Hammerson reports British property value drop
Hammerson, the FTSE 100 retail property group, has revealed a decline in the value of its British portfolio in a further sign of the faltering commercial property market.
Hammerson, which owns British shopping centres such as Brent Cross and a stake in the Bullring in Birmingham, said that £51m was wiped off the value of its UK properties in the six months to the end of June.
The company blamed the increase in stamp duty in April and prices weakening for retail parks, and added that the value of its shopping centres had remained flat in the period.
Hammerson’s first-half results signalled that weakening values in parts of the commercial property market have now begun to show up in the books of some of Britain’s largest listed landlords.
Analysts at Peel Hunt on Monday declared “the long bull market in physical real estate is over” and lowered its expectations for net asset values for a series of property companies including Hammerson.
The drop in Hammerson’s UK assets was more than offset by the rise in value of its French portfolio in the first half of its financial year, however, while the group said it was “reassured” by activity in the leasing and investment markets since the Brexit vote.
Hammerson’s French portfolio increased in value by £69m and the value of its outlet malls also rose, resulting in a 2.4 per cent overall boost to net asset value per share to £7.27. Some 40 per cent of its portfolio is held overseas.
Profit declined by more than 50 per cent to £162.5m — a reflection in part that the previous year’s results had been boosted by fast rises in property values — while like-for-like rental growth was 2.1 per cent against a year earlier.
Hammerson said it had agreed 20 new leases since the vote to leave the EU, while a “blip” in footfall after the Brexit vote was swiftly followed by a return to business as usual.
The group said it had almost completed a £500m programme of disposals, but had taken a loss of £12.6m against the latest valuations on three properties sold for a total of £296m during the first half of the year.
“We are heartened and reassured by the business that has taken place since the referendum,” said David Atkins, chief executive.
“Consumer confidence has returned to its pre-referendum level.”
It will increase its interim dividend by 6.3 per cent to 10.1p a share.
Analysts at Liberum said the group’s portfolio of “largely defensive retail assets” should make it less vulnerable than some rivals to cyclical movements in the property market.
But Peel Hunt on Monday downgraded its expectations for Hammerson’s net asset values by 7 per cent as part of a broader post-Brexit downgrade of the property sector. The broker said it was most concerned about the future values of London offices, but added “we also have concerns over retail”.
“Yields were under-pressure before the vote and the fall in the pound and consumer confidence combined with the continued move towards online shopping will dampen retailers’ leasing plans,” its analysts said.
The group also announced Monday it would seek a dual listing in Johannesburg in early September as it aims to tap into a pool of South African capital that has shown strong appetite for overseas real estate assets.
Hammerson has received at least a short-term boost from an unexpected quarter — the hit augmented reality game Pokémon Go.
It said footfall on the weekend following the game’s UK release had seen double-digit growth from the same weekend a year earlier, as players hunted virtual monsters around “gyms”, “pokestops” and “lures” located around Hammerson’s properties.