Hammerson sees strong returns on French property

Hammerson warned of more pressure on UK property prices as the strong performance by its French portfolio helped partially offset a downturn at home.
The UK real estate developersaid yesterday that UK capital values fell sharply in the second half of its financial year to the end of December, in contrast to France, where it has about 30 per cent of its business.
An adjusted net asset value increase of 3 per cent for the 12 months to December 31 masked a 5.5 per cent slump in the second half, following 9 per cent growth in the first six months.
John Richards, chief executive, warned there was likely to be pressure on UK capital values in the first half of 2008.
"I wouldn't be surprised to see a further 50 basis points move in yields in the first half of the year," said Mr Richards. "It will no doubt be a challenging year but we can outperform it."
However, Mr Richards said the company was proving resilient to the downturn because of the quality of its ($14.4bn) property portfolio. He added that retail, which accounted for more than 70 per cent of its portfolio, remained the most robust sector in the UK.
He was less bullish on the office sector in the City of London, saying there were worries about a drop in occupier demand.
Hammerson reported a return of 5.4 per cent for the year, on which the capital return was 1.6 per cent. In the six months to June 30, the portfolio saw a return of 5.9 per cent, while in the second half it turned negative at -4.1 per cent. Capital returns in France rose 16.5 per cent.
The property group said pretax profit fell to 110.4m, compared with 792.4m for 2006, reflecting a smaller gain in property values.
"This shows that prime assets will come through the credit crisis relatively resiliently," said Lehman Brothers analyst Mike Prew.