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"In future years 2008 may well be seen by historians as the beginning of one of
the harshest economic periods in history. Within this crisis, one of the hardest
hit areas has been commercial property, where an imbalance between a high number
of sellers, often in distressed situations, and an extremely low level of buyers
caused values to collapse. This collapse has been across all sectors and has
affected all property investors, including LAP.
As at 31st December 2008, our property portfolio was valued at £218.5m, a drop of
13.2% on a like-for-like basis. While this is a significant reduction in value,
it nevertheless compares favourably with the Investment Property Databank (IPD),
the property market benchmark, which showed retail property capital values fell
by some 28% during 2008. Our relative outperformance can be attributed to a
number of factors:
Firstly, it is now becoming increasingly clear that our recent development
programme was well-timed as it was completed prior to the current economic
difficulties. A number of our centres are now benefiting from significant
increases in income as the tenants to whom we pre-let units before development
commenced have started paying rent. This increase in income has provided a
cushion and helped to limit the fall in the value of our properties.
Secondly, between 2006 and 2008, we sold approximately £140m of properties at
prices which can now be seen to be the top of the market. These disposals were
from the more secondary end of our portfolio, the retail property sector that
has faced the steepest decline. Additionally we disposed of Chenil House, King’s
Road, in July 2008 for £14.9m. This reflected our desire to move away from
developments that were not pre-let as we predicted correctly the onset of the
fall in values of residential property...more
Michael Heller, Chairman.
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