Acquisition of retail portfolio

RNS Number : 4398D

Hammerson PLC

23 March 2011

 



Acquisition of retail portfolio

Hammerson plc has exchanged contracts to acquire a portfolio of six assets from St. Martins Property Investments Limited for £208 million. Hammerson's initial commitment, including transaction costs, is £221 million. Passing rents on the properties are £17.2 million, and after taking account of vacancy charges and other direct costs the yield on purchase price is 7.0%.

The assets acquired are: 

§ Centrale, Croydon: a 65,000m² shopping centre in Croydon's town centre.

§ Monument Mall, Newcastle: a 9,000m² shopping mall in Northumberland Street in the centre of Newcastle-upon-Tyne.

§ Elliott's Field, Rugby: a 13,000m² open A1 retail park.

§ Three Spires, Lichfield: a 17,000m² shopping mall forming the City's prime retail pitch.

§ Cathedral Lanes, Coventry: a 6,000m² shopping complex.

§ Wickes, Folkestone: a 4,000m² retail warehouse unit.

The acquisition provides Hammerson with an excellent opportunity to secure a group of good assets in strong trading locations. There is scope for Hammerson to create value through the rejuvenation of the principal assets (Centrale, Monument Mall and Elliott's Field) via development and asset management initiatives.

Centrale Shopping Centre, Croydon

Centrale, purchased for £98 million, is the largest of the assets. It is situated in the heart of Croydon town centre. Croydon has the 13^th largest shopping population in the UK with 455,000 people. The freehold centre covers 64,486 m² (694,122 ft²). It was constructed in two phases (1988 and 2004) and comprises 80 units with a 954 space car park. Tenants include Debenhams, H&M, House of Fraser and Next.

Current zone A rents at Centrale are around £130 per square foot compared to prime Croydon zone A rents of c. £200 per square foot. Average rents at the centre (excluding anchor stores) are £19 per square foot compared to Hammerson's UK shopping centre average of £46 per square foot. There is the opportunity to create value through investment and transformation of the existing centre. This will include the introduction of new retail tenants, improving circulation between floors and providing both a cinema and catering offer at the centre.

Monument Mall, Newcastle

Monument Mall, purchased for £28 million, is in the centre of Newcastle, with its main frontages opening onto the prime retailing pitches of Northumberland Street and Blackett Street. Newcastle has the 6^th largest shopping population in the UK with 605,000 people. The freehold shopping centre covers 8,823 m² (94,966 ft²) comprising 16 retail units and a food gallery over four trading levels. The complex is adjacent to Fenwick and tenants include Boots, Peacocks, TK Maxx and Wallis.

Current Zone A rents at Monument Mall are around £175 per square foot, compared to prime Northumberland Street zone A rents of c. £220 per square foot. Average rents at Monument Mall are £24 per square foot. The centre offers restructuring potential through a comprehensive reconfiguration of existing units, exploiting the location by opening units to the street, and bringing new retailers into the scheme.

Elliott's Field Retail Park, Rugby

Elliott's Field Retail Park, purchased for £40 million, is situated in the premier out-of-town retailing location for Rugby, just off the A426 (Leicester Road), which links Rugby to Junction 1 of the M6 motorway. The 12,646m² (136,127 ft²) open A1 consented park comprises 10 units in four terraces, a standalone restaurant and carwash. Despite the open A1 consent, the freehold scheme's tenants are predominantly bulky goods retailers including Comet, Halfords, Homebase, and Wickes.

There is significant scope for Hammerson to create additional space and capitalise on strong demand from fashion and catering tenants, thus increasing the overall rents from the property. Average rents at Elliott's Field are £15 per square foot, compared with potential rents of £30-35 per square foot for fashion tenants.

Other assets

Three Spires, Cathedral Lanes and the Wickes unit at Folkestone, which were purchased for an aggregate £42 million, provide short-term asset management potential to stabilise and protect income, thus maximising their investment value.

David Atkins, Chief Executive of Hammerson, said:

"We have a clear strategy of selling mature assets to recycle capital into properties where we can use our skills to generate superior returns. This transaction is a rare opportunity to secure a group of good properties in strong trading locations with significant asset management potential. We believe we can rejuvenate and transform Centrale, Monument Mall and Elliott's Field, thereby improving retailer sales and increasing asset values."

The acquisition will be accretive to earnings in 2011, and will be funded from existing bank facilities, increasing gearing by around 6%.

Completion of the acquisition of all assets is expected by the end of March, with the exception Three Spires which is expected to complete later this year.

Hammerson was advised on the transaction by CBRE and Nabarro.

Further information:

David Atkins, Chief Executive	Tel:  [phone]
Morgan Bone, Director of Corporate Communications	Tel:  [phone] [e-mail]

Notes to editors

Hammerson

Hammerson has been creating and managing some of the most exciting retail destinations and office buildings in Europe for over 60 years. A FTSE 100 company with a real estate portfolio in the UK and France of around £5.3 billion at 31 December 2010, Hammerson has investments in 17 major shopping centres and 17 retail parks. We own seven London office buildings, which provide 158,000 m² of prime accommodation.

Hammerson aims to be the best owner-manager and developer of retail and office property in the UK and France. We focus on prime regional shopping centres and out-of town retail, while exploiting opportunities in the office sector. Our strategy is to outperform through two areas of focus: maximising income growth and creating a high quality property portfolio through acquisition, development and asset management. Both areas are underpinned by prudent financial management.

 

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