Equity release specialist Sovereign Reversions is stepping up its advisory business after losing an annual £5.4 million.

The AIM-quoted company, which buys elderly people’s homes at a discount to market value and allows the sellers to remain for their lifetimes at moderate rents, says its portfolio of equity release assets grew 17 per cent to £77.9 million in the year to April. Chief executive Graeme Marshall says the value of equity release plans arranged by the company rose 25.5 per cent.

He stresses that Bedford-based Sovereign, which bought Home & Capital Trust Group in the previous financial year and paid £8 million for property trader Welfare Dwellings Trust in March, is growing its advisory business. Marshall argues that this provides an income stream ‘unhindered by falls in property prices’ and enables the company to initiate deals and advise on other companies’ products, such as lifetime mortgages, as against remaining a ‘passive ‘business taker’.

He suggests that equity release schemes should become more popular, as against lifetime mortgages, as the property market weakens. Indeed, he contends that equity release provides counter-cyclical growth potential, as worsening economic conditions cause more cash-strapped older people to seek to realise what cash they can while keeping a roof over their heads.

Sovereign says its embedded value rose 7.5 per cent in 2007-08 to 484.5p a share, and Marshall maintains that, if the overall property market fell another ten per cent, the company’s net asset value would fall by 31p to 230p. That compares with today’s price of 182.5p, down from 420p at the beginning of last year, and suggests the fall has been overdone, though a significant rerating looks unlikely while current sentiment prevails in the property and share markets.   

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Sovereign Reversions	AIM	£20.72m	150.00p	0.00p
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