Property giant Hammerson has agreed to a cut-price sale of seven of its retail parks to Orion European Real Estate for £400 million (R7.8 billion) in the biggest sale of UK retail parks in the past decade, as it finalises a strategy to exit the troubled sector altogether. Photo: Fantasista
Property giant Hammerson has agreed to a cut-price sale of seven of its retail parks to Orion European Real Estate for £400 million (R7.8 billion) in the biggest sale of UK retail parks in the past decade, as it finalises a strategy to exit the troubled sector altogether. Photo: Fantasista

Hammerson disposes of 7 UK retail parks for £400 million

By Edward West Time of article published Feb 24, 2020

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CAPE TOWN – Property giant Hammerson has agreed to a cut-price sale of seven of its retail parks to Orion European Real Estate for £400 million (R7.8 billion) in the biggest sale of UK retail parks in the past decade, as it finalises a strategy to exit the troubled sector altogether.

JSE-listed Hammerson is seeking to reduce exposure to retail property in the UK as shoppers move online, leading to store closures on the UK high street, and as it reduces its debt pile – £3.1bn as at last June.

Hammerson’s chief executive, David 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.” He said the completion of the seven retail parks enabled the group to create a more concentrated portfolio of flagship venues, premium outlets and city quarters, “which we expect will deliver greater levels of both income stability and growth over the medium term”.

The sale follows a decision announced in July 2018 to exit the retail parks over the medium term, and instead create a focused portfolio of flagship assets, premium outlets and city quarters across major European cities.

South African companies facing high street headwinds in the UK include Truworths International, with its UK footwear chain Office as well as investment firm Brait, which plans to offload its problematic investment in New Look.

Since the Brexit vote in 2016, JSE-listed stocks with property holdings in the UK, including intu Properties and Capital & Counties, have slumped. Hammerson’s share price has declined more than 54 percent on the JSE in the past three years.

Hammerson’s total disposals of retails since the start of 2019 have amounted to £975m.

Separately, Parc Tawe in Swansea and Abbey Retail Park in Belfast have been sold individually, generating proceeds of £55m.

Combined, the portfolio sale of seven retail parks represents a net initial yield of 8.7 percent, with a discount to a June 2019 book value of 22.2 percent.

In total, Hammerson has sold 14 retail parks since July 2018, generating sales proceeds of £764m, to reduce the group’s debt and strengthen the balance sheet.

It holds an interest in one remaining retail park, Brent South, part of the Brent Cross Estate, which is held in a joint venture with Aberdeen Standard Investments and is marked for sale.

The seven UK retail parks comprise 205 000m² of space and generate net rental income of £36m a year.

The parks were Central Retail Park (Falkirk), Cleveland Retail Park (Middlesbrough), Cyfarthfa Retail Park (Merthyr Tydfil), Elliott’s Field Shopping Park (Rugby), Forge Shopping Park (Telford), Ravenhead Retail Park (St Helens) and The Orchard Centre in Didcot.

The headline price of £400m is subject to an adjustment for rent-free periods and rental guarantees, and as a result the transaction is expected to generate net proceeds of £395m.

Together with the sale of a major stake in its Italie Deux flagship destination in Paris for £363m, which was completed in December, and further retail parks disposals in 2019, this latest transaction takes Hammerson’s total disposals since the start of 2019 to £975m.



Hammerson shares closed 0.73 percent lower at R43.45 on the JSE on Friday.

BUSINESS REPORT

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