Bottom Line: Brixton hits a wall

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The Independent Online
YESTERDAY'S 6p drop in Brixton Estates' share price to 224p, following a 7 per cent rise in pre-tax profits to pounds 30m, provided further evidence of what a subjective matter valuing property companies is.

The first of the fickle measures the market uses - its ever-changing view of what constitutes a reasonable premium or discount to the underlying value of property portfolios - has moved sharply against the sector since the New Year.

Cautious comments from Brixton on potential tenant demand confirmed the wisdom of not paying a big premium to net assets until rental growth is a more realistic possibility than now. The downward movement of the share price towards yesterday's 192p net asset figure takes a justifiably less rosy view of future income.

The second measure - the value surveyors are prepared to put their name to, and perhaps justify in court in the next slump - is becoming increasingly more conservative.

One of the reasons Brixton's net asset value came in lower than expected was the 30 per cent divergence between Jones Lang Wootton's external view of the value of development sites and the directors' estimate last year.

Despite an 18 per cent fall in Brixton's shares from 274p since the sector's peak in January, they are still at a discount of about 5 per cent to NatWest Securities' estimate of net assets next December.

That compares with a 15 per cent discount for Slough, which shares a broadly industrial portfolio. Brixton is thought to be a better- managed company but until tenants start booking up extra space again that is already in the price.