View from City Road: Holding back on Hammerson

If Hammerson had actively tried to upset Standard Life it could hardly have done a better job.

Standard's income on its 23.6 per cent stake has dropped from pounds 8m to pounds 3.9m following the dividend cut. The net asset value underpinning the shares has fallen to less than half the 1989 peak and is likely to drop further this year, limiting the scope for a recovery in Hammerson's share price. And its high gearing reduces its potential for recovery.

Most upsetting of all, the 5.75 million shares Standard picked up at pounds 11 each to rescue it from the clutches of Rodamco in 1989 are now worth just 331p. Hammerson could not be expected to survive the property slump unscathed, but it has underperformed three of its peers - MEPC, Land Securities and Slough Estates - by between 30 and 50 per cent in the past two years. That may be partly due to its larger exposure to overseas markets, but it also reflects investors' belief that it strolled complacently into the recession and failed to take action quickly enough when the severity of the downturn became clear.

Standard Life can only hope that Ron Spinney, Hammerson's new chief executive, can take action quickly enough to make a difference. That is likely to mean more disposals than the pounds 150m or so talked about by the management, which would only maintain gearing at its current level. It could also mean a hefty rights issue - a one-for-two at about 250p would raise just pounds 200m and still leave gearing at about 70 per cent.

A rights issue depends on the attitude of Standard Life, and some took the lack of a cash call yesterday as a sign that it would not give its support. More likely is that it wants to see what he proposes after his three- month review of the business before deciding how much support they are prepared to give.