Land Securities Group plc (LSE: LAND), the UK’s largest commercial property REIT, is issuing two new series of bonds totaling £3.32 billion (US$4.33 billion) through its capital market platform, backed by nearly £500 million in annual cash flow from holdings in more than 100 UK office, retail and leisure properties.
S&P Global Ratings has assigned ‘AA’ ratings to the Class A14 and Class A15 sterling-denominated fixed-rate notes, which are being used to pay off existing notes and a credit facility, while partially repaying subordinated commercial paper debt.
The notes are being issued the Land Securities Capital Markets platform, a £6 billion program that has issued asset-backed notes since 2004 for Land Securities Group, a publicly traded real estate investment trust that is the UK's largest commercial property development and investment firm holding more than £14.4 billion in assets.
The notes being redeemed include £500 million in Class A11 notes due 2036; £318 million in Class A6 notes due 2029; and £322.2 million in Class A7 notes due 2032.
The individual A14 and A15 tranche sizes are to be determined; each has a 2039 maturity.
The notes are backed by the mortgage income streams and joint venture credit assets of large portion of its portfolio estimated at £482 million by S&P. The portfolio consists of 104 commercial properties (existing or under development) with a combined value of £12.78 billion (US$16.67 billion).
The properties are primarily office (48% of the portfolio concentration) and retail (39%), with a majority (67%) located in London.
In June, the Land Securities REIT changed its brand name to Landsec. One of its most noted holdings is the £200 million-plus Piccadilly Circus illuminated signage display in London’s West End.
S&P stated the REIT’s portfolio is “relatively stable, granular and diversified,” with the 10 largest tenant groups accounting for 24.9% of the pass-through rent.
As a Tier 1 organization under the UK’s REIT regime rules, LandSec is required to limit loan-to-value ratios of less than 55%, and keep interest coverage ratios in excess of 1.85x in its portfolio. The new transaction is “well within” those parameters, according to S&P, with a debt-LTV ratio of 25.2% and a projected ICR of 4.7x.
