Yahoo Finance Hammerson allows chief a long goodbye despite big wrong calls
The property industry is a comfortable world of long tenures and long goodbyes. So it is that David Atkins, chief executive of Hammerson, can announce his departure sometime before next spring while his chairman, David Tyler, offers cheery slaps on the back for 10 years of terrific work. In most other industries, the duo would have been ushered out after the events of 2017-18.
To recap: the Atkins and Tyler combo proposed paying a magnificent £3.4bn for Intu, Hammerson’s smaller shopping centre rival. The deal would have been catastrophic when you see that Intu’s equity is virtually worthless today. Only a revolt by Hammerson’s own shareholders saved the day.
In the middle of that saga, Atkins and Tyler rebuffed a £5bn cash-and-shares takeover proposal from Klépierre of France. The supposed justification was that the 635p-a-share terms “very significantly” undervalued Hammerson, owner of the Bull Ring in Birmingham and Brent Cross in London. Ho, ho: with Hammerson’s shares now trading at 74p and expecting a fund-raising, it will be a miracle if 635p is ever seen again. The correct response in 2018 should have been to bite Klépierre’s hand off.
Naturally, Tyler mentioned neither episode in his upbeat assessment of Atkins’ reign. Nobody doubts the chief executive’s “ambition, passion and integrity” and, yes, life has been tough for most property companies in the age of Covid-19, especially retail-only specialists. But Hammerson’s troubles pre-date the virus. Under Atkins, the company had two big calls to make on mergers and acquisitions. It got both wrong.
British Land can ride out retail property storm
Over at British Land, you can see the attraction, relatively speaking, of diversification in the property game. The plunge in the value of the retail portfolio, headlined by Sheffield’s Meadowhall, was predictably awful – down 26%. But the larger office portfolio was reckoned to have risen by 2%.
Is it the calm before a video-conferencing storm hits office valuations? Actually, that thesis looks a tad speculative.
The enforced national experiment in working from home could have lasting effects, as British Land chief executive Chris Grigg happily conceded. On the other hand, the group also expects “the trend towards higher density offices and hotdesking to reverse”, which also sounds correct. Surviving office workers may demand, and be granted, more elbow room to practise social distancing. The net result for landlords could be a score draw.
Thus you can understand why there’s a flicker of interest in British Land’s shares, up 7% on Wednesday despite the retail-driven headline loss of £1.1bn. At 408p, the shares stand at a 47% discount to the published net asset value of 774p. That’s a very wide gap.
True, even wider discounts were seen back during the 2008-09 financial crash. But, unlike then, British Land should not require a rights issue to fix its balance sheet. The current financial structure looks strong enough to withstand a few more hefty whacks from retail-land.
A formal “material uncertainty” hangs over all valuations in the current climate, it should be said – and it should be taken seriously because commercial property transactions have dried up. Yet even a less-than-reliable 47% discount is pricing in an awful lot of pain. Zoom, one suspects, is not going to do for London offices what Amazon has done for the value of shops.
