Shopping centres giant Hammerson on Tuesday slashed more than £800 million off the value of its property empire amid brutal conditions for retailers.
The property group behind London’s Brent Cross mall was forced to cut its dividend as it plunged deeper into the red, recording a £573.8 million pre-tax loss for 2019, compared with a £173.3 million loss a year earlier.
Its rental income was hit as cash-strapped tenants demanded reductions or pushed through debt restructurings including rent cuts known as CVAs.
Today it said 33 of the retailers it lets space to, including Debenhams and Topshop-owner Arcadia, closed shops or got rent cuts through CVAs, or went into administration.
The landlord, which also has properties in France and Ireland, saw the total value of its estate drop £828.2 million to £8.3 billion.
Retail park and shopping centre values fell, and only Hammerson’s premium outlets division, behind upmarket shopping destinations such as Bicester Village, saw values rise.
The 2019 dividend was held, but Hammerson said it would cut its 2020 dividend by 46% to 14p. The City had been expecting a 23.5p dividend.
Chief executive David Atkins said: “The magnitude of the challenge facing UK retail is significant.”
The boss said the company will look to keep paying down its debts, which have reduced to £2.4 billion after nearly £1 billion of recent disposals.
It last week sold a number of out-of-town retail parks, meaning it has exited that troubled market. It unveiled plans to focus on other parts of its empire in 2018 after it ditched a £3.4 billion swoop for smaller rival Intu.
Atkins said Hammerson will concentrate on its premium outlets and introduce more mixed uses at sites.
The company is working up new plans for a Brent Cross extension and a Croydon mall with Westfield, with offices, restaurants and homes being mooted to go alongside shops.
Atkins said: “As we drive a faster pace of change in shifting our brand line-up and repurposing space, we expect to see improved results in the UK.”
Liberum analyst Tom Musson warned of potential further valuation cuts if Intu fails in its current efforts to raise equity to pay down its near-£4.7 billion debt pile. If banks took control of Intu’s assets, he said, “we think a fire sale is likely, putting further pressure on UK shopping centre valuations”. However, banks would only take control in a worst case scenario.
M&G keeps lock on £2.5bn fund
M&G today said its £2.5 billion property fund will stay suspended to protect the interests of investors.
The funds group first blocked savers from withdrawing their cash in December after it could not sell buildings fast enough to meet the redemption requests amid Brexit uncertainty and difficulties in the retail sector.
The fund owns shopping centres, warehouses and offices.
The firm said it is making good progress in raising cash, and £245 million of disposals are under way.