Hammerson has offloaded its out-of-town retail parks for £455m as it looks to reduce its £3bn debt pile and shield itself from the high-street crisis.
The property group, which owns the Bullring shopping centre in Birmingham, is selling seven sites, including Elliott’s Field in Rugby and the Cyfarthfa park in Merthyr Tydfil, to the London-based private equity firm Orion for £400m. The sale of two other parks has raised another £55m.
However, in a sign of the tough market conditions faced by retail property groups, the parks are being sold at a knock-down price. The £455m raised is 22% less than the properties were valued at last summer.
Last year David Atkins, the Hammerson chief executive, promised to sell more assets after coming under pressure from an activist investor, the US hedge fund Elliott Advisors, to improve performance. The company’s share price has declined 40% in the past 12 months to 225p.
Atkins said: “Against a challenged retail and investment backdrop we have exited the retail parks sector. Having achieved disposals of close to £1bn since the beginning of 2019, our focus remains on strengthening our balance sheet to create further resilience.”
The sale of its stake in a French shopping centre raised £363m, with other retail park sales boosting the figure to £1bn.
Hammerson is trying to claw back credibility after a turbulent recent history that included the abandonment of a plan to buy smaller rival Intu Properties, the company behind the Trafford Centre in Greater Manchester. It also fended off a £4.9bn takeover approach from the French mall operator Klépierre.
The disposals come at a tough time for property groups, which have been hit hard by the high-street crisis. Hammerson also owns a stake in Bicester Village, the Oxfordshire designer discount outlet, which is reported to be struggling as the coronavirus outbreak keeps high-spending Chinese shoppers away.
Retail failures and restructuring programmes have pulled down rents while even household names such as Marks & Spencer want to operate fewer stores as sales move online. Confidence was further undermined by the suspension of the £2.5bn M&G Property Portfolio fund – which remains closed – after it could not sell properties fast enough to repay investors who wanted out.
Intu is trying to persuade investors to back an emergency cash call despite a bombed-out share price of just 14p, which values the company at less than £200m.
Hammerson has now disposed of 14 retail parks and plans to sell its remaining interest in the Brent South site, which is part of Brent Cross. The company will update investors on Tuesday, when it is due to publish its annual results.
The Stifel analyst John Cahill said that despite the reduced price tag, the sale of the retail parks was “unequivocally good news” for Hammerson. “The sale of all the remaining retail parks in one go reduces contagion into the rest of the portfolio valuation and makes a substantial contribution to reducing leverage, plus exposure to the UK,” he said.
