THE INVESTMENT COLUMN: Hammerson gets into shape
First the bad news. Hammerson's share price is 23 per cent lower than two years ago and less than half the level at which it entered the 1990s. The property company's net assets, which ended 1992 at 384p per share, finished last year at 376p. The dividend, cut in half in 1992, nudged up yesterday but by a less than breathtaking 6.5 per cent.
The good news, however, is that the owner of the Brent Cross shopping centre looks in better shape now than at any point since Ron Spinney took over a hopelessly overextended, unfocused world-wide property investor in May 1993. Since then he has cleared out the dross, reduced debt and focused on a handful of markets where Hammerson sees growth.
That good news was just beginning to become evident in full-year figures reported yesterday, which showed a modest 5 per cent rise in rental income translated into a 22 per cent underlying rise in operating profits from pounds 52.7m to pounds 64.3m, a more meaningful figure than the reported number in our table which includes lumpy disposal profits.
Hammerson is now roughly in the shape Mr Spinney always envisaged. About half the assets are in the UK, with a quarter each in Europe and North America. By asset class, the split is about 60/40 in favour of retail over offices.
That balance makes sense with Hammerson's portfolio revealing a wealth of growth potential from the shop assets compared with probably years of stagnation from offices. The retail assets are currently being rented at about 7 per cent below market rates, suggesting good growth. Offices, by contrast, are on average pulling in 30 per cent more than Hammerson could achieve with replacement tenants. Fortunately, most leases still have a long stretch to run, so the income is safe.
In an era of subdued inflation, the challenge for property companies is to generate extra value for shareholders by reading cycles better than their peers, trading properties cleverly, buying the right stock and managing assets astutely.
Most property companies, grown complacent on years of rising prices, do not have a clue how to do those things. Hammerson does, as it has clearly shown with its shrewd purchase and development of 99 Bishopsgate, a bombed- out office block in the City on which the company has already made a handsome turn. With luck it will do the same with its most recent purchase, Birmingham's ugly Bull Ring centre.
Mr Spinney has laid a good set of foundations. All he needs now is for the green shoots of the property recovery to take hold. In the meantime, a 17 per cent discount to forecast net assets of 400p, at yesterday's share price of 342p, provides a solid floor.
Oscar Pistorius trial: Paralympian sick again after photographs of Reeva Steenkamp's body are shown in court
Missing Malaysia Airlines Flight MH370: US pushes search towards vast expanse of the Indian Ocean
Tony Benn dead: Veteran Labour politician passes away at 88
Arrest made after man is found by the side of the road with his penis cut off
Missing Malaysia Airlines Flight MH370: Focus shifts west as Indian Ocean becomes latest search area for the aircraft and its passengers
Katie Hopkins continues campaign to become Britain's most hated talking head with poorly timed Bob Crow tweet
No EU referendum under Labour: Ed Miliband to reveal that vote on membership is ‘unlikely’ in next Parliament if party wins power
Grace Dent: Who cares if she spells it Barraco Barner? Gemma Worrall is more employable than some bookish arts graduate
Europeans have ‘got whiter’ due to natural selection in past 5,000 years, scientists say
Fracking is turning the US into a bigger oil producer than Saudi Arabia
How climate change helped Genghis Khan: Scientists believe a sudden period of warmer weather allowed the Mongols to invade with such success
- 1 Tony Benn meets Ali G: Watch Labour veteran burn Sacha Baron Cohen
- 2 Women do experience two different types of orgasm, study reveals
- 3 Tony Benn dead: Veteran Labour politician passes away at 88
- 4 Malaysia flight MH370: Pitbull song lyrics bear uncanny resemblance to missing plane mystery, according to YouTubers
- 5 Gauthier Soho has ranted against 'food blaggers' - so can we really trust online reviews?
iJobs Money & Business
£35000 - £43000 per annum + Bonus and Benefits: Harrington Starr: A global lea...
£50000 - £60000 per annum: Harrington Starr: Linux Systems Administrator - UNI...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...