Hammerson, the retail property giant and Birmingham Bullring [pictured] owner, has unveiled stinging losses as its portfolio of shopping centres slumped in value amid challenges to the high street.
The firm swung to a loss of £319.8 million in the six months to June 30, compared with a £55.7 million profit this time last year. On an adjusted basis, which is the company’s preferred measure, profits were down 10.5% to £107.4 million. Net rental income dropped 12.3% to £156.6 million.
The headline loss was largely down to a £423.4 million net revaluation loss on its property portfolio in the first half, as continuing market uncertainty and a slowdown in leasing affected value, especially in the UK.
More than half of this was down to its flagship shopping destinations in the UK, which had a revaluation deficit of £266 million. In France, there was a revaluation loss of £71 million, while the Irish portfolio was down by £30 million.
However premium locations produced a revaluation surplus of £111 million. Rental income on a like-for-like basis was down 0.1%.
For UK flagship destinations the decline was steeper at 6.8%, affected by CVAs and administrations leaving shops empty.
Hammerson chief executive David Atkins said: “The UK retail landscape is undoubtedly challenging and traditional high street fashion is under pressure.
“However, our focus on shifting our line-up towards categories with greater customer appeal and rental growth potential has resulted in over 90% of new leasing to leading consumer and food and beverage brands.”
Hammerson also said it had achieved 90% of its target to sell off £500 million worth of assets.
This included a £423 million deal with AXA IM Real Assets for a 75% stake in Paris’s Italie Deux shopping centre, announced alongside the results on Monday.
Atkins said: “Our absolute priority remains to reduce debt. We stated our intention to achieve over £500 million of disposals in 2019 and even in this tough environment where deals are taking longer to transact, we are now most of the way there.
“We will continue to pursue additional sales throughout 2019 and into 2020 to further strengthen our balance sheet.”
Property businesses have taken a huge hit in rent reductions from the proliferation of CVAs across the high street and in fashion retail in particular. New Look, Debenhams, Mothercare, Select, Arcadia and Monsoon Accessorize are all trading under CVAs – a form of insolvency process that allows distressed businesses to pay back a portion of their debt over a period of time.
Many retailers have been using the process to secure significant rent reductions but this has also led to a backlash from profitable retailers. Over the weekend it emerged that Primark was seeking rent reductions of up to 30%, on the promise of lease extensions, in a bid to level the playing field with retailers operating over the weekend.
Also on Friday evening Mike Ashley, the Sports Direct chief raised the issue in his wide-ranging commentary to accompany his group’s year-end results, saying that profitable retailers were being used to prop up “the rotten ones”.
Additional reporting: Press Association