The roof fell in on shopping centre giant Intu last summer. Many wondered if rival Hammerson would be the next to collapse. News of a potential asset sale by the company should stave off fears.
Hammerson is discussing the sale of its retail parks to Canadian private equity firm Brookfield. The amount is thought to be about £50m less than the £400m price agreed with investment manager Orion before that deal fell through a year ago. Yet if confirmed it will offer a positive sign that large retail sites offering click-and-collect services have proved relatively resilient in the pandemic.
More asset disposals will be needed to strengthen Hammerson’s balance sheet. It was 70 per cent geared at the end of 2020, with £2.2bn of debt. A further fall in property values expected this year will add to the pressure. The Irish portfolio, accounting for more than a tenth of assets, is a particular concern, says Colm Lauder of Goodbody. Its value fell 18 per cent last year — half as far as the UK one.
The company should be able to pull through. It has less secured debt than Intu and was able to pull off a £552m emergency rights issue last summer. Shares — though worth 86 per cent less than five years ago — have more than doubled in value since their November low.
This price rise is not entirely warranted. Barclays expects compound annual growth in earnings of 7 per cent in the next five years. That would push up the yield to a modest 6 per cent, hardly enough to compensate for remaining hazards. Hammerson has acknowledged there could be risks to its going concern status in certain circumstances.
Even when the balance sheet is fixed, new boss Rita-Rose Gagné has a weighty task ahead. The rise of ecommerce will force property companies to rethink their relationship with tenants and find new ways to pep up city centres. Hammerson is a rebuilding project that will take years to complete.
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