Developer Terrace Hill is standing tall in a difficult property market, but its share price has been hamstrung by downbeat sentiment and may continue to be held back.

Executive chairman Robert Adair says the company is sticking to its knitting and adding value through excellent deals – such as the purchase of a West London site for £17m in November that it sold for £31m in December – a strategy which helped net asset value advance strongly in the year to October. Triple net asset value, incorporating all work in progress and subtracting theoretical tax and goodwill, increased 13.8% to 83.7p, or by 16.1% if dividend payments are added back in.

A final 1.3p dividend meant the total payment increased by 16.7% to 2.1p per share, for a 3.9% yield. Gearing has reduced 48% by year-end and Adair expects it 'to keep dropping for the next few months, by which point we hope there’s scope to do more acquisitions’. To this end, Terrace Hill has £26m of cash on its balance sheet, plus a £32m bank facility.

Adair explains that in current conditions Terrace has been focused on doing deals, particularly on the commercial side, and has continued to build up its Clansman housebuilding division with the intention of spinning it off when market conditions improve – ‘hopefully in 15-18 months’. He admits to having seen recent further weakening in investment yields and foresees a modest slowdown in occupier demand.

Though Terrace Hill is doing well and long-term prospects are buttressed by Britain's housing requirements, the shares could continue to falter short term. Reduce.

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