Monday, July 11, 2005

Location, Location, Location

Pobres retailers: palos porque no tienen buenas ubicaciones, palos porque tienen demasiado buenas ubicaciones. Y además a los vaivenes de los veleidosos clientes, que dura vida...

FT.com: UK retailers: Published: July 8 2005 15:32

Any visitor to Marks and Spencer's flagship store in Marble Arch knows it is prime retail space. So why are investors in M&S and other retailers not getting a return matching that offered by commercial property?

Over the last decade, the dividend yield on shares in Boots, J Sainsbury and M&S has averaged between 3.7 and 4.6 per cent. Over the same period, commercial property has yielded 7.8 per cent. Investors have also lost out on capital appreciation. Sainsbury's shares have fallen 40 per cent, M&S's 21 per cent and Boots' shares are up 8 per cent, while retail property, according to the Investment Property Databank, has seen capital growth of 61 per cent.

Investors are entitled to ask why retailers have not made their property work harder, although what value boards should assign to it is less clear. Balance sheet net book values ₤630m for Boots, ₤2.1bn at M&S and ₤5.3bn at Sainsbury bear little relation to market values. In any case, these are difficult to ascertain since, at best, only other retailers would be interested.

Retailers could perhaps make more imaginative financial use of their property. Boots is experimenting with sub-letting parts of its stores. But other arrangements, like sale and leasebacks, do not change the value of what shareholders own, even though they deliver a one-off cash boost. At the very least, boards should have property yields in mind when making strategic choices, while investors should be using them as a benchmark against which to judge retailers' performance."

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