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TWST: Let’s start off with an introduction to London Merchant Securities (London: LMSO.L) and a quick historical sketch.

Mr. Rayne: London Merchant Securities in its present form came to being in the '60s. It was a London office development company, which in the late '60s diversified into industry. From the late '60s to the late '70s, it continued to build its property portfolio, which was predominantly office developments in the West End of London, and grew the industrial group. The industrial group was consolidated into Carlton Industries which was sold in the late '70s. From '79 onwards the Group effectively reformed into a real estate investment and development company and a venture capital and development capital business. So today there are two arms of the business: one is real estate. We acquire real estate, hold it, develop it; we rarely trade it. And the other side is traditional, but diversified venture capital and development capital.

TWST: Can you talk about any developments you are involved in now that will be of interest to potential investors?

Mr. Rayne: Yes, we are just completing a leisure development in Kingston, which is about 168,000 square feet. It is about 91% pre-let with tenants such as Odeon Cinemas, Megabowl, a number of restaurants and a large David Lloyd health club. This is in the town centre of Kingston, in South West London. We are just about embark on the second phase of an office development in the Fitzrovia area, which is pre-let to Ove Arup, the largest firm of engineers in the world. That is a very satisfactory development because it has continuous income throughout the development phase. We have just completed and let a 34,000 square foot office building in Whitfield Street, with is again in the Fitzrovia, W1, London area. That was a re-development of one of our old industrial buildings and has a very good tenant – with a 15-year lease. At the moment, we only have one building which is standing empty, waiting for re-development and waiting for final planning to come through. That is about 100,000 square foot in the Tottenham Court Road, W1, London area.

TWST: What are your overall occupancy rates across the whole portfolio?

Mr. Rayne: We reported at our half year that we had voids of just under 10%. With the current letting that will come down to about 6%.

TWST: Does that include the property which is waiting to be re-developed?

Mr. Rayne: Yes it does. So we are very, very low on voids.

TWST: What are your overall plans and objectives for both sides of the company over the next couple of years?

Mr. Rayne: First, and it is less dependent on markets, is long-term rates of return provided by dividends as well as capital appreciation. So, the dividend payment and dividend cover is an important thing for us. Second is long-term capital appreciation and the reduction of the current discount we have on net assets to market price. The third, is the continuous growth of our property investment portfolio - our plan is to continue to grow rental income through acquisitions and the redevelopment of the older buildings in the portfolio.

TWST: What do you see is the key challenge facing management??

Mr. Rayne: The biggest challenge for us always in business is making sure we have the right people doing the right jobs. The challenge now is, I believe, maintaining a strong balance sheet and being in a position to take advantage of any upturn in our particular patch, whether it’s in the property or the venture capital side. We have seen a number of our venture capital partners unable to follow through on their investments and we have to make sure that we can. We have to make sure we have enough good management to put into our investee companies. And on the property side, it’s building great buildings, buildings that really work; good usable space in the right position at the right price.