Lean pickings in the quoted property sector

Quoted property companies are strange beasts. They talk a different language to the rest of the market. No mention of earnings and P/E ratios for them; it's all about NAV, ERV and triple NAV. So let's try and simplify things. Essentially, shareholders hand over money and expect the companies to use this to buy and sell properties and manage the property cycle to the best of their ability. Sell at the top and be in a position to buy at the bottom - simple really.

However, it's fair to say that very few property companies have covered themselves in glory in recent times. Culturally embedded with a 'buy and hold' mentality, they have been caught horribly short by the admittedly unprecedented collapse in property values. As a result they've found themselves with way too much debt and a long string of properties that are declining in value and which they are unable to sell. All of a sudden investors have become horribly obsessed with LTV (loan to value) levels or, put more simply, how much of the company's borrowings are covered by its assets. The answer from the Banks' perspective is clear. "Not enough, so can you please cover the shortfall by getting some more money from your shareholders."

All of which brings me to the events of recent days and the ever lengthening queue of companies asking for shareholder handouts. So far we've seen requests from Workspace, Helical Bar, British Land, Hammerson and Land Securities, with the promise of Segro, Liberty and Brixton to follow.

With the exception of British Land, who had a rights issue and sold a lot of assets, most companies seem to be raising enough to just keep the wolf (or rather the Bank) from the door. However, to my mind, these companies have not gone far enough. Whilst they risk incurring the wrath of existing shareholders who will inevitably see their positions diluted out of sight, the only way for these property companies to offer significant value to potential new investors is to raise enough money (significantly more than they are at present) to be able to go out and take advantage of the current heavily distressed prices.

None of the comparatively timid fund raisings I've seen so far have tempted me back into these stocks. Instead, I'm sticking with the two I've already got, Shaftesbury and London & Stamford. I like Shaftesbury because all of its debt is secured on long term agreements and their assets are of excellent quality. London & Stamford remains attractive because it has that most precious of commodities: net cash. It's a buyers market and they are one of the few buyers around.

Bradley Mitchell is manager of the Royal London UK Growth Trust