Hammerson has exchanged contracts to acquire the remaining 40% of Highcross, securing 100% ownership of Leicester’s major shopping centre (the “Acquisition”) and committed capital to a new outlet centre venture with its partners Value Retail, APG and Meyer Bergman.
The investments totalling £280 million significantly strengthen Hammerson’s portfolio, increasing scale in both prime retail destinations and outlets centres, alongside the Company’s focus on its strategic development schemes and retail parks which are a key element of Hammerson’s growth strategy.
Hammerson has acquired 40% of Highcross, Leicester for £180 million (including purchase costs) from its JV partner¹. The 105,600m² (1.15m ft²) centre comprises three department stores, 114 stores and the St Peter’s Square dining quarter which features a 12-screen Cinema de Lux.
Acquired at a modest discount to 30 June 2014 book value, the centre generates a passing rent of £27.8 million. The acquisition represents a net initial yield of 5.5% whilst the nominal equivalent yield is 6.25%.
The purchase reinforces the Company’s strategy of owning high-quality retail schemes in successful locations and Highcross is the second largest asset, by area, in its portfolio after Bullring, Birmingham.
Anchored by John Lewis, Debenhams and House of Fraser, the centre has successfully established itself as Leicester’s prime retail destination since the refurbishment and extension in 2008, and over the past nine months Hammerson has continued to transform the retailer line up with Urban Outfitters and Hugo Boss strengthening the centre’s appeal.
The centre has strong income growth potential with the opportunity to increase occupancy through attracting new brands and upsizing key retailers. Following the successful repositioning of the St Peter’s Square dining quarter, which introduced new brands including Byron and Chimichanga, there is the additional opportunity to drive future growth from the centre. This includes the creation of a new anchor on the lower mall and reconfiguring the original East Mall to provide a stronger high street presence and larger stores.
Leicester has an attractive consumer catchment and is the principal shopping destination in the East Midlands. The city’s population currently ranks ninth largest nationally and is expected to grow by 3.7%².
Investment in Outlet Shopping
Hammerson is the only UK listed REIT to have strategic exposure to the outlet shopping centre sector and today it is announcing a further investment of £100 million. The outlet village market has seen increasing demand from investors due to its consistent delivery of double-digit organic growth.
The outlet village proposition is supported by the increase in global tourism, with Chinese visits to Europe set to grow 72% by 2018³, alongside the expansion of luxury retail brands generating increased merchandise.
VIA Outlet Investments
Hammerson is investing £70 million into VIA Outlets, a major new venture that will aim to acquire existing European outlet centres with growth potential. Alongside Hammerson, the other partners in VIA Outlets are Value Retail, APG and Meyer Bergman.
VIA Outlets will focus on outlets with large catchments close to major European cities with a strong tourist appeal. VIA Outlets has already acquired two assets in 2014:
- Batavia Stad, Amsterdam: The Netherland’s first outlet centre, the 26,340m² (283,500ft²) scheme is home to over 100 stores, cafes and restaurants and well known brands including G-Star, Michael Kors, Hugo Boss and Polo Ralph Lauren.
- Fashion Arena, Prague: The largest outlet centre in the Czech Republic, and the only one in Prague, the 25,125m² (270,400ft²) centre comprises over 100 brand outlet stores including Diesel, GANT, Tommy Hilfiger and Nike.
VIA Outlets has also identified a series of future acquisition opportunities. Hammerson has already committed £70m towards the new venture and acquisitions are expected to complete before the end of 2014. Hammerson has a 47% economic interest in VIA Outlets and the Company’s investment in VIA Outlets is expected to generate an IRR in excess of 10%.
Hammerson has also agreed to provide £30 million to Value Retail to assist with new extensions at Bicester Village and Kildare Village and for the new Value Retail village in Shanghai, which is due to open in 2015.
David Atkins, Hammerson chief executive said: “The investments we have announced today underline our commitment to winning retail sectors which will deliver continued growth and outperformance.
“We believe that 100% ownership of Highcross will enable us to increase the centre’s attractiveness to both retailers and consumers and to drive future sales performance. VIA Outlets provides us with an attractive opportunity to increase the Company’s exposure to the fast-growing European outlet shopping market and leverage Value Retail’s extensive European platform and its relationships with luxury and premium retail brands.”
¹BIS Company Ltd (Postal Services Company Act 2011) – Formerly the Royal Mail Pension Plan
²Source: CBRE; growth rate 2013 to 2018
³Source: European Travel Commission