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Land Securities in £750m sale of division to streamline business
Land Securities Group is to sell its Trillium outsourcing unit for £750m, streamlining its business and bolstering its balance sheet amid miseries in the UK property market.
Trillium, which manages the property of large public and private sector occupiers including the UK government, has been sold to property investment and services firm Telereal, bringing to an end months of speculation concerning its future ownership. Trillium had gross assets of almost 1.3bn at September 30, and the sale – which does not include the Accor Hotels arm – is expected to complete on January 12.
"Trillium has been a successful business for Land Securities but slightly unusual in context of the REITs sector," chief executive Francis Salway said.
"The sale leaves the group with a stronger balance sheet and with a simpler property investment and development company with market leading positions in the London office and retail sectors," he added.
The unit was put up for sale in autumn 2007, when Land Securities outlined now defunct plans to demerge into three retail, London property and real estate outsourcing businesses.
At the time, some experts said the cash-generative unit, which posted underlying operating profits of 102m in the year to March 31, could fetch as much as 1.5bn, but a sharp decline in UK credit and property market conditions dampened buyer interest.
Land Securities, which owns the White Rose shopping centre in Leeds and Victoria centre in Harrogate, said the sale price represented a loss of around 306m on a September 30 valuation, but it said the transaction would generate 444m of cash which it would use to reduce group debt by around 10 per cent.
"We clearly have to accept that pricing of assets has changed since early autumn with the very substantial change we have seen in the economy and with asset pricing generally," Salway said.
Analysts said the Trillium sale was earnings dilutive in the context of its historic profitability but resolution of the protracted sales process was to be welcomed, particularly since recession had put Trillium's future earnings under increased pressure.
Salway said The Department of Work and Pensions, one of Trillium's biggest clients, was continuing to vacate space and the value of the business had already diminished significantly since March.
"We consider it desirable to receive cash now, rather than at an unspecified time in the future, particularly as any future disposal of Trillium might suffer from the running down of the largest contract with the Department for Work and Pensions, which now has less than 10 years to run," he added.
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