Hammerson to raise £825m and introduces a new approach to leasing

Retail landlord Hammerson is set to raise more than £800 million through a share placing and the sale of its 50% stake in European shopping centre owner VIA Outlets.

The company said that the moves will help it pay down a massive debt bill, reducing it to around £2.2 billion.

It marks a major retreat from parts of the European market, where VIA is a big player. The business owns 11 premium outlets in nine European countries, with 1,130 stores in total, giving it the third largest portfolio by area on the continent.

Hammerson said it had hashed out a deal to sell VIA to its partner APG, a Dutch pension fund for £274 million.

The company also plans to ask investors to help them out by buying another £552 million of new shares in the company. It will plough the cash into paying down debt, and investing in a transformation of the business.

CEO David Atkins pronounced the end of the way shops are rented in the UK, saying it was in dire need of change. “The pandemic has exacerbated structural shifts in retail, exerting further pressure on both property owners and brands, and provided further evidence that the UK’s historic leasing model has served its time,” he said. “It is outdated, inflexible and needs to change.”

Atkins’ solution includes more flexible leases, setting rents at more affordable levels, tying rents to an index, rather than the current system of reviews, and what the company calls an “omnichannel top-up element”, in short connecting online shopping with physical stores.

“We are introducing a new UK leasing approach, one that is simpler, reflects an omnichannel retail environment and rewards positive performance on both sides,” he said.

“It will deliver a sustainable, growing income stream and we are in initial discussions with retailers and anticipate introducing the first of the new leases later this year.”

Hammerson, which owns the Bullring in Birmingham and Brent Cross in London among other key shopping destinations, said that it had managed to collect 34% of the rent that is due for the third quarter of the year.

Hammerson said it had seen a strong recovery in both France and Ireland, where footfall at its flagships and retail parks was only down 18% last month compared to July 2019.

But its UK portfolio relies more heavily on sites in the centre of cities, which in turn rely heavily on officer workers and public transport links.

As both these have been disrupted, with many people working from home and shoppers keen to avoid busses and trains, the UK has been more subdued, down 51% in July compared to the same period last year.

Adjusted profit dropped by 84% in the first half of the year to £17.7m on net rental income of £87.3 million, down by 44%.