Land Securities, the FTSE 100 property company, is set to demerge its Trillium outsourcing business into a separately listed company valued at more than £1 billion.

The move to break up Britain’s largest real estate investment trust (Reit) follows months of discussions between Paul Myners, who took over as chairman in January, Francis Salway, chief executive for the past three years and banking advisers.

Land Securities’ share price has fallen by 36 per cent since Mr Myners stepped into the chairman’s role, leaving it with a market value of £6.9 billion even though the company last valued its property portfolio at £14.8 billion. The board is due to meet next week, coinciding with the publication of its first-half figures, to agree formally to a demerger of Trillium.

Mr Salway confirmed that he was conducting a strategic review at the start of September. Bankers at Citigroup have been advising.

Trillium’s management, headed by Ian Ellis, a main board director, have been working for the past few weeks under the assumption that the business will be spun out into a separate company early next year, according to industry sources.

Trillium owns and manages hundreds of offices and depots let on long-term contracts to many of Britain’s biggest employers including the Department for Work and Pensions, Royal Mail, Norwich Union and the DVLA.

Mr Salway has championed Trillium as a steady cash generator to help to balance its more cyclical core business of developing and leasing retail and office property. While that strategy may have worked, it has failed to excite investors.

The presence of Trillium should have allowed Land Securities to out-perform its rivals in the UK Reit market, where share prices have been battered during the past six months over fears of falls in the capital values of property.

The idea was that Trillium’s strong cashflows would have acted as a buffer to any declines in the value of its shops and offices portfolio.

The fall in Land Securities’ share price this year has mirrored a decline in value of the UK’s £28 billion Reit sector. Its shares closed yesterday at a year low, down 38p to £14.90.

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