Member Info for JGFFourie

Hammerson has fallen almost exactly in line with the fall in other property REITs. Currently, property of any kind (even residential property) is no longer seen as a good investment and there is a flight from equities into fixed interest investments. As the price falls, the return by way of dividend income increases, so, at some point, Hammerson (and other property REITs) will begin to seem attractive, by reference to the returns on fixed interest securities.

Don’t hold your breath! All REITs are trading at about 60% of their net asset value, so that it is not likely that the price will rise much above 30p, based on present valuations. However, 30p would still be quite nice!

I am not sure about this particular dividend, but in the case of all other dividends which I receive from REITs, the initial payment is 80% of the full dividend and the remaining 20% appears later in my account, under the description “tax reclaimed”.

The current strategy of the Directors is to reduce the companies debt, or, if not reduce, it, renegotiate it so that it has a longer maturity date. If the creditors have no control over the company, because it is not in breach of any of the covenants under its debt, it can be free to just sit tight and wait for the economy to improve. Not just the British economy - the company has properties abroad, as well, spreading the risk more widely than those REITs whose assets are situated only in the United Kingdom.

I am not able to see how raising money by committing to a long term interest rate of 7.5% until 2028 can be a wise move. Interest rates might well fall. Also, paying off the 3.5% Bonds which do not mature until 2025 doesn’t seem to make much sense. Better to just invest the cash required to pay them off - possibly at a higher rate of interest, until it is needed. However, it does, of course, provide certainty in a very uncertain market. Possibly that is why the price rose to 25p this morning, after having fallen to 23.8 on Friday after the news.

One reason why the prices of shares in REITs might be “softening” at the moment is that the Government has just announced that it is offering over 6% on National Savings Bonds. It is now offering a rate of interest comparable to that which shares in REITs are offering by way of dividend income, but with absolutely no risk of loss of capital, up to a maximum, I think, of a million pounds. This may be enough to tempt many investors away from equities and into bonds.

That, of course, remains to be seen. The success of the Directors will be measured by their ability to complete the current proposed disposal programme successfully. In the present very difficult market for commercial property, that does, of course, represent quite a challenge.

Hammerson represents a good long term investment - prices have been “marked down” today to permit those wishing to invest in the longer term to buy at a favourable price. Based on the current rate of payment of dividends, the return is about 6%, however, this year, only 90% of the profits are being paid out as dividends, so this has the effect of enhancing the value of the shares. The price is likely to settle at about 24p now for quite a long time.

There has been a rather muted response to the announcement of the restoration of dividend payments. It does not really alter the overall position of the company. When the dividend is paid, the company will be worth that much less. However, the disposals seem to be progressing according to plan, so payment of a dividend should not affect the overall viability of the company.

Buying yesterday at 23.8p was a good idea!

The Board is acting on its underperformance, by retaining all earnings, for the time being. This improves the cash position of the company and increases its value by the amount of the cash retained but also because a sounder financial position makes the company less liable to fail.

Yes, as you say, Hammerson has sufficient liquidity to meet its debt repayments for the next two years. It does need to sell more of its assets within those two years, so as to sure to have funds set aside to repay further debt maturing in 2025 to 2026. By the time the main debt matures in 2027, market conditions might, very well, have improved.

I thought that, at 23.8p this morning, it might be worth taking a small position, as the market seems to value Hammerson, at the moment, at about one-half of its net asset value per share. At a guess, the current net asset value is probably about 48p, so anything under 24p is realistic.

Indeed - small top up today at 51.3.

By definition, a “black swan event” is never expected!

I don’t think that the larger shareholders, who now control Hammerson, are particularly interested in short term share price fluctuations. If the share price falls, it simply represents and opportunity to increase their holdings in the company on advantageous terms. In the long term, if Hammerson can continue to realise sufficient from its disposals program to stave off its creditors, it will represent a very sound capital investment. The larger shareholders see it as a long term investment, rather than as a vehicle to make short term gains speculating on the share price.

It is true that, in the modern high interest climate, the shareholders in Hammerson would be best served if sufficient of the portfolio were to be sold to pay down most of the debt. Then, with a streamlined administration servicing a smaller number of remaining prime properties, the company would be very well placed.

In economic terms, the company is in a far sounder position, given the head winds currently facing the economy, by retaining the dividend for the time being. The survival of the company depends upon having sufficient cash in the bank to stave off attacks by hostile creditors. The more cash the company has in the bank, the sounder its position and, in principle, the higher the value of the share price, since, if the company had paid a dividend, it would have been less valuable to the extent of the dividend paid out. The current fall in the share price is simply that all share prices are currently falling, because of the difficulties faced by some major banks, in particular Credit Suisse.

Thank you - it could all have been summed up in a simple “don’t panic” of course!

Hammerson held Hillcross in a separate company with its Japanese investment partner. Clearly, both owners considered that trying to keep the company afloat would simply be a case of “good money after bad” and so they have decided to let it go under. Hammerson will be buffered by limited liability of the separate investment company and will not become liable for the debts of the Hillcross company.