Jon Hunt, the founder of the Foxtons estate agents chain, looks set to pocket a profit of several million pounds after short selling shares in the troubled property developer Hammerson.
His position was revealed after Hammerson, the owner of Brent Cross shopping centre and Birmingham's Bullring, announced a £584m rights issue earlier this week in an attempt to shore up its finances. Other developers are expected to follow suit with similar fund-raisings, starting today with British Land, which was working through the night yesterday to put together its own cash call in an attempt to raise more than £500m.
Mr Hunt sold Foxtons – which is now in potential financing trouble after breaching its banking covenants – to private equity for £370m in 2007, at the height of the property boom. Now he also looks set to pocket a profit of several million pounds after short-selling shares in the troubled developer Hammerson.
Regulatory filings show Mr Hunt borrowed a 0.45 per cent stake in the developer – about 1.3 million shares – betting the stock would fall. His position was worth over £5m when Hammerson announced its rights issue on Monday.
Short-selling is a procedure used by hedge funds to profit from an expected fall in the price of a company's shares. In a short sale, the investor borrows a stock and sells it on, before buying it again a few days later – theoretically at a lower price – and returning it to the original owner while pocketing the price difference. Mr Hunt is set to make a hefty profit, given that Hammerson stock has crashed by one-third so far this year, has lost more than half its value in the past five months, and is three-quarters off its peak of two years ago. Mr Hunt may have made £10m if he took out the short position when the shares were at their peak in 2007.
His position was revealed in a statement under stock-market rules dictating the disclosure of such positions during rights issues. A further eightinvestors also disclosed short positions in Hammerson following news of the fund raising, including Tiger Global, Blue Ridge Capital, Glenview Capital, Morton Holdings, Steadfast Capital and Maverick Capital.
The dramatic fall in real-estate prices has left many real-estate developers indanger of breaching terms of their covenant agreements with lenders. Hammerson made its rights issue on Monday after the contracting lending market and a fall in the merger and acquisition market hindered its alternative funding plans, stopping it borrowing or being able to sell assets at attractive prices.
The positive reaction in the City for Hammerson move has encouraged rivals mulling such share sales to get them off the ground, according topeople close to the situation. Beside British Land's cash call today, Liberty International, the owner of Covent Garden and Capital Shopping Centres, is hoping to raise about £350m in a similar operation.Reuse content