Aim-traded property recovery play London & Stamford says it plans to target deals worth over £200m going forward in an attempt to avoid overpaying in the clamour for property assets.
Since the group made its maiden purchase nearly a year ago, the commercial property investment market has undergone a radical reversal of fortunes, with cash-rich investors and foreign buyers competing for limited assets and pushing up prices. So how large is the company prepared to go? "The answer, I suppose, is however large the deal needs to be to get us out of the current feeding frenzy," says director Martin McGann, adding that "north of £200m" was the starting point.
At its half-year results, the company was sitting on £291m of cash deposits (held in 15 separate banks to mitigate risks), plus up to £90m available from Cavendish, its joint venture with Middle Eastern investors. "Gear that up and you start to get near £1bn," adds Mr McGann. "Is more available? Well, we haven't asked yet."
| LONDON & STAMFORD (LSP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 125p | MARKET VALUE: | £625m | |
| TOUCH: | 124-126p | 12M HIGH: | 137p | LOW: 81p |
| DIVIDEND YIELD: | 3.4% | TRADING STOCK: | nil | |
| PREMIUM TO NAV: | 20% | |||
| INVEST PROPERTIES: | £304m | NET CASH: | £150m | |
| Half-year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 95.2 | -3.6 | -0.7 | 2.0 |
| 2009 | 104.3 | 15.4 | 4.5 | 2.2 |
| % change | +9 | - | - | +10 |
Ex-div: 25 Nov Payment: 21 Dec | ||||
In the latest six-month trading period, L&S raised £220m net of expenses in July's placing and completed property acquisitions, including a retail park in Aintree and a distribution unit let to supermarket Somerfield. Two days before the period-end, it paid £41.4m for a block of 146 apartments in the north stand of the redeveloped Arsenal stadium. Since the end of September, it has leased 59 of these. "We intended to let five a week, but it has been more like nine or 10 a week," said Mr McGann. A rental yield of 7 per cent is being targeted on the flats.
The net asset value (NAV) nudged up to 104p, the result of an £11.6m valuation uplift, but management notes that "the greatest part of recent improvement in yields has occurred post 30 September". L&S's share of the valuation of the Meadowhall Shopping Centre, owned in a joint venture with Cavendish and British Land, increased by £2.4m.
Income from these purchases, plus earlier deals buying office buildings in Leeds and the City of London, has boosted net rental income to £6.7m, more than double March's year-end figure of £3.1m.
Broker KBC Peel Hunt forecasts that allowing for the recent yield shift, year-end NAV will hit 121p.
