EDITOR’S COMMENT Is it just me or are you starting to feel a slight change in sentiment in the market? There’s definitely a change in tone among much of the listed sector, a confidence that now might be the time to start spending again – if, of course, vendors are willing to accept actual valuations.
While I am still firmly in the “survive until 25” camp, very much believing that we’re not going to see high volumes of investment deals, real positive growth and a return to something that feels like a more normal real estate market until next year, I do feel a tinge of positivity.
And it is summer. And the sun is trying to shine on us a bit. So, let’s sit with that for a while and focus on a few reasons to be cheerful.
At Hammerson, chief executive Rita-Rose Gagné is not just feeling cheerful, but relieved. After three years of hard graft, cutting jobs, selling off assets and focusing firmly on the numbers, she may have finally started to turn the REIT around.
While the sale of Hammerson’s stake in Value Retail to LVMH-backed L Catterton, may have been at a chunky discount, getting out of the complex structure that has delivered very little return to the business has gifted Gagné £600m to pay down debt, appease shareholders (a little) and the ability to get back out into the market to play.
In an interview with EG this week, Gagné tells us: “We scaled back, but we are scaling back up. The notion was never to make the company smaller, it was to make the company larger and stronger. We just had to go down this path to then grow it back in the right way.”
Growing back the right way for her is taking £350m from the Value Retail deal and re-investing it in the portfolio with a key focus on consolidating its £1bn of joint ventures.
In the world of student beds, Unite says the environment today provides the “strongest investment opportunity” for the business in a number of years. As such it has raised almost £450m from a share placing to give a total firepower of £700m. It expects to have spent that £700m by the end of the year and is hungry for assets.
Even Custodian Property Income REIT boss Richard Shepherd-Cross is hungry for growth, despite still smarting from the firm’s failed £1bn merger with Abrdn Property Income Trust.
“I feel like a terrier that’s been bitten by a rat,” he tells us in this week’s EG Interview, commenting on whether he has been put off growing the business through M&A. “I’m now really angry and now I really want to do one.”
Finding scale and growing is vital for Custodian. Shepherd-Cross needs to be positive about finding opportunities. When the business launched a decade ago, being a £150m trust was big enough. That is no longer true today and while the trust is now valued at close to £600m, he knows it is still not big enough. And like that terrier, he’s not giving up on the chase until he finds his prey.
Maybe the terrier simile is perfect for the real estate market at the moment. Terriers (I have one) are ace. They are solid little dogs that are brimming with personality. Border terriers (like my dog) are particularly known for having endurance, for being loyal, but notoriously difficult to train. If a terrier wants something, it will go for it and keep going until it gets it, no matter how many treats you may waft under its nose.
As the environment does start to shift and sentiment moves from one in which we’ve seen the whole industry scale back, from space requirements and investment activity, to one that is scaling back up, maybe we all need to be a little bit more terrier. Determined, relentless and focused on capturing our prey.
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