Hammerson plc, the British and European mall owner is a way less risky investment than it was a year ago as its new management team has cleaned up its portfolio. This is even though war is still raging in Ukraine which is still creating uncertainty and fueling a higher cost of living in Western Europe.
Hammerson, which became a real estate investment trust (Reit) in 2013, now owns and manages a portfolio of 20 shopping centres in the UK, France and Ireland and also has a 25% investment in Value Retail, the outlets retail property business. Value Retail owns assets outside major cities in Western Europe. One of Hammerson’s iconic malls is Bullring & Grand Central, located in Birmingham, England’s second largest city.
Research analyst and fund manager, Ahmed Motara says Hammerson has become a well-known and well-trusted landlord since it was founded by Lewis Hammerson, a residential developer, in 1942. The company went public in 1954 and was the first company to develop and own a covered mall in the UK, in 1976 with the opening of Brent Cross in north London. The company focused its portfolio in 2010 to include only retail assets in the UK and Western Europe.
It now owns eight of the top-rated 50 UK shopping centres according to research group, GlobalData, as well as shopping centres in Dublin, Ireland.
“Its assets in Paris and Marseille are also significant, with the Terrasses du Port opening to great fanfare in 2014. Further, the Value Retail investment is the highest returning in the group,” he says.
All the positives have need to be retained by the management team of Rita-Rose Gagne (CEO) and Himanshu Raja (CFO), which took the helm in 2021.
They were brought in after the company’s culture of relatively aggressive balance sheet management led to unnecessary value destructive disposals and dilutive rights issues in 2009 and 2020 that ultimately led to the resignation of Hammerson’s former CEO David Atkins.
Motara that 2021 was a transformative year for Hammerson as the new management duo delivered on its promise to restructure the company in order to position it for growth.
“As a result, a new strategic direction to mixed use city centre assets was established, a two-year administrative cost cutting programme, by 20%, was put in place and further disposals were concluded to strengthen the balance sheet,” he says.
The end of Covid-19 mobility restrictions and an operating recovery in the company’s assets also produced a 40% plus rebound in the company’s underlying earnings. This was after adjusting for the earnings dilutive impact of disposals which would linger for part of 2022.
Analysts have also said that December 2021 probably marked the bottom of the property devaluation cycle. Hammerson had seen its properties lose value amid Brexit uncertainty and then in light of the pandemic, with its European Real Estate Association (EPRA) net asset value (NAV) down to 64p a share. Hammerson’s net debt also went down to £1.6bn compared with £3.3bn in 2020.
There are even no material re-financings until 2025 and Moody’s also upgraded its outlook on Hammerson bonds from negative to stable, explains Motara.
Overall, 2022 should see a further circa £500m of disposals and depending on the assets sold, a special dividend may be forthcoming along with the announcement of a resumption to normal cash dividends for 2023, providing investors with a significant cash return in 2023, he says.