UK shopping centres can still have a bright future, according to Dundrum Town Centre co-owner Hammerson, following a brutal five years in which the value of the company's malls has fallen by almost two-thirds and its largest rival has collapsed.
The value of Hammerson’s portfolio fell 7.9 per cent in 2021 to £5.4 billion (€6.5bn), compared with a 21 per cent slide in 2020, the company said as it announced annual results on Friday. But valuation falls slowed markedly in the second half of 2021, down £109 million compared with £361 million in the first half.
“We’re not necessarily calling the bottom but we are starting to see some stabilisation,” said Rita-Rose Gagné, the company’s chief executive. Following a spate of asset sales and the issuance of a €700 million bond last year, Hammerson would start investing to “reinvigorate” its malls, “offering more to consumers: services, goods, entertainment and lifestyle”, she said.
The retail sector has been ravaged by the coronavirus pandemic, which has forced shops to close and squeezed Hammerson’s tenants, many of which have struggled or refused to pay rent. Hammerson’s largest rival, Intu, collapsed into administration in 2020.
But 2021 marked an improvement on the previous year, as value declines slowed, tenants resumed rent payments and Hammerson signed a number of new leases – albeit at a discount to pre-pandemic rents.
The company’s adjusted earnings in 2021 were £80.9 million, up from £36.5 million a year earlier. The revaluation of the company’s malls led to an overall loss of £429 million last year, compared with £1.73 billion in 2020.
Ms Gagné has been overhauling Hammerson, which owns shopping centres in Ireland, the UK and France, including Brent Cross in London and the Bullring in Birmingham, since taking over in late 2020.
“Last year, I was facing a very weak balance sheet, no clear strategy and lockdown. The situation was very challenging,” said Ms Gagné, who sold off more than £500 million worth of shopping centres and retail parks last year to trim the company’s debt and offset valuation declines.
Plunging values meant that Hammerson’s headline loan to value ratio – a key measure of risk – decreased by only 1 per cent, to 39 per cent, despite the sell-off of assets.
"Hammerson's loan to value ratio is still high and although the portfolio valuation began to stabilise in the second half of last year, that was before the consumer spending squeeze kicked in this year," said Mike Prew, an analyst at Jefferies.
Ms Gagné said the company was looking to rein in leverage and had earmarked about £500 million-worth of assets to sell during the next two years.
Hammerson’s share price, which has fallen almost 90 per cent in the last five years, was flat at 34.5p on Friday. – Copyright The Financial Times Limited 2022