Land Securities to split into three after slide in shares

Land Securities, the UK's largest real estate investment trust (Reit), is to split into three separate quoted companies.

The three-way merger into retail, London property and Trillium, its property management division, would not take place for at least 12 months, the chief executive Francis Salway said yesterday, adding that it would enable a more focused property business.

The move comes after a fall in its shares cut the company's market value by £3.6bn.

"The rationale for this plan is not linked to short-term market movements, but the evolution of the group, and giving best value to shareholders," Mr Salway said. "It is very important for the business to come to the right long-term strategic decision, which we have done."

Ian Ellis will continue to head Trillium, which is worth around £2bn, while Mike Hussey will become head of the London business, which has £8.3bn in gross assets. Mr Salway will continue at the helm of the £6bn retail business.

While the three divisions had performed well under the current structure, "the business models are distinctive", the company said. "They operate in market segments with different characteristics and they will be able to adopt a capital structure best suited to their respective sectors' outlook," the company said. Although some analysts have argued that a break-up would destroy shareholder value, others believe a split was inevitable given the fall in the share price and is the best way forward for the business.

The news came as the company reported better-than-expected figures for the six months to the end of September, with a fall in pre-tax profit from £1.18bn to £375m due to a smaller valuation surplus. The group posted a 0.9 per cent increase in the value of its investment portfolio to £15bn, despite reporting falls of 1.5 per cent in the value of its shopping centre business and a 3.9 per cent drop in the value of its retail warehouse portfolio.

The value of real estate shares has fallen 36 per cent this year and analysts say Reits will only survive if they specialise. British Land, which is to report today, has seen its share price slide 44 per cent.

Analysts at JP Morgan said a lot of work still needs to be done, but said a break-up at Land Securities could "create positive shareholder value".