The Investment Column: Hammerson backs the boom

EVERYBODY in the property industry is wondering just how long the boom will continue. Ron Spinney, Hammerson's chief executive certainly thinks the good times will continue to roll.

Hammerson is putting its money where is mouth is, launching an ambitious expansion programme on the premise that there is still plenty of demand for the right schemes in the right place. It plans to spend pounds 115m out of a total pounds 150m on new UK developments, up from pounds 60m last year. And in 1999 it will plough another pounds 100m into the British property market.

The group is concentrating on central London offices and prime shopping centres. It has just bought Britannia House, a site near London's Old Bailey law courts, and is investing a total of pounds 45m to develop the site.

Hammerson certainly has the financial firepower to fund the investment programme. Gearing has fallen to 58 per cent and net assets per share showed a robust 13 per cent increase to 439p. Net rental income rose from pounds 121.6m to pounds 122.7m in 1997, while there was an underlying increase in the value of Hammerson properties of nearly 8.5 per cent.

Hammerson's shares rose 6p to 508.5p yesterday, but still do not look expensive compared to peers. NatWest Securities puts Hammerson on a current net asset value of 456p which represents an 11 per cent premium compared with a 14 per cent average for the property sector. That said, concerns remain that the UK property cycle is moving to a mature stage, the economy is slowing down, and developers might be expected to be pulling in their horns rather than looking to expand.

And hopes of a blockbuster property merger appear to have faded. Having failed to entice rival MEPC into a merger, it looks like once bitten, twice shy, and Hammerson has ruled out another deal. Hold.