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Hammerson Q1 2018 Business Update





  • Estimated EPRA NAVPS of 790p[1] at 31 March 2018, up 1.8% in the quarter principally driven by retained earnings and valuations of Premium Outlets and Ireland; UK flagship shopping centre valuations stable
  • Strong leasing momentum across UK, France and Ireland following record activity in 2017;
  • £7 million of group leases signed, significantly up on Q1 2017, 6% above previous passing and 3% above ERV at 31 December 2017
  • Positive ERV growth across all segments of the portfolio
  • Good progress on major developments with construction commenced at Les 3 Fontaines, Cergy, and at the Brent Cross extension, London’s first Cinema de Lux has been secured alongside an agreement for a new John Lewis store
  • Estimated net debt of £3.4 billion[2] at 31 March 2018, implying an LTV ratio of 35%[2], down 100 bps on year end
  • £92 million of disposals at book value already achieved in Q1 and on track to deliver £500 million annual disposal target; currently in active negotiations for the sale of a number of assets

David Atkins, Chief Executive of Hammerson said: “Our strategy and the positioning of our portfolio continue to deliver a strong operational performance. Our attractive high-growth markets of Premium Outlets and Ireland are driving valuation growth and we are on track with our disposal programme.

“Whilst we recognise the difficult trading environment and challenges felt by many retail and restaurant formats in the UK, there continues to be good demand for space across our centres. The Easter trading weekend again demonstrated that not all retail is equal with our centres delivering positive footfall growth of 5% compared to average reported Easter footfall across all shops of -2.4%.[3]

“The positive momentum of the business is a mark of the quality of our portfolio and the skill of our team which are delivering continued income growth and will drive future shareholder returns.”

Strong operational performance

In what is traditionally a quieter leasing period, the first three months of 2018 had a strong start with leases signed across the Group totalling £7 million (+59% on Q1 2017). This performance was achieved despite the current challenging UK retail backdrop and the headwinds currently affecting consumers and retailers.

A combination of severe weather and subdued consumer confidence weighed on UK retail sales (down 2.0%[4]), albeit Hammerson centres outperformed the market. In France, retail sales fell 0.4% beating the wider market benchmark [5]. Premium Outlets sales grew by 4%[6] with sales and footfall impacted by adverse weather across Europe. Bicester Village delivered a double-digit increase in the period, buoyed by the recent major extension.

Footfall at Hammerson’s UK centres was up 0.5% and in France up 3.5% (adjusted for centre closures and snow days). Over the Easter period, consumers made the most of the bank holiday with footfall up 5.3% at Hammerson’s UK centres compared to the Easter weekend last year, and in France footfall was up 4.7%.

Retailer appetite remains strong for superior space

Leasing activity

Leasing volume

Q1 2018 [7]  

Leasing volume

Q1 2017

Leasing vs previous passing rent Leasing vs ERV
UK £3.1m £2.4m 10% 4%
France £3.0m £1.4m 3% 1%
Ireland £0.7m £0.5m 48% 7%
Total Portfolio £6.8m £4.3m 6% 3%


Leasing during the period was up and driven primarily by strong lettings at UK shopping centres, with brands such as NYX, Levi’s, Skechers, Charbonnel et Walker and Lovisa all taking space. The highlight was a new Arket store at Bullring, Arket is H&M’s latest Nordic-inspired fashion offer which will open its first store outside the South East.

France and Ireland delivered a particularly strong leasing performance. In France, there were numerous relettings at Les 3 Fontaines, Cergy and at Les Terrasses du Port, Nespresso and Amazing Jewelry, which will open its first store in a French shopping centre outside Paris.

In Ireland, Pavilions, Swords had an impressive start to the year with Smiggle taking its third store with Hammerson in Dublin and River Island upsizing to a flagship store. At Dundrum, Dublin’s fine food emporium, Fallon & Byrne, is set to open a new flagship food hall and delicatessen to further reposition the leisure offer within Dundrum’s Pembroke district.

Demand from luxury and aspirational retailers continues to be strong in Premium Outlets. At Batavia Stad Fashion Outlet, Amsterdam, an upsized Nike has opened, with new and enhanced restaurants signed at La Vallée Village, Paris, Wroclaw Fashion Outlet and Landquart Fashion Outlet, Zurich, continuing to improve the customer offer and dwell time.

Strong occupancy and minimal impact from tenant failures

Hammerson continues to work actively with retailers to maintain a more compelling customer offer and also provide right-sized stores for tenants. Compared with the same period in 2017, occupancy for the portfolio has improved from 96.6% to 97.1% at 31 March 2018, above the Group target of 97.0%.

As widely reported, several UK retailers and food & beverage operators have announced restructuring plans or entered into administration since the start of 2018, including New Look and Toys R Us. With high occupancy and continued good demand for our destination centres the impact of these retailers on the Group’s profitability is very limited.

It is estimated that the effect of tenant CVAs and administrations active as at 31 March 2018 will result in a reduction in NRI of £3.5 million in 2018, equivalent to 0.9% of 2017 Group NRI. Proactive leasing of affected units is already underway, which will further mitigate the potential NRI impact. In France, there has been a negligible number of tenant failures with all impacted retailers continuing to trade. In Ireland, there was no impact.

Portfolio valuation

Hammerson today publishes independent ‘Red Book’ valuations of its portfolio as at 31 March 2018, which have been prepared by Cushman & Wakefield. The portfolio value of £10.6 billion as at 31 March 2018 was stable with a capital value uplift of +0.3% compared to 31 December 2017.

Hammerson Portfolio Valuation

£m 31 Mar 2018


31 Dec 2017


Q1 capital return[8]
UK shopping centres 3,523 3,528 -0.6%
UK retail parks 1,180 1,270 -1.0%
UK other 444 422 4.6%
France 1,993 2,011 0.4%
Ireland 1,096 1,095 1.2%
Premium Outlets 2,352 2,234 0.9%
Total 10,588  10,560 +0.3%


Within the UK shopping centre portfolio, ERV growth was positive and in line with last year’s annual growth rate of 0.9%, with Westquay, Highcross and Brent Cross contributing good ERV growth of 1.1%, 0.3% and 0.2% respectively in the first three months. UK flagship shopping centre valuations were stable. There was an outward yield shift of up to 10 bps limited to a small number of centres including Union Square, The Oracle and Victoria Gate.

UK retail parks also delivered positive ERV growth during the period with a modest outward yield shift of up to 27 bps at a small number of retail parks causing an overall capital return decline of 1.0%. The 31 March 2018 retail park valuation was also reduced by the sale of two properties for £92 million.

In France and Ireland, development progress on Les 3 Fontaines, Cergy and Dundrum lifted valuations, offset by a slight negative impact of a weaker EUR/ GBP exchange rate.

There was also positive valuation uplift at both Value Retail and VIA Outlets with the recent acquisition of direct interests in Value Retail Villages boosting the 31 March 2018 valuation.

Balance sheet update

Up 1.8% in the quarter, estimated EPRA NAVPS was 790p per share as at 31 March 2018. This was primarily driven by retained earnings and valuation gains. Additionally, a mandatory accounting adjustment for the carrying value of Hammerson’s investments in Value Retail’s Spanish Villages resulted in an additional 2p per share uplift in EPRA NAVPS.

Hammerson estimates net debt of £3.4 billion as at 31 March 2018, down on the £3.5 billion reported at 31 December 2017 due to the completion of disposals.  This implies LTV of 35%, which is 100 bps lower than year end.  The Group’s weighted average interest rate was estimated to be 2.8% for Q1 2018, down 10 bps from 2.9% for the year in 2017.

Developments driving future returns

Construction has commenced at Les 3 Fontaines, Cergy, to extend and strengthen this existing prime Paris centre. The £225 million project is expected to deliver a 7% yield on cost. At the £38 million Italie Deux extension, pre-lets include M&S Simply Food and Pret A Manger, ahead of enabling works starting later this spring.

In Ireland, the successful Court of Appeal judgment facilitates engagement with stakeholders on the regeneration opportunity for the five acre Dublin Central scheme. This is an outstanding European city centre development site which adjoins the prime thoroughfares of Henry Street and O’Connell Street.

There is continuing momentum on the major extension at Brent Cross. National Amusements, a leading cinema brand, has confirmed it will open its first London Cinema de Lux with a 1,800 seat capacity, 12 auditorium venue to anchor the leisure element of the extended centre. John Lewis has also agreed to a complete renewal of its four-storey full-range store as part of the redevelopment, having traded in Brent Cross since the centre opened in 1976.

Continuing with a programme to reconfigure and reposition the Retail Parks portfolio, the extension at Parc Tawe in Swansea and the first phase of The Orchard Centre expansion in Didcot opened in the quarter.

Following the successful extension of Bicester Village, future expansion opportunities within the Premium Outlets portfolio continue. At Hede Fashion Outlet, Gothenburg, an additional extension of 17 stores will commence in Q2 2018, following the recently refurbished and rebranded VIA Outlet scheme.

Capital recycling commitment

The business is on track to dispose of properties of at least £500 million in 2018. Active negotiations for the sale of a number of assets are on-going with two retail park disposals already completed this year for £92 million at book value.

intu acquisition documentation update

While Klépierre’s position remains unclear, the Board of Hammerson does not intend to finalise shareholder documents in relation to the proposed acquisition of intu. The PUSU deadline for Klépierre is 16 April 2018.


[1] The estimated EPRA NAVPS is the estimated value for the net assets per share, as at 31 March 2018, calculated in accordance with guidance issued by the European Public Real Estate Association (EPRA). Further details are set out in Appendix 1. Estimated growth of 1.8% includes an IFRS 9 accounting adjustment for the carrying value of the investment in Value Retail’s Spanish Villages. Further details are shown in the Balance Sheet Update section.

[2] Calculated on a basis consistent with that reported in the 2017 Annual Report.

[3] Data taken from Springboard’s Easter trading update with high street Good Friday footfall -9.6% and high street Easter Saturday footfall -6.9%.

[4] Hammerson UK shopping centre sales 1 Jan – 24 Mar 2018 (VISA in-store sales index: Jan 18 -4.0%, Feb 18 -2.5%, March n/a)

[5] Hammerson France shopping centre sales Jan-Feb 2018, March data not available at time of release (Banque de France index: Jan 18 -2.2%, Feb 18 -1.3 %, March n/a)

[6] Sales data to the end of February. March data not available at time of release

[7] Measure of leasing activity including new annual headline rent from all units leased, excluding development leasing

[8] Capital value movement on retained portfolio at constant FX rates