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Acquisition of Retail Parks Portfolio

19.10.2012

Hammerson plc announces that it has acquired The Junction Unit Trust from its several unit holders for £254.5 million.

Summary of assets:
  • 4 prominent retail parks in strong catchment areas
  • Well-let to a diverse mix of high-quality tenants
  • Average lease length of 11 years
  • Low average current rents of c. £18 per square foot
  • High proportion (68%) of open A1 consent, allowing Hammerson to increase underlying rents through asset management
  • Current annual passing rent of £18 million which is due to rise to £20 million over five years through contracted rental uplifts
  • 34,000m2 (365,000ft2) of consented development opportunities and 17 ha (46 acres) of additional development land which offer the opportunity to further enhance returns
Summary of acquisition:
  • Consistent with focused strategy to invest in the three successful areas of retail property: convenient retail parks, prime shopping centres and premium designer outlets
  • Expands Hammerson’s presence in the retail park market to 22 assets with a total value of £1.4 billion
  • Yield on purchase price of 7%
  • 5% discount to fund valuation of £267 million at 30 September 2012
  • Enhances forecast earnings per share by over 1 pence or c.5%* from 2013
The principal assets to be acquired are:
Thurrock Shopping Park, Lakeside.

Thurrock Shopping Park is situated next to Junction 31 of the M25 and Lakeside shopping centre. There is a strong consumer catchment of 877,000 people within a 20 minute drive, and together with the adjoining Lakeside shopping centre and Lakeside Retail Park it forms a regional destination which is one of the largest dedicated shopping areas in Europe. Comprised of Lakeside Extra, Lakeside Tunnel and a large development site, current passing rent is £5 million, with average rents of £19 per square foot.

Lakeside Extra has a Gross Lettable Area (GLA) of 14,000m2 (150,000ft²), and includes Boots, TK Maxx, Gap and ASDA Living. Lakeside Tunnel includes Decathlon, Halfords and Pets at Home in 8,500m2 (91,000ft²) of accommodation. Both have unrestricted open A1 non-food consent.

There is an additional 6 ha (16 acre) development site included in the acquisition, which is allocated for retail and residential use.

Forge Shopping Park, Telford.

The scheme is situated to the west of Telford town centre, with a catchment population of 260,000 within a 20 minute drive. The Forge is Telford’s primary shopping park and comprises 29,000m2 (310,000ft²) of open A1 retail floor space, anchored by a 6,000m2 (66,000ft²) Sainsbury’s, which is the principal foodstore in Telford. With 20 tenants including Next, Outfit, Boots, Gap, Currys and TK Maxx, Forge Shopping Park has a current passing rent of £5 million per annum and average rents of £21 per square foot.

Imperial Retail Park, Bristol.

Situated two miles south of Bristol city centre, over 468,000 people live within a 20 minute drive of Imperial Retail Park. The 32,000m2 (340,000ft²) scheme is anchored by a 10,000m2 (105,000ft2) B&Q, and includes brands such as Next, Boots and HomeSense. Current passing rents are £5 million per annum, and average rents are £15 per square foot.

The scheme also includes a cleared development site of 5 ha (14 acres) with planning resolution for a mixed use scheme.

Abbotsinch Retail Park, Glasgow.

Abbotsinch Retail Park is adjacent to Junction 27 of the M8 motorway to the west of Glasgow. The catchment population is 665,000 within a 20 minute drive. The 16,000m2 (170,000ft²) park is anchored by a 9,000m2 (100,000ft²) B&Q alongside Comet, DFS, Pets at Home, Harveys and Frankie & Benny’s. The scheme has passing rent of £3 million per annum, with average rents of £18 per square foot.

The scheme also includes a development site with planning consent of 6,000m2 (70,000ft2), providing the opportunity to develop an additional retail terrace and a standalone food store.

Oldbury Shopping Park Development.

In addition to the assets above, the acquisition includes approximately 6 ha (16 acres) of a development site adjacent to Oldbury town centre, approximately 1 mile from Junction 2 of the M5 motorway. Planning consent exists on the site and adjoining properties for a development, including a retail park of up to 16,000m2 (170,000ft²), with consented mezzanines of 12,000m2 (124,000ft2), giving a total GLA of 27,000m2 (294,000ft2).

The total floor area of the acquired assets is 100,000m2 (1.1 million ft2), with occupancy of 98%. Average rents of the acquired assets, the majority of which (68% by area) have open A1 planning consent, are £18 per square foot. The assets have an average unexpired lease term of 11 years, and an average capital value of £230 per square foot.

The purchase price for the Trust is £254.5 million, which represents a 5% discount to the gross fund valuation of £267 million at 30 September 2012. Hammerson will also commit capital expenditure of circa £5 million to complete certain asset management projects. The consideration will be paid in cash from existing facilities.

Passing rents on the properties are £18 million per annum and after taking into account purchase costs the yield on the purchase price is 7%. The acquisition is expected to enhance forecast earnings per share by over 1 pence or approximately 5%* from 2013.

Contracted rental uplifts are anticipated to increase annual income to £20 million over the next five years, and the high proportion of open A1 consent will allow Hammerson to asset manage the parks, undertaking developments and enhancing the tenant mix to grow the underlying rental levels. The new assets will be managed by the existing retail parks team.

There is scope to further increase returns through the 34,000m2 (365,000ft2) of consented development opportunities, and 17 ha (46 acres) of development sites included within the acquisition.

David Atkins, Chief Executive of Hammerson commented:

“Following our investments in Value Retail, Victoria Quarter and the Whitgift Centre, this acquisition is another demonstration of Hammerson deploying capital into one of our three defined areas of retail focus. There is continued strong consumer demand for the ease and convenience of retail parks, and that consumer demand is being reflected in the increasing requirements of a range of fashion and catering retailers for space in retail parks. This portfolio acquisition on attractive terms enhances our income profile and will be actively managed to grow rents and capitalise on development opportunities, maximising returns for shareholders.”

For more information please contact:

David Atkins, Chief Executive
Morgan Bone, Director of Communications
Tel: +44 (0) 20 7887 1009 / morgan.bone@hammerson.com

For images of the acquired retail parks, a video outlining Hammerson’s investment activities over the year, and other investor material please visit www.hammerson.com

*based on consensus 2013 forecast earnings per share of 20.8 pence per Bloomberg 18 October 2013.

ENDS