Concern over value gap between share prices and assets

A recent transaction has raised concern about a gap between the value of shares and assets and what that may mean for the property market.

The deal which has helped bring the issue to the fore was when Landsec agreed to sell its stake in London’s so-called “Walkie Talkie” building to Hong Kong-based Lee Kum Kee.

The sale price of £1.3billion for the building, including the firm’s 50 per cent stake, smashed records for a single UK building.

But the deal was done as Landsec traded at a 29 per cent discount to the value of its assets and there are mounting concerns about a growing gulf in public and private market values.

Some property experts are fearful that the value gap evident in the latest deal, and a number of others done recently, will herald a slide in the market.

Rufus Ballaster, Carter Lemon Camerons’ head of property, said: “Nothing in this game is easy – are the assets valued at the price they would fetch (in our experience no – they are often valued at less due to obvious professional valuation caution)?

“If the company were asset stripped and broken up, what would its tax bill be – that can be what drives a discount from aggregate net value and total share price?  Are com-prop-co shares as sought after by the main buyers as the underlying asset – often not as they are more volatile and much commercial property trades for its long term security of income.” 

Carter Lemon Camerons has in-depth knowledge of property law.  Whatever the size of the deal we advise on every stage of your transaction to meet your goals. For more information, please contact Chris Picardo or Rufus Ballaster or visit our website.