Brave move in times of change for property

Until this morning, it was Britain's biggest property company, and indeed one of the largest anywhere, so it is a momentous decision.

It is also a leap of faith. Chief executive Francis Salway is convinced that the three divisions are big enough to be independent, which is true, and that they will operate more efficiently once independent because they will have balance sheets more closely tailored to their specific needs, which is debatable.

Focus will certainly make life easier for investors, which matters nowadays when property investment is becoming more international and investors are increasingly unwilling to cope with complexity. Therefore, it will arguably lead to a more efficient allocation of capital, which would be good for the companies. But only time will tell if Salway is right in his belief that, under the new format, management will have sufficient extra freedom, flexibility, fervour and finance to deliver consistently higher returns than they could under the group structure.

Of course, investment bankers can come up with compelling arguments for a demerger, but they are often just the converse of the arguments they deploy to promote consolidation. No one mentions the opposite of synergy - the extra cost of three head offices rather than one, the duplication of overheads and skills or the myriad unforeseen additional expenses that will no doubt arise along the way.

Advisers won't argue against the demerger because, when completed, it is three clients and three sets of fees rather than one. Nor will the executive management protest, because it also means three sets of incentive plans, and indeed three more opportunities to be taken over and hit the jackpot.

What LandSecs founder Harold Samuel would have made of it is a moot point, but interestingly Salway thinks he would have been in favour. He had an aversion to companies that refused to move with the times, so he would have applauded the demonstration of willingness to embrace change - and he would have been impressed by Salway's personal conviction that this is the right thing to do.

The group also delivered a trading update today. While the figures defy meaningful comparison because of it becoming a real estate investment trust, the operational excellence still shines through. It has been selling property heavily because it believes this is the top of the market. Its development pipeline is drying up because it believed two years ago that things would be tough next year. It knows its stuff, and this clear warning of hard times ahead, rather than the demerger, may well preoccupy the market for the next few days. These are changing times for the sector in more ways than one.