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Land Securities Reaps Rewards From REIT Move

by Robert Lee, Tax-News.com, London

17 May 2007


Land Securities has announced that its conversion to a real estate investment trust (REIT) earlier this year has helped to bring about considerable tax benefits for the company, enabling shareholders to reap a substantially increased dividend.

In its preliminary results for the year ended March 31, 2007, Land Securities said that its conversion to a REIT removed latent capital gains tax liability of GBP1.3 billion (US$2.6 billion). The company's pre-tax profit for the year was a little under GBP2 billion, compared with GBP2.4 billion in 2006.

REIT status has also enabled the firm to substantially increase its dividend to 53p, a 13.5% increase on the previous final year dividend.

Francis Salway, Chief Executive of Land Securities, commented: “Land Securities’ successful conversion to REIT status in January 2007 has enabled us to announce a substantial increase in the dividend. In addition, with tax considerations no longer constraining our investment decision making, we have sold or marketed for sale some GBP1.1bn worth of property since 1 January."

Land Securities was one of the first property companies to take advantage of the UK's new REIT regime, which went into effect on January 1, 2007. The company now claims to be one of the world's largest REITs.

REIT status allows companies to avoid paying corporate tax provided most of their income is distributed to shareholders in the form of dividends. However, under the UK regime, companies must pay a 2% conversion charge. In January, Land Securities announced that it expected to pay a GBP300 million conversion charge in July 2007.

The firm's national portfolio of property, currently valued at GBP14.8 billion, includes some of Britain’s best-known commercial and retail centres, such as the Birmingham Bullring and Gunwharf Quays in Portsmouth, as well as London landmarks such as the Piccadilly Lights and Westminster City Hall.


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