Every change in the cycle produces its crop of heroes – those who made the right move, while the rest of us were caught. So, in the past, we’ve had Jimmy Goldsmith turning his stocks into cash before the stock market collapse of Black Monday in October 1987, and George Soros betting against the pound ahead of its crash in 1992.
Property is not immune. In the recent slump, Gerald Ronson, Jon Hunt and Tony Pidgeley all spring to mind as those who called the market right. To that line-up can be added a fourth – Sir John Ritblat.
Goldman Sachs has cut its target share prices for the sector by an average 23%.On British Land, the investment bank is even more gloomy, saying it may have to sell up to 40% of its assets because it is too highly geared. Goldman rates the property firm’s shares a “conviction sell”, which is about as bad as it gets. As I write this, shares in BL are trading at 441p. Roll back to November 2006 when a certain veteran who has been through several recessions offloaded his British Land shares for £56.6m. It must have hurt Ritblat to get rid of his remaining 3.5m shares in the company – after all, he had built it up. There again, he did get 1,615p a share. No wonder that, whenever I come across Ritblat, he is smiling.
Business really is business, and if BL’s new broom, Chris Grigg, needed any reminding of that, he now has it. Where did Grigg spend the bulk of his career, rising to partner? Goldman Sachs. And which bank has just mauled his new employer? Goldman Sachs. Nice.
Someone else with a reputation for getting it right when others get it wrong is Mike Slade of Helical Bar. No sooner does he return from racing his yacht than he goes into the City to raise £27.7m through a share placing. Why does he want the extra money? The “exceptional market conditions” mean there are “buying opportunities that arise only once or twice in a property career”.
There has been a spate of rights issues, and Helical Bar wasn’t the first listed property company to ask shareholders to stump up cash. Serviced office provider Workspace announced a similar plan a few weeks earlier. It’s looking to bring in £87.2m.
Why does it want the dosh? Because it runs a “material risk” of breaking its banking covenants after the value of its properties slumped 25.5% in the past nine months. The company’s bankers – among them Royal Bank of Scotland and GE – will extend their term if £50m of short-term debt is paid back, although Workspace will need to pay huge fees for the privilege.
The contrast between the pair, Helical Bar and Workspace, could not be greater. Analysts reckon shareholders in the latter who don’t take up the rights will see their holding diluted by a massive 83%. But if they do go ahead, as Ian Wild at Blue Oar Securities points out, they run the risk of “throwing good money after bad”.
Wild is sceptical about the rush of rights issues. Slade’s, he says, is “an exception it’s a strong company enhancing its position”. Most are aimed at helping the issuer cut their debts. “The banks are invariably achieving enhanced terms on the remaining debt and are most definitely not taking a haircut.” It’s an unfortunate term to use about Mike, 61, who possesses a youthful head of flowing locks, but I think I know what he means.
Chris Blackhurst is City editor of the London Evening Standard
Why does Slade want the extra money? The “exceptional market conditions” mean there are “buying opportunities that arise only once or twice in a property career”
