Helical Bar spots signs of life in commercial property

Developer ready to look at acquisitions again
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The Independent Online

The property developer Helical Bar has become the latest company to signal a stabilisation in the commercial property market, revealing that it expects the City to lead the way.

Helical also said that after two years of uncertainty it was again eyeing acquisitions, but its chief executive remained cautious and described current market conditions as a "curate's egg".

Since 4 June, Helical said it had witnessed an improvement in the capital value of prime properties, which are let on long leases to tenants with strong covenants. In particular, it cited "positive yield movement" for prime London West End and the capital's City office properties, as well as for desirable out-of-town retail parks, industrial estates in the South-east and the auction market. Mike Slade, the chief executive of Helical, said the City of London would rebound quicker than other areas.

However, Helical, which has investments overseas, including in Poland, warned that average property values continue to fall, as a result of declining rental values, and that investors need to "exercise great caution". Its update follows a cautiously upbeat update from Land Securities, the property giant, last week, which said it was seeing signs of life in the market after a torrid two years, although it warned that vacancies continue to rise and capital values are still declining. The capital value of UK commercial properties has plunged by more than 40 per cent since mid-2007.

During the quarter to 30 June, Helical completed 23 lettings, which increased its annualised income by £356,000, largely boosted by 14 lettings in the Hub, Glasgow. It also completed six lease renewals that will deliver £455,000 of annual rent.

Mr Slade believes the time is right to hit the property acquisition trail again. "After two years of market uncertainty, Helical is now firmly on the front foot with both its existing portfolio as well as in respect of potential opportunities." Overall, Helical secured £850,000 of annual income in its investment and UK development portfolio over the quarter. Mr Slade added: "We are now starting to see much improved signs in parts of the UK market, with the valuation of certain types of assets clearly levelling out. The market remains a 'curate's egg' and best left to experienced stock pickers, but one in which Helical will deliver value for shareholders."

Helical raised £28m in a share placing in January to help fund potential acquisitions and now has a war chest of up to £500m through unnamed joint venture partners and existing facilities. Yesterday, Helical also said it had renegotiated £134m of its debt, which has removed loan-to-value covenants for between two to three years on the loans.

With its full-year results in June, Mr Slade said: "We have the firepower from the recent placing, the backing of our US partner and others and internally generated resources to take full advantage of the opportunities."