Re­bound long way off

Finweek English Edition - - Companies & Markets - JOAN MULLER

IN­VESTORS HAVE BEATEN a hasty re­treat out of Bri­tish shop­ping cen­tre gi­ant Lib­erty In­ter­na­tional fol­low­ing worse than ex­pected re­sults for first half 2008. The dual-listed stock (JSE and FTSE), which has an SA share­hold­ing of more than 40%, was down 10% in rand terms in the five days fol­low­ing its in­terim earn­ings an­nounce­ment ear­lier this month.

Un­der­ly­ing prof­its slumped 17% in the first six months of 2008 (year-on-year) – in stark con­trast to the sit­u­a­tion just six months ago, when the com­pany de­clared a 6% in­crease in un­der­ly­ing prof­its for 2007. At the same time prop­erty val­ues of Lib­erty In­ter­na­tional’s £8bn (R116bn) port­fo­lio fell by 7,4%.

The Lon­don-listed prop­erty in­dex is off a mas­sive 52% from its 2007 highs as jit­tery in­vestors con­tinue to bail out of bricks and mor­tar on the back of on­go­ing tur­moil in global fi­nan­cial mar­kets. How­ever, it has to be said that Lib­erty In­ter­na­tional’s share price has been more re­silient than the rest of Bri­tain’s real es­tate sec­tor, no doubt due to its large ex­po­sure to re­gional shop­ping cen­tres in prime lo­ca­tions. Even so, in­vestors are clearly keen to cut their losses be­fore share prices drop fur­ther.

Man­age­ment con­cedes there’s more bad news to come. Says Lib­erty In­ter­na­tional chair­man Pa­trick Burgess: “Prop­erty val­ues are un­likely to re­cover un­til sta­bil­ity re­turns to Bri­tain’s bank­ing sec­tor. There­fore, we con­sider the process of fall­ing val­ues not yet com­plete.”

SA fund man­agers agree a re­cov­ery is still some way off. Coro­na­tion Fund Man­agers’ prop­erty an­a­lyst An­ton de Goede says shop­ping cen­tre val­ues are likely to fall fur­ther to pre-2002 lev­els, when the most re­cent up­swing in Bri­tain’s prop­erty mar­ket started. Says De Goede: “Pos­i­tive mo­men­tum within the Bri­tish prop­erty mar­ket may only re­turn once this yield out shift has been com­pleted, which could take 12 to 18 months given the cur­rent un­cer­tain con­sumer and bank­ing en­vi­ron­ment.”

Evan Jankelowitz, co-head of Stan­lib’s prop­erty fran­chise, says Lib­erty In­ter­na­tional is prob­a­bly not the place to be over the short term. “The com­pany has great as­sets and great man­age­ment but is caught in a very weak mar­ket.”

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