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Hammerson favours France over UK for current investment
Hammerson is pursuing ambitious development plans in France in 2010 as Europe's frail property market recovers, but has vetoed new UK projects, pending a stronger economic rebound.
Hammerson said today it was ploughing £430 million into two French retail projects, a fully pre-let one at rue du Faubourg Saint-Honore in Paris and Les Terrasses du Port in Marseille ( where it has 40% of the space pre-let), but has pegged back construction in Britain until at least 2011.
"If you look at the economies, France has come through this recession in better shape than the UK and when one converts that through to the property market, we're seeing a similar picture," Chief Executive David Atkins said.
"We've got better tenant demand and ultimately, the (French) schemes are more viable. So it was a fairly simple decision," he said, adding no London project would begin without pre-lets.
In a challenging year for quoted property landlords, Hammerson said its portfolio value fell 9% to £5.1 billion in 2009, having rebounded 6% since June that year.
It posted a 13% rise in adjusted NAV per share to 421 pence in the six months to end-December, broadly in line with analysts' estimates.
Hammerson reported annual rental income of about £294 million last year, up 1.1% on a like-for-like basis, but said occupiers were still cautious about renting new space.
Leasing incentives remained broadly unchanged over the year, Atkins said, with 2.5 year incentive packages offered to tenants taking 12-15 year leases at new schemes like its Union Square mall at Aberdeen, Scotland.
"After the "financial terror", we now have a good old fashioned economic recession," said Nomura analyst Mike Prew. "No one should be surprised that late cycle pressure on rents is being felt by landlords now," he said.
This time last year, Hammerson and FTSE 100 peers Land Securities and British Land sounded a rash of emergency cash calls to repair loan covenants strained by a 45% fall in values between June 2007 and September 2009.
However, Atkins said Hammerson was now in "excellent shape" after executing a £580 million rights issue and £780 million of asset sales.
The company's gearing fell to 72% at end-2009, compared with 118% at end-2008, with no significant debt maturities before 2012. Its loan-to-value was about 40%.
Finance Director Simon Melliss said Hammerson's firepower was "just a tad short of £800 million", although the £430 million of French development costs would be tapped incrementally from this warchest.
Atkins said that The Cap Trois Mille department store in Nice had caught the company's eye, although competition for the property was likely to be fierce.
Hammerson's return to property trading in December has drawn mixed reviews from investors and analysts, with some describing the firm's new buys as expensive and its sales as underpriced.
With Canada Pension Plan Investment Board, Hammerson bought Scottish mall Silverburn for £297 million in December from administrators acting for The Elementary Property Company and Retail Property Holdings.
That price reflected a net initial yield of about 6%, against the average all property yield of about 7.3% that month, data from broker CB Richard Ellis showed.
Last month, Hammerson shares took a tumble after it said it had offloaded a half-empty Paris office building at a 14% discount to book value.
Hammerson said today it was ploughing £430 million into two French retail projects, a fully pre-let one at rue du Faubourg Saint-Honore in Paris and Les Terrasses du Port in Marseille ( where it has 40% of the space pre-let), but has pegged back construction in Britain until at least 2011.
"If you look at the economies, France has come through this recession in better shape than the UK and when one converts that through to the property market, we're seeing a similar picture," Chief Executive David Atkins said.
"We've got better tenant demand and ultimately, the (French) schemes are more viable. So it was a fairly simple decision," he said, adding no London project would begin without pre-lets.
In a challenging year for quoted property landlords, Hammerson said its portfolio value fell 9% to £5.1 billion in 2009, having rebounded 6% since June that year.
It posted a 13% rise in adjusted NAV per share to 421 pence in the six months to end-December, broadly in line with analysts' estimates.
Hammerson reported annual rental income of about £294 million last year, up 1.1% on a like-for-like basis, but said occupiers were still cautious about renting new space.
Leasing incentives remained broadly unchanged over the year, Atkins said, with 2.5 year incentive packages offered to tenants taking 12-15 year leases at new schemes like its Union Square mall at Aberdeen, Scotland.
"After the "financial terror", we now have a good old fashioned economic recession," said Nomura analyst Mike Prew. "No one should be surprised that late cycle pressure on rents is being felt by landlords now," he said.
This time last year, Hammerson and FTSE 100 peers Land Securities and British Land sounded a rash of emergency cash calls to repair loan covenants strained by a 45% fall in values between June 2007 and September 2009.
However, Atkins said Hammerson was now in "excellent shape" after executing a £580 million rights issue and £780 million of asset sales.
The company's gearing fell to 72% at end-2009, compared with 118% at end-2008, with no significant debt maturities before 2012. Its loan-to-value was about 40%.
Finance Director Simon Melliss said Hammerson's firepower was "just a tad short of £800 million", although the £430 million of French development costs would be tapped incrementally from this warchest.
Atkins said that The Cap Trois Mille department store in Nice had caught the company's eye, although competition for the property was likely to be fierce.
Hammerson's return to property trading in December has drawn mixed reviews from investors and analysts, with some describing the firm's new buys as expensive and its sales as underpriced.
With Canada Pension Plan Investment Board, Hammerson bought Scottish mall Silverburn for £297 million in December from administrators acting for The Elementary Property Company and Retail Property Holdings.
That price reflected a net initial yield of about 6%, against the average all property yield of about 7.3% that month, data from broker CB Richard Ellis showed.
Last month, Hammerson shares took a tumble after it said it had offloaded a half-empty Paris office building at a 14% discount to book value.
Mon, 22nd Feb 2010