans for flagship office buildings such as the controversial “walkie-talkie” in the City of London, retailers needn't be too worried about the review.
The London office market clearly does not affect the retail sector. And while Trillium can give the retail arm leverage in terms of planning and policy issues, Land Securities has built up a strong reputation with the Government and councils across the UK on the back of its pioneering retail developments. This reputation will not be depleted by the loss of its outsourcing business.
Land Securities has developed some of the best shopping schemes across the UK and has a pipeline of schemes coming to fruition, including the Princesshay shopping centre in Exeter, which opens next week and its partnership with Hammerson for Bristol’s Cabot Circus, which opens next year.
These shopping centres are breaking new ground in terms of development. Instead of the same old covered shopping centres, Land Securities has always sought to find what’s best for the location. In Exeter, for example, the development respects the historical buildings in the city and all shopping streets point to the cathedral.
Its size has allowed Land Securities to be pioneering in terms of its relationships with tenants. As a traditional property company, change can be slow, but it has not shied away from pushing forward more flexible lease structures and trying to build relationships with retailers, rather than viewing it as a simple landlord and tenant business deal.
Its push for new retailers and independent retailers in its scheme is just one example. In Exeter it has an entire section reserved for independent retailers and while of course these retailers can’t afford to pay the usual rents reserved for shopping centres, Land Securites has offered individual deals including options such as turnover-based rents, short leases and fixed uplifts.
In what is predominantly an archaic industry, Land Securities should be credited for making the extra effort and taking the industry forward. Any break up of the company should not change that.