Hammerson looks ahead: The Investment Column

Ron Spinney has achieved a great deal at Hammerson since he took over from the company's founder Sydney Mason in 1993. He has reined in a disastrous geographical diversification, cut debt to manageable levels and created a well-balanced group with an emphasis on retail, the area of the property market expected to have the most scope for growth.

As full-year figures for 1996 show only too clearly, however, what he has been unable to do to any great extent is remove the millstone of a large portfolio of UK office buildings rented at well above the market rate. While a good spread of blue chip tenants in those properties ensures strong cashflow, it precludes growth.

Net assets per share, as a result, edged ahead from 376p to 388p, at the bottom end of expectations, and the dividend was increased by a pedestrian 5 per cent to 11.2p, giving a yield at yesterday's share price of 440p of 3.2 per cent.

Hammerson is doing the right things, even if transforming Britain's fifth- biggest property business is proving a frustratingly slow process. It has put in train a serious development programme that has already chalked up a number of successes, including the pre-letting of Globe House, a landmark headquarters building overlooking the Thames at Temple, to BAT.

The pounds 38-per-square foot, 20-year terms are well in excess of an estimated pounds 30 break-even point, underlining the potential for a development portfolio in the books at cost, not likely, value.

Elsewhere, ambitious plans include expanding the Brent Cross shopping centre to counter the perceived threat from a planned centre at White City in west London.

The property market is heading in the right direction, and Hammerson has a good exposure to its growth areas. With net assets forecast to be slightly less than the current share price at the end of the year, however, and the developments still a way from completion, much of the good news is already in the price.