(Alliance News) - Land Securities Group PLC on Friday suggested commercial property prices have begun to stabilise as investor interest picks up given the more "balanced" outlook for interest rates.
Chief Executive Mark Allan said: "Following a reset of values over the past two years driven by rising interest rates, the stabilisation in rates and evidence of continued rental growth is starting to attract increased investor interest for the best assets."
"Around 60% of our portfolio already showed stable values in the second half and overall yields were largely stable in the final quarter, pointing to a positive outlook for our overall return on equity."
The comments came as the London-based commercial property development and investment company reported results for the financial year ended March.
Pretax loss in the year narrowed to GBP341 million from GBP622 million a year prior.
EPRA earnings fell 5.6% to GBP371 million from GBP393 million a year prior, with EPRA earnings per share also down 5.6% to 50.1 pence from 53.1p.
EPRA net tangible assets per share decreased 8.2% to 859p on March 31 from 936p a year prior.
Revenue rose 4.2% to GBP824 million from GBP791 million.
The total dividend was increased by 2.6% to 39.6p from 38.6p a year ago, in line with guidance of low single digit percentage growth.
Land Securities said it had delivered "continued outperformance," reflected in 8% uplifts on relettings and renewals and 130 basis points occupancy growth across London and major retail.
This drove 2.8% like-for-like net rental income growth.
The company said values for best assets starting to stabilise which with an around 5.7% income return plus expectation of continued rental growth supports a "positive outlook for overall return on equity."
Allan said the operational outperformance demonstrates the "importance of owning and operating the best-in-class real estate."
In Central London, Land Securities delivered 1.4% like-for-like net income growth in offices, with overall occupancy 140 basis points to 97.3%.
West End values, 72% of its London portfolio, were up from 48% three years ago, and were virtually stable in the second half, Land Securities said. The overall change in Central London values moderated to minus 2.4% from minus 4.5% in first half.
The company's Retail arm saw 6.9% like-for-like net income growth, with occupancy up 130bps to 95.4%.
Land Securities said its loan-to-value ratio rose to 35.0% from 31.7% a year prior. Net debt at March 31 was GBP3.52 billion up from GBP3.35 billion.
Shares in Land Securities fell 2.0% to 676.50 pence each. The wider FTSE 100 was down 0.3%.
By Jeremy Cutler, Alliance News reporter
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Land Securities (LAND)