Property developer is forging ahead with new shopping centres in the UK and France
Property developer Hammerson, which owns London’s Brent Cross and Birmingham’s Bullring, is forging ahead with new shopping centres in the UK and France and has signed up John Lewis as an anchor tenant for its planned mall in Leeds.
The company sold the bulk of its portfolio of London offices for £518m to Canada’s Brookfield last month to focus on retail. It used some of the cash to invest an additional £100m in nine designer outlets, including Bicester Village near Oxford, through its holding in Value Retail. Hammerson also secured French department store Printemps as an anchor tenant for its shopping centre at Les Terrasses du Port in Marseille, which is due to open in the spring of 2014. Nearly three-quarters of the 61,000 sq metre centre are now pre-let.
Footfall at the group’s UK shopping centres dropped 2% in the first half of the year, and 3.3% at its French malls. David Atkins, Hammerson’s chief executive, said: “That’s no real surprise against the general economic backdrop. But it’s not all bad news – leisure, footware, jewellery and beauty have done well. The one area of real weakness was ladies’ fashion and with the sun shining [now] there is every prospect of a bounce.”
Occupancy levels have improved to 97.5%. The company’s net rental income rose by 2.4% to £141.6m in the first half of the year, and its net asset value increased 0.9% to 535p a share. Hammerson was one of few risers on the FTSE 100 index earlier in the day but the shares closed down 3.7p at 457.3p, with no gainers on the bluechip index at closing time.
The Olympics could provide a small boost across the country by way of a feelgood factor – “depending on how well we do” although in London, people might find other things to do than go shopping, or even go away to avoid the crowds. Atkins pointed to a slight dip during the Jubilee weekend when people were out to celebrate, but not necessarily hitting the shops.
Even so, he is optimistic. Hammerson’s new schemes in places like Marseille and Newcastle are expected to boost income growth to 15% in the next three years, 5% a year. “We will continue to grow our dividend by a similar amount,” Atkins said.
Construction at Eastgate Quarters in Leeds city centre, where Hammerson is building a 36,000 sq metre mall, will start early in 2014 and the centre is scheduled to open two years later. It’s a rival development to Land Securities’ Trinity Leeds, which is almost three times the size and is due to open next spring, also in the city centre.
Atkins said the two will be able to exist side by side, with Hammerson looking to fill its two arcades with mid-to-upmarket retailers while Trinity Leeds will have more “mass market” retailers.
Hammerson has started a string of other retail developments, such as Manor Walks in Cramlington and Monumental Mall in Newcastle, which will both open next year, and is planning a major extension of Brent Cross, adding up to 65,000 sq metres of shops.
In Croydon, Hammerson faces a tough battle with Australian developer Westfield, which is plotting its third major mall around London. The majority leaseholders of the Whitgift centre have chosen Hammerson as their preferred development partner, but Westfield has the backing of the Whitgift Foundation, which owns the freehold. Hammerson wants to merge Whitgift with its Centrale mall and will on Friday unveil its master plan for 140,000 sq metres of retail space in the town centre after meeting with the council.
Hammerson owns 19 shopping centres (11 in the UK), including Cabot Circus in Bristol and the Oracle in Reading, as well as 18 retail parks (17 in the UK).
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