In the years since Hammerson chief executive Rita-Rose Gagné began her strategy to turn around the listed mall owner’s fortunes, the REIT has become leaner and gained a more solid footing. While the ongoing turnaround has not been helped by the wider macroeconomic woes that Q4 brought many industry players, Gagné is upbeat that a broader return to cities – and stores – will underpin Hammerson’s journey back to growth as it continue to reshape its portfolio.
The REIT’s full-year loss narrowed to £164m, compared with a £429m loss in the previous year. That loss was driven by a £282m valuation deficit, 96% of which occurred in Q4 last year. Group portfolio value fell by 5% to £5.1bn, while EPRA NTA per share was down to 53p, from 64p in the previous year.
Hammerson is aiming to offload a further £300m of non-core properties by the end of 2023, with some already “in train”. During the year, it sold £195m of properties, mainly relating to the sale of its stakes in Silverburn and Victoria.
Gagné tells EG there is scope to reinvest that capital into the portfolio, pointing to the potential for consolidating ownership on certain sites or properties. “Our portfolio has more value to it – that is where we are focused now,” she adds.
Gagné says the REIT’s progress is underpinned by a wider customer return to cities, and to stores. She adds that it has been the “best year” for occupier demand since 2018, after closing 317 leasing deals that generated £45m headline rent during 2022. For Gagné, it is a clear signal that shoppers are still drawn to bricks-and-mortar stores.
“We have had a high level of renewals as well as new entrants, international brands coming into the portfolio, expansions and new formats,” Gagné says. “We have had £45m of leasing activity, and that is a function of trends coming together, and affordable rents. Our properties are well positioned to capture that.”
Gagné adds that, “attractive” entry points aside, the boost in leasing reflects a “flight to quality by the best brands that are positioning themselves for the future”. She cites Marks & Spencer and Nike as examples of major retailers that say they need “to be in the best places”.
“Stronger brands are flocking towards the best properties,” she says. Headline LTV has stayed static at 39%, while net debt has been chipped down by 4% to £1.7bn. During the year, the value retail business refinanced more than £1bn of debt facilities in relation to Bicester and La Vallée. The company says there are no refinancing needs until 2025.
Gross administration costs were down by 17%, with Hammerson targeting a further 20% reduction by the end of 2024. Cost-saving measures have included reductions in staff count – average employee headcount shrank by about 25% to 370 during the year – and downsizing its head office in its relocation to Marble Arch, W1. It has also simplified its supplier structure, which Gagné says was “extremely complex”.
“That all goes to our push to be that agile platform, but also to reinforce our earnings, our cash flows, our value, and what we ultimately deliver to our stakeholders,” she says.
Gagné expects capital rate compression, in terms of value, to return at some point for retail real estate. “It’s a phenomenon related to that flight to quality,” she says, adding that the “best properties” will stand out as the overall macro environment stabilises and cash flow improves. “That is where the proposition is extremely attractive at this point in time.”
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