Property share prices are showing a remarkable similarity these days, virtually all sliding from last October and still trying to establish a reliable base. This of course reflects investor uncertainty on several fronts, from interest rates and working from home to the effects of the October 30 budget and the global fragility since President Trump took office.
Hammerson, a real estate investment trust (Reit) that owns or part-owns north London’s Brent Cross, the Bullring in Birmingham and Southampton’s Westquay, is one of the more intriguing prospects. It reported an increased full-year loss of £526 million in 2024 in what the chief executive, the French-Canadian lawyer Rita-Rose Gagné, called a “transformative” year.
She said the company was entering 2025 as a repositioned business after taking a £500 million loss on selling a 40 per cent stake in Value Retail, owner of Bicester Village. The group has also sold 50 per cent of the Croydon shopping centre redevelopment scheme to the joint venture partner, Unibail-Rodamco-Westfield, and unloaded its holding in the Parisian shopping centre Italie Deux. An adjacent site there has gone to the owner of Ikea. It’s a far cry from Hammerson’s modest origins, converting British houses into apartments during the Second World War.
Despite net tangible assets per share sliding from 382p to 370p, the company reported a strong finish to the year in terms of footfall, sales, leasing and capital redeployment, and said these trends have continued into 2025.
The ever-upbeat Gagné has managed a dramatic turnaround in little over four years. “The portfolio is now repositioned to higher-quality city destinations,” she said, “that are now all in the top 20 retail venues in their geographies and in that 1 per cent of where all retail spend is. We plan to do more in 2025. The next chapter for us is about growing, while scaling back disposals.”
In the debate over the future of the high street, Hammerson’s strategy depends on retailers accepting that over 80 per cent of transactions still “touch” (the company’s word) a physical store rather than online, and that the first priority is that those stores are in city centres to catch the maximum combination of passing trade and destination shopping. Retailers seem to agree. In 2024, the company signed leases for a record 262 units paying £41 million rent a year, 56 per cent more than those units were previously producing. The five UK locations reach over 30 per cent of the population, the Paris and Marseille outlets cover a fifth of French shoppers, and the three Dublin properties reach 80 per cent of those in Ireland.
The changes do not stop there. Gagné is taking Hammerson back to its roots in the residential sector, focusing on the build-to-rent (BTR) market. She has noticed that many of its shopping centres are next to underused land, enough to site 6,000 to 7,000 BTR units in the medium to long term. It is, though, worth remembering that housing requires a different skillset from managing a mall.
“The major building blocks of the turnaround are complete,” Gagné said. “But there is more to come. This phase of growth is just getting started and it’s a question of scaling up.” But the company remains cautious about capital expenditure beyond 2027.
Nevertheless, the stock market is not yet entirely sold on Gagné’s big bet on city centres. Until that is resolved the shares may continue to stutter.
Interest rates are fundamental to all property companies, and there is little doubt that the long-heralded downturn in rates is going to happen more slowly than the sector had hoped.
The investment bank Stifel’s analysts predict earnings per share rising from an adjusted 19.6p to 20.7p this year. That would take the price-earnings ratio down to 13.8p and the dividend yield up to 6.2 per cent.
We said the shares should be avoided three years ago, which was the right call. A year ago we said hold. Maybe now is the time to turn positive.
Advice Buy
Why Gagné’s roses look ready to bloom
TR Property Investment Trust
For those lacking the confidence to back their individual fancies in bricks and mortar, the obvious alternative is to invest in a fund. Many concentrate on sub-groups, such as supermarkets or workplaces, but TR Property Investment Trust has the scope to cover the entire range, here and in Europe where a third of its holdings are based.
That is not to say that TR buys into every type of property all the time. Its fund manager, Marcus Phayre-Mudge, takes a view on what’s hot at any moment.
Although he is currently not a fan of the UK residential market, TR does own a chunk of Vonovia, Germany’s largest residential property firm. The reason: the German market is heavily controlled and demand exceeds supply. It is also in shares of industrial, retail and office companies and directly owns multi-let industrial sites in London, Gloucester, Bicester and Northampton. So flexibility is the keynote.
In the six months to last September TR lodged a net asset value (NAV) total return of 10.9 per cent, while the share price returned 13 per cent. Both beat the benchmark, the FTSE EPRA Nareit Developed Europe Capped Index, which came in at 9.3 per cent. Earnings per share were 8.16p, against 7.31p in the same period the year before. Dividend yield is 5.3 per cent.
Phayre-Mudge said: “We are seeing an encouraging, albeit bumpy, recovery in listed real estate. The best buildings in prime locations are attracting strong tenant demand, while others are struggling. This environment supports our approach.”
Encouragingly, private equity has started taking over property firms, suggesting the stock market is undervaluing them, and that may lead to more deals. TR has not been exempt from the sector’s stock market downturn over the past six months, but it is a well-spread vehicle in which to catch the upturn.
Phayre-Mudge has run the fund since 2011, outperforming the benchmark in 12 of the past 13 financial years. Wealth managers such as RBC Brewin Dolphin, Quilter Cheviot and Hargreaves Lansdown are on the share register.
Advice Buy
Why Looks near the bottom of the cycle
