August 8, 2008 3:00 am

Hammerson has £407m wiped off property values

Hammerson, the retail and offices property developer that owns London's Brent Cross shopping centre and which has a stake in Birmingham's Bullring, sank to a pre-tax loss in the first six months of the year after almost 10 per cent was wiped off its net asset value.

Hammerson has been hit by a sharp decline in the value of underlying property assets during the past 12 months as the wider property sector has suffered its worst slump since the early 1990s.

Yesterday, the company reported a pre-tax loss of £417m, from a profit of £368m profit a year ago, because of the devaluation of its properties by some £407m.

Adjusted net asset value per share fell from £15.45p to £13.92p, a drop of about 10 per cent. Its portfolio, which is primarily good quality office and retail buildings, and which also includes Bishops Square in the City, is now worth about £7.1bn.

There was better news from the company about the strength of the occupier market after fears were raised this week by rival Liberty International about growing bad debts from retailers going into administration.

Hammerson's chief executive John Richards said that there was no sign that administrations among its tenants had risen.

Hammerson saw a 4.4 per cent increase in like-for-like rental income, while total net income reached £145.8m, a 5.4 per cent rise on a year ago.

However, some bigger retail groups suffering from the consumer downturn are seeking to improve their rental terms from landlords such as Hammerson. Retail heavyweights, led by Sir Philip Green and Lord Harris, the Carpetright boss, are set to meet landlords next month with a shopping list of demands for wide-ranging rent reform.

Hammerson reported a good take-up in the shopping centres that it has under development but said that it was unlikely to start any new schemes before next summer.

The loss per share was 145.6p, compared with earnings per share of 126.8p in the same period last year. The interim dividend rises 5 per cent to 12.6p. The shares fell 24p to 965p.

* FT Comment

Hammerson's loss moved the real estate sector lower yesterday but this seems unfair given the fact that the results were as expected and its reassurances on crucial questions about rental income. Hammerson remains one of the more expensive property stocks, however, after outperforming the recent sector rally by more than 10 per cent. This makes peers such as British Land more attractive in the short term on both price and dividend yield. There will also be concerns about future falls on the continent, although its prime property assets make it one of the better-placed real estate groups in the longer term.

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