Hammerson Pins Future on Mega Malls as It Boosts Asset Sales

(Bloomberg) -- U.K. retail landlord Hammerson Plc is pinning its hopes on luxury-outlet stores and mega malls as it tries to convince investors it was right to rebuff a takeover approach by Klepierre SA.

The company will sell 1.1 billion pounds ($1.3 billion) of surplus assets as it seeks to cut its debt levels at a time when U.K. retail is being buffeted by internet shopping and growing costs. Hammerson plans to delay a planned extension of a London mall, cut costs and diversify its portfolio away from Britain. It will also buy back 300 million pounds of shares.

“These are turbulent times in U.K. retail and the wider economy,” Hammerson Chief Executive Officer David Atkins said in an interview. “We felt that now is not the time to press the start button” on new development in Britain.

Hammerson’s revamped strategy is an attempt to reassure investors that turning away French rival Klepierre three months ago wasn’t a tactical error. Retail landlords are under pressure from e-commerce, which now accounts for nearly one-fifth of U.K sales and has helped spur a slew of store closures and bankruptcies this year.

To diversify, the mall owner will change the mix of retailers in its properties, with fewer department stores and generic retailers and more fashion, leisure, events and lifestyle spaces, it said in a statement Tuesday. It also plans to sell its remaining retail parks, a type of development common in the U.K. that typically includes large out-of-town stores clustered around a parking lot.

Offloading Assets

The London-based company now expects to sell 600 million pounds of real estate this year, a 20 percent increase on an earlier target. If it can sell assets for close to their current valuations, it could show that the gap between the firm’s market worth and the value of its properties isn’t justified.

Hammerson gained as much as 2.2 percent and was up 0.9 percent at 530.6 pence at 9:09 a.m. in London. That’s still well below the company’s latest net asset value per share of 776 pence as of the end of June. Hammerson is down 3 percent on the year.

“Retail parks have been struggling” and “in the context of the ongoing physical retail problems, it makes sense to focus,” Bloomberg Intelligence analyst Sue Munden said.

The company already announced the sale of two properties Monday for 164 million pounds, a 10 percent discount to their December valuations, bringing its total sales this year to more than 300 million pounds.

Hammerson also owns malls in Ireland and France, which unlike the U.K. aren’t facing economic pressures due to Brexit. The value of Hammerson’s 10.6 billion-pound portfolio was flat in the six months through June, with growth in the luxury outlets business and the Irish operation offsetting writedowns for its U.K. properties.

Before news broke of Klepierre’s bid in March, Hammerson’s shares had slumped about 20 percent since the start of the year as Britain’s worsening retail environment led to concerns it could damp demand for space in malls. Klepierre abandoned its courtship of the U.K. company in April, and cannot now make another approach until October.

Within days, Hammerson ended its own pursuit of another company, Intu Properties Plc, after a growing number of shareholders opposed the deal.

Hammerson also said:

• It’s targeting cost savings of at least 7 million pounds a year and will cut the number of executive directors from four to two
• The company plans to redeem 500 million euros of bonds due 2019
• More on results here

To contact the reporter on this story: Jack Sidders in London at jsidders@bloomberg.net

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Paul Armstrong

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