Property veteran warns of ‘double dip’

Michael Slade, chief executive of Helical Bar, on Thursday warned the property market was entering a “double-dip” downturn as the niche developer reported a fall into loss in the year to March.

Mr Slade, a well-known property figure who started in the business in 1967, said “we’ve all been here before and we will find a way through this better than the others”.

But he predicted it would be the end of 2009 “before we see any stability in the investment market” and there would be little or no rental growth before 2011.

“Anyone who doesn’t think so needs to go back to school . . . we’re in for a pretty long slow bash.”

The first dip in the market was driven by the excessive run up in the market in 2006 and the first half of 2007. However, Mr Slade said the second would be caused by the weakening of the economy that was now becoming apparent.

Helical Bar “saw this coming two years ago” and reduced the proportion of assets it held in its investment portfolio. It expected to “re-enter the market during 2009 and 2010”.

In the year to March, the group’s investment properties fell in value by 11.3 per cent as yields rose by 90 basis points. Mr Slade said a further fall of about 5 per cent could be expected in the current financial year.

“There will be tenant failures, we’ve had some already,” he said, and predicted “some big retail failures” this year while other retailers, which might have taken new outlets were cutting their expansion plans.

However, Mr Slade said that Helical Bar was involved in niche areas that offered growth, such as student accommodation and retirement villages. It was currently developing five retirement villages that would be sold “unmortgaged [to the] over 60s”, but this would take time to come through.

Helical Bar had also bought retail land in Poland two years ago, which was now beginning to generate good profits.

The group reported a pre-tax loss of £24.3m, compared with a profit of £60.1m last year. Net rental income rose from £14.8m to £16.4m, but development profits fell from £13.6m to £6.1m and there was a £32.8m loss on the sale of investment properties compared with a profit of £40.6m last time.

The diluted net assets fell from 334p to 306p per share. The group proposed an unchanged final dividend of 2.75p, to give a total for the year up 3 per cent at 4.5p.

● Meanwhile Quintain Estates and Development said it had outperformed the general property market in its year to March, thanks to its focus on less cyclical areas such as student accommodation and healthcare, where returns were linked to inflation.

It reported an 11.5 per cent drop in net asset value per share to 584p. Quintain saw the value of its big scheme at Wembley in north west London fall by 11 per cent, but showed a 2.5 per cent rise in the value of its site on the Greenwich peninsula, near the former Millennium Dome.

The group, chaired by Financial Times columnist John Plender, refinanced its £620m debt in March and borrowed an extra £95m since the year end “with only a relatively small increase in interest cost”, which it said was a tribute to its standing in the credit markets.

Quintain recorded a pre-tax loss of £54.7m compared with a £48.6m profit, but lifted its final dividend by 0.25p to 8.5p to give a total for the year of 12.25p up 4.3 per cent.

Helical Bar shares were up 5½p to 305½p in afternoon trading, while Quintain was also 5½p higher at 373p.