The decision by Hammerson and Westfield to pursue a joint venture to break the impasse that threatened to cast Croydon into the retail wilderness was as sensible as it was surprising. Both deserve immense credit.
Boris Johnson labeled it a marriage. For others it sounded like a coalition.The mayor was among those to confess to surprise at the news, even though he and Westfield chairman Frank Lowy are getting to know each other well. They stood shoulder to shoulder at the launch of Westfield Stratford in 2011, and they were together again in south London on Thursday, committing to overhaul Croydon’s tired Whitgift Centre.
Equal credit should go to Hammerson for striking this pragmatic deal. More than anything, it is a victory for Croydon, its people and its council. They needed this outcome more than any other party.
A consensual solution had seemed all but impossible for the past 14 months. First the Whitgift Foundation, which owns the freehold of the Whitgift centre, turned to Westfield to pursue development. That didn’t delight Royal London Asset Management and Irish Bank Resolution Corporation, which together own 75% of the Whitgift Centre’s long leasehold. They turned to Hammerson, the council failed to broker agreement and a long and undignified battle ensued.
The detail of this deal is complicated but significant. It sees Westfield acquire a 50% stake in Hammerson’s £115m Centrale shopping centre in the heart of Croydon. The jv has acquired a 25% stake in the Whitgift Centre, Hammerson having previously agreed to do so with RLAM. Next the jv will redevelop Centrale and the Whitgift into a 2m sq ft mixed-use scheme, with construction on the £1bn project starting as early as 2015. Westfield will design and construct the development; Hammerson will lead asset management.
Lowy made no secret at Thursday’s press conference that his preference would have been to pursue the project alone. But you don’t build a company as successful as Westfield without a strong pragmatic streak and that has won through.
Meanwhile, Hammerson chief executive David Atkins said the development would be neutrally branded, though consultation will take place. It would need to be a striking name to trump one as glitzy as Westfield Croydon, but we’ll see.
Now, if the council is smart – and it will have its work cut out given the news that broke just hours before the jv announcement that chief executive Jon Rouse is leaving – it will remove all obstacles to ensure momentum. That way there is a fighting chance that Croydon will be an attractive retail destination once again, and a compelling office location too.
For Westfield and Hammerson the deal also represents a major win. Hammerson’s share price ticked up nicely on the news. And, who knows, a friendship built on a successful jv might lead to a more serious relationship at some point.
The Whitgift breakthrough overshadowed news from another listed landlord this week. CSC is to change its name to Intu Properties, implement free Wi-Fi in its 12 fully-owned malls and launch an e-commerce website.
It was immediately clear it faces an uphill struggle to convince the market its strategy will deliver. One analyst said that the £25m investment would be better used to pay down debts, given its 50% loan to value ratio. Its share price fell on the news.
Mike Hussey, chief executive of Almacantar, hoped it was not a case of “outa the frying pan intu the fire”. But JP Morgan’s Harm Meijer was harshest, wondering whether the new name was an acronym for “Improving Nothing, Terminal Unperformer”.
