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Company spotlight: City Lofts

FINANCE

CITY LOFTS has big plans but will the upmarket flatbuilder's dreams come true?

Recently the firm placed 3,125,000 new shares with a private client and raised £2.5 million.

As the placing represented 6.6 per cent of the existing share capital of the company, it diluted the existing stock but also improved liquidity since just over 50 million City Lofts shares are now in issue.

Whether punters will want to take advantage of the option to buy more shares depends on the performance. Chief executive Stuart Wright is confident in his plan to focus on building flats in urban areas.

He believes demand remains high due to low interest rates and a renewed concentration on urban regeneration, yet the focus could well prove the firm's undoing.

The Government is trying to encourage homebuyers back into city centres with low-cost subsidised housing.

Not only will this undercut City Loft's own product but will also hit buy-to-let investors whose rental income will be undermined by cheaper options to buy part of a new home.

As City Lofts only registered a profit in the six months to September 2004 by disposing of fixed assets, this does not augur well.

The firm joined the Alternative Investment Market at the end of 2003 but some corners of the City have already turned against it.

After the share placing brokers Numis reiterated a 'sell' rating and ushered traders looking for a smaller house builder towards Country & Metropolitan.

This makes sense, as C&M already caters for low-cost buyers in City Lofts'northern market.