Hammerson said yesterday that it had sold its 75percent stake in Italie Deux for £423m in a deal with Axa Investment Managers (Axa IM) as it drives down debt. Following the deal, Hammerson’s net debt stands at £3.1bn on a pro forma basis.
Axa IM is a global leader in real asset investments and the leading real estate portfolio and asset manager in Europe.
The latest Italie Deux transaction takes Hammerson’s total disposals in 2019 to £456m of its £500m target for the year, following the sale of £33m of retail park assets in the first half of the financial year.
David Atkins, Hammerson chief executive, releasing the firm's results for the six months to June 30 yesterday, said: "The UK retail landscape is undoubtedly challenging, and traditional high street fashion is under pressure. However, our focus on shifting our line-up towards categories with greater customer appeal and rental growth potential has resulted in more than 90percent of new leasing to leading consumer and F&B brands. The company swung to a loss of £319.8m from a profit of £55.7m the prior year. On an adjusted basis profits were 10.5 percent lower to £107.4m. Net rental income slid 12.3percent to £156.6m.
The headline loss was largely down to a £423.4m net revaluation loss on its property portfolio in the first half, as continuing market uncertainty and a slowdown in leasing affected value, especially in the UK.
The company’s interim dividend was unchanged at 11.1pence per share. Atkins said Hammerson intended to reach the goal of £500m of disposals in 2019 and “even in this tough environment where deals are taking longer to transact, we are now most of the way there. We will continue to pursue additional sales throughout 2019 and into 2020 to further strengthen our balance sheet.”
US activist investor Elliott Advisors, which holds a 5.3percent stake in Hammerson, has been pressuring the company to reshape its portfolio and offload debt. Last year Hammerson backed away from a £3.4bn takeover of smaller shopping centre rival intu Properties. French shopping centre operator Klepierre also abandoned a £5bn bid for Hammerson last year.
The disposal reflects a 4.1percent net initial yield on Italie Deux, while the total sale price represents an 8.5percent discount to December 2018 book value and marginally below end of June 2019 book value.
As part of this transaction Hammerson will complete the Italie extension, with a projected cost to complete of £18m as at the end of June this year in addition to other committed refurbishment works. The new joint venture follows the creation of the first partnership with Axa IM - Real Assets in 2014 at Hammerson’s flagship destination, Cabot Circus.
“Italie Deux is a major, well anchored shopping centre with an attractive catchment and strong track record of performance located in a key global city. We are delighted to be working with the Hammerson team to realise the significant future potential of this asset,” said John O’Driscoll, the European head of Transactions at Axa IM - Real Assets.
Hammerson shares closed 6.25percent lower at R44.82 on the JSE yesterday.