Property group turns to Dylan for inspiration!!
By Daniel Thomas, Property Correspondent
Published: August 19 2008 08:25 | Last updated: August 19 2008 22:08
The four horsemen of the apocalypse made an appearance in the property industry on Tuesday as UK developer Brixton warned that worse was to come for the struggling sector.
The company’s weak first-half results were fronted by a picture of the horsemen, although the suggestion seemed to be that they were coming for the industry rather than for Brixton.
Tim Wheeler, head of Brixton – described with only a modicum of irony by a real estate analyst on Tuesday as “everyone’s favourite” chief executive – quoted from Bob Dylan’s All Along the Watchtower in the company’s results: “None of them along the line know what any of it is worth.”
He said the song captured the beleaguered mindset of the commercial property industry.
Mr Wheeler, a veteran of the property industry and known for his opinionated comments, warned that there would be further falls in prices as valuers struggled to catch up with the real level being set by the few transactions carried out in the market.
The value of Brixton’s own portfolio lost 10 per cent in the first half, or around £245.3m ($458m), underperforming the benchmark IPD industrial index.
Brixton focuses on what is seen as the less salubrious part of the property market: developing warehouses, industrial buildings and business parks, mainly around London’s M25 motorway and the south-east gateway airports.
The group’s name – like that of rival Segro, the developer formerly known as Slough Estates – derives from the London district in which it started.
Mr Wheeler has been one of the most bearish chief executives in the market, accurately pinpointing the top of the market in 2006 with a large sell-off of Brixton’s properties.
In the event, with hopes of a short, sharp downturn dashed, his once unfavoured predictions of a drawn-out and damaging property slump appear to be on the mark.
Mr Wheeler gave a confident report of the company’s prospects, saying that its £2.2bn of good-quality properties let to a diversified tenant base meant it was well placed to weather the storm and declaring a 2.1 per cent increase in the interim dividend.
However, he warned of the deterioration in the wider market.
The company said that net asset value per share fell 17.8 per cent to £4.48 in the six months to the end of June.
The company revealed a loss before tax of £236.7m, from £192.3m in June last year, and a loss per share of 86.8p, from earnings per share of 70.9p.
There was more positive news on rental income, with rental growth of almost 4 per cent and net rental income up 13.5 per cent to £39.4m.
But there were warnings about the future.
Mr Wheeler said that its properties would not be immune to the economic slowdown, and voids – the empty space in its buildings – had risen to 18.7 per cent, in line with company forecasts.
Tenant defaults were rising, but still modestly, as were bad debt provisions.
The group has frozen new development and acquisitions.
The company has been affected by the rates that owners of unoccupied property are having to pay, which have cost the group £1.6m since their introduction in April.
Copyright The Financial Times Limited 2008
