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Hammerson outperforms retail market in Q1, waits for Klépierre clarity
Hammerson reported modest growth in the value of its portfolio of shopping centres in the first quarter of the year, but said it was waiting for French suitor Klépierre to make its position clear later this month before proceeding with its own takeover of UK rival Intu.
In spite of the difficulties endured by much of the UK retail and restaurant sectors, the FTSE 100 group said there remained good demand for its premium centres, with leasing increasing thanks to strong lettings in the UK and occupancy improving to 97.1% from 96.6%.
The recent collapse into administration of the likes of New Look, Toys R Us and Maplin, with some prominent restaurant restructuring plans announced elsewhere, Hammerson said it saw "very limited" impact thanks to its high occupancy and continued good demand for its 'destination centres'.
There will be an estimated £3.5m drop in net rental income from tenant administrations and company voluntary arrangements, as of 31 March, equivalent to 0.9% of 2017 group NRI, with a "negligible" number of failures in France and none in Ireland.
Chief executive David Atkins said: "Our strategy and the positioning of our portfolio continue to deliver a strong operational performance. Our attractive high-growth markets of Premium Outlets and Ireland are driving valuation growth and we are on track with our disposal programme."
Clients signed £6.8m of leases, significantly higher than the first quarter last year and 6% above previous passing rents and 3% above estimated rental value at the end of December. With new openings from retailers such as NYX, Levi's, Charbonnel et Walker and Lovisa and H&M's first Arket-brand store outside of Asia, UK leasing saw rents up 10%, France 3%, with the smaller Ireland business enjoying a 48% leap.
"Whilst we recognise the difficult trading environment and challenges felt by many retail and restaurant formats in the UK, there continues to be good demand for space across our centres," Atkins said, adding his favourite motto that "not all retail is equal" as Hammerson's centres delivering positive footfall growth of 5% over Easter compared to average reported footfall across all shops of -2.4%.
By the 31 of March, net asset value had reached 790p per share, up 1.8% on the same period last year, driven by retained earnings and valuation gains in France and Ireland, with the UK portfolio down very slightly.
The value of the total portfolio crept up 0.3% to £10.59bn, according to the independent 'Red Book' valuations of its portfolio by property consultants Cushman & Wakefield, with UK shopping centres down 0.6% to £3.52bn, UK retail parks down 1% to £1.2bn after the sale of two properties.
In France and Ireland, work on the £225m extension of Les 3 Fontaines in the Paris suburbs, and development progress at Dundrum in Ireland lifted valuations, offset by a slight negative impact of a weaker euro exchange rate.
Net debt was estimated at £3.4bn, down from £3.5bn over the three months due to the completion of disposals, which implies a loan-to-value of 35%, which is 100 basis points lower than year end.
Having had the smooth process of its £3.4bn takeover of Intu Properties disrupted by an offer from France's Klépierre last month, Atkins said that until the French company's makes its position clear by the put-up-or-shut-up deadline of 16 April, the board intend to hold back from finalising shareholder documents in relation to the Intu deal.