The landlord, which owns swathes of properties in London’s West End, said in its half-results this week that its net asset value was down almost 1%, led by declines in its retail properties.
Seeing Shaftesbury as “struggling with big shops”, Jefferies said the planned 241,000 sq ft in the pipeline will nudge earnings higher into 2021, but “neither the asset value nor stock price has adequate yield support”.
Jefferies sees a “widening divergence” in the mix of properties, as the Shaftesbury portfolio's larger shops have become its “weakness”, with its Long Acre street of large high street shops seeing a 14% decrease in rental values over the past six months.
“The large shops on this street are c.9k sq ft and were in demand a decade ago, but now demand is ‘dead’ and this market is suffering from department store sudden death, especially in mid-range fashion (e.g. Gap),” the analysts said.
By contrast, the Covent Garden estate has been holding steady as it attracts “halo brands” such as Apple, Tiffany, Bucherer as opposed to the mid-range retailers who have suffered from weak consumer confidence.
All in all, Jefferies felt the landlord should be downgraded to ‘underperform’ from ‘hold’ on a maintained 790p price target, against a sector that saw a bounce this month when it was announced that rival landlord Capital & Counties would sell its Earl’s Court properties, but with fellow retail landlords British Land and Land Securities both suffering steep write-downs in the value of their properties this year.
Shares in Shaftesbury fell 1% early on Wednesday but were flat at 910.5p by the afternoon.