In the property sector, those who were greedy when others were fearful are well positioned for recovery.
Though the property sector prognosis is bearish, those who were greedy when others were fearful are well positioned for recovery.
While analysts are divided on the exact time the property market will return, if ever, to pre-2007 days, they all agree that new companies, which have been able to purchase assets during the recession and which are unburdened by the legacy of huge falls in the value of existing property assets, are the ones occupying the strongest positions.
Two such companies are Max Property and London & Stamford. Floated on AIM with a £211 million funding in May 2009 by property magnate Nick Leslau, Max, externally managed by Prestbury Investments with a team led by Leslau and Prestbury CEO Mike Brown, cannily entered the market when prices were low. Its stated aim is to buy at a relative trough and sell when the company expects an appreciation in property values, producing handsome returns for shareholders, including Aviva and BlackRock. Since flotation, Max has spent £244 million buying the industrial portfolio of collapsed property fund Industrious, while in January this year, the group purchased an office portfolio from UBS in a £39 million deal.
Brown insists that although the macroeconomic environment is ‘gloomy’, it has created many opportunities for Max. ‘There are only one or two years in ten when the market is sufficiently confused that you can pick up mispriced deals,’ he explains. ‘When there are dislocations in the market and companies going bust, there is “distressed pricing”, which for a company that is only one year old and with large reserves of cash represents a great opportunity.’
With £90 million of uncommitted cash left, Max is one of the two companies that analysts generally agreed was a wise investment, having launched at the right time in the property cycle. Moreover, at 104p, the shares are trading at a near 19 per cent discount to broker Oriel Securities’ 128p NAV per share estimate for the year to March 2011.
Another to have entered the fray at the apposite time is London & Stamford, which joined AIM in 2007 by way of an IPO that pulled in £247.5 million. Headed by property entrepreneurs Raymond Mould and Patrick Vaughan, London & Stamford has bought a number of high-profile properties including the office block One Fleet Place and a residential development called ‘The Stadium’, in part of the former Highbury football ground, purchased last September for £41.4 million.
Still with £200 million cash and planning a move to the Main Market by September, London & Stamford is deal-hungry, having acquired the Radial distribution fund and its property portfolio in a deal worth £208.5 million in May. Its shares traded recently at 118.25p, a modest 3.86 per cent discount to forecast net asset value.
Despite continuing fears of a property double-dip, companies like Max Property and London & Stamford could still make big gains from having entered the market at the right time.