Interim Management Statement

RNS Number : 6129F

Hammerson PLC

28 April 2011

 



Hammerson plc

Interim Management Statement for the period from 1 January 2011 to 28 April 2011

Key points:

·    £308 million of acquisitions announced which add growth potential to the portfolio

·    Planning application submitted for one of the UK's largest shopping centre developments at Eastgate Quarters, Leeds

·    Planning application submitted for a new office and residential development at Principal Place, London EC2

·    Occupancy at 31 March 2011 of 96.7% (31 December 2010 97.3%)

·    Like-for-like shopping centre sales up 1.5% in UK, down 0.3% in France. Sales in both countries were ahead of national benchmarks

·    New £500 million revolving credit facility agreed

David Atkins, Chief Executive, said:

"This has been an extremely active period where, in line with our strategy, we have enhanced the growth prospects of our portfolio through both acquisitions and progressing major developments. We have also secured a new revolving bank credit facility, which provides flexibility going forward. Whilst the economic backdrop for consumers remains difficult, we are seeing the benefit of our focus on regionally dominant shopping centres and convenient retail parks, which continue to attract successful retailers."

Maximising income from our assets

Sales at our shopping centres continued to outperform national benchmarks in the first quarter. The UK shopping centre portfolio demonstrated a 1.5% like-for-like sales increase, whilst in France, like-for-like sales in our shopping centres were down 0.3%. There were just 32 units in administration at 31 March 2011 (31 December 2010: 36) representing less than 1% of passing rents. Rent collection in both the UK and France remained excellent.

We signed 48 new leases in the first quarter of 2011, with 25 in the UK and 23 in France. In the UK we signed 15 long-term leases at rents both above and below ERV, with overall rents 5% below. In France, overall, new leases were signed in line with ERV.

Demand from retailers for high-quality space remained strong. New fashion lettings in the UK include Phase Eight and T.M. Lewin at The Oracle, Reading; Jaeger at Brent Cross, London NW4; Swatch at WestQuay, Southampton; Primark and Jack & Jones at Queensgate, Peterborough; Maddie and Marks Footwear at Silverburn, Glasgow; and Josef Seibel at Highcross, Leicester. In France, we agreed lettings with IZAC at Italie 2, Paris; and both Comptoir de Famille and Emporio at Espace Saint Quentin, Saint Quentin-en-Yvelines.

At Les Terrasses du Port, our major shopping centre development in Marseille, construction is progressing well. Having redesigned the scheme we restarted discussions with retailers and agreed new lettings to Golden Paradise, Soleil Sucré, Orange, Carnet de Vol and IZAC. Leases representing over 50% of the income are now pre-let or under offer. 

We have continued to focus on the catering offer at our shopping centres and retail parks. Construction has begun at Spiceal Street, our new restaurant quarter in Bullring, Birmingham, where we have exchanged contracts for two of the three units, with the third in solicitors' hands. New catering openings within the portfolio include: Pizza Express at Brent Cross; T.G.I. Friday's at Union Square, Aberdeen; and Costa Coffee at our Westwood Retail Park, Thanet.

Overall occupancy in the portfolio decreased slightly to 96.7% at 31 March 2011, from 97.3% at 31 December. Our overall occupancy target remains 97%, and there was no single factor which significantly affected the change in occupancy over the period.

Occupancy (%)	UK Retail	France Retail	Office	Group
31 March 2011	96.8	97.3	95.4	96.7
31 December 2010	97.3	98.1	95.6	97.3
30 June 2010	95.6	97.9	94.9	96.2

Improving the portfolio

During the first quarter we announced acquisitions totalling £308 million: a 50% interest in SQY Ouest, Saint Quentin-en-Yvelines in Paris; the remaining 75% interest in our existing Central Retail Park in Falkirk; and a portfolio of six UK retail assets from St. Martin's Property Investments. We have today announced the exchange of conditional contracts to sell one of the St. Martins assets, Three Spires in Lichfield, to a client of Orchard Street Investment Management. Our strategy is to acquire income producing properties with the potential to add value through active asset management and development.

In March we submitted a revised outline planning application to Leeds City Council for a 100,000m² shopping centre development, which will create the City's dominant retail destination. The proposal features a two-level shopping centre with 130 stores anchored by John Lewis and Marks & Spencer, and will have parking facilities for 2,500 cars.

We have also entered into a development agreement with South Oxfordshire District Council for a 22,000m² mixed-use scheme which will extend the Orchard Centre, Didcot, providing new retail stores, a leisure and catering quarter, new homes and new civic space. We intend to submit a planning application in the next twelve months. 

In France, we have started the consultation process with stakeholders and the local authority in Beauvais to bring forward the 24,000m² Le Jeu de Paume retail project. We have completed technical studies and intend to submit a planning application in June.

In our office portfolio, a planning application was submitted in March for a new development at Principal Place, London EC2 (formerly known as Bishops Place). The 55,000m² office building will feature large floor plates which can accommodate two trading floors, and be situated next to a residential tower with 240 high-quality apartments. Subject to planning approval and occupier demand, completion is set for the end of 2014. Together with our 46,000m² proposed office development at London Wall Pace, London EC2, where a planning application was submitted at the end of last year, we are well placed to benefit from the improving London office market.

Financing

Borrowings were £2.2 billion at 31 March 2011 and cash balances were £69 million to give net debt of £2.1 billion (31 December 2010: £1.8 billion).  Cash and committed unutilised bank facilities at 31 March 2011 totalled £0.7 billion.

The 2010 proposed final dividend of 8.8 pence per share will be paid on 13 May 2011.  35% of shareholders elected for the scrip alternative and approximately 4.8 million new shares will be issued, using a Scrip Reference Share Price of 447.8 pence.

We have secured a new £505 million five-year revolving credit facility. The facility was increased from £400 million to £505 million following an over-subscription, and will replace existing undrawn facilities of £670 million due to expire 2011-2013.

Board changes

At the beginning of April we announced the appointment of Judy Gibbons as a Non-Executive Director with effect from 1 May 2011. Judy has over 25 years experience in technology businesses and we believe her appointment will help us develop further our understanding of the opportunities and challenges presented by multi-channel retailing.

David Edmonds, who has served as a Non-Executive Director since May 2003, will be retiring from the Board at today's Annual General Meeting. As a company we have benefited hugely from David's advice, and he will continue to act as Chairman of the Hammerson Pension Scheme Trustees.

Occupational markets

In both the UK and France the impact of government deficit reduction measures and above-target inflation is adversely affecting consumer spending, although meaningful monthly comparisons are made difficult by a number of factors including the timing of the Easter break. Against this backdrop, Hammerson's regionally dominant shopping centres and convenient retail parks continue to attract successful retailers.

In Central London, take-up increased consistently throughout the first three months of the year, reducing availability in both the City of London and the West End. The supply of newly completed space in the City of London is set to fall sharply over the next two years, lowering vacancy rates further and supporting rental growth.

Investment markets

Investment in UK commercial property increased in the first quarter of 2011, when compared with the same period in 2010, and there has been a marked increase in the value of retail transactions, with investors particularly focused upon well-let assets with secure income. In France, despite a slight increase in transactions, investors' caution and a lack of available supply continue to constrain investment activity. This is leading to significant competition for the best assets, putting further downwards pressure on prime yields and thus supporting values.

Conference call

There will be a conference call for investors and analysts at 07.45 BSTtoday. To participate in the call, please dial:

UK	[phone]
US	[phone]
Netherlands	[phone]
France	[phone]

The participant code is 223089

For a replay of the conference call, please visit: www.hammerson.com

For further information

David Atkins, Chief Executive Simon Melliss, Chief Financial Officer Morgan Bone, Director of Corporate Communications

Tel:  [phone] Tel:  [phone] [e-mail]

Financial information

The financial information contained in this statement is based on unaudited management accounts for the three months ended 31 March 2011.

Forward-looking statements

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond Hammerson's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Hammerson does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Company should not be relied upon as a guide to future performance.

 

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