Land Securities, the UK’s largest REIT and to date the only REIT to include hotels in its portfolio, is breaking into three parts.
The hotels are being hived-off into the outsourcing division, separating from retail and the company’s London portfolio.
The move is being made in the hope that the share price of the three separate businesses is buoyed by the removal of any conglomerate discount and the introduction of focus.
The outsourcing business is officially called Property Partnerships and features a number of Government and private sector outsourcing contracts run by Land Securities Trillium operation.
During the six months to September 30, Trillium’s operating profit on its Accor portfolio was £11.6m. Turnover at the portfolio was up 5.6%.
The hotels portfolio is less than a fifth of the overall underlying operating profit at the division where the biggest single source is a massive contract with the Government. This means there is little chance of hotels breaking away to form a specialised REIT in their own right and thus further highlighting hotels as an asset class. However, the inclusion of hotels inside the overall outsourcing portfolio is of itself encouraging.