UK-based shopping centre owner Hammerson recorded its best level of lettings in its 75-year history in 2017 as it managed to extract higher rentals from its prime tenants.
While many types of UK shopping centres, especially the smaller neighbourhood and convenience malls, are suffering due to subdued consumer spending, larger shopping centres are still profitable.
“In recent years we have actively rebalanced the weighting of our portfolio towards high footfall destinations in major cities across the UK and Europe and this has underpinned our strong financial success at a time of ongoing structural change in retail,” said David Atkins, CEO of the real estate group which owns £7.75bn worth of retail centres on the continent.
“We created very attractive store spaces, which enable retailers to showcase their best ranges. These store set-ups complement their online retail with click-and-collect services and so forth. This meant we could earn high rents compared with the market from premium often multinational tenants and group occupancy is at a 17-year high at 98.3%,” he said.
This activity contributed to a 6.5% uplift in earnings per share, which has risen on average by 8.3% a year over the past five years.
Hammerson last year made a bid to take over fellow UK shopping centre owner Intu Properties. This would create the largest real estate company on the JSE, with assets worth £21bn (R340bn).
Hammerson intends to sell about £2bn worth of the weaker assets from the combined portfolio.
Head of listed property funds at Stanlib Keillen Ndlovu said Hammerson presented an attractive investment case over the long term. It should offer value after the merger with Intu is completed and once the Brexit process is clarified.
“Hammerson remains our top pick for UK property exposure on the JSE. The team has been doing a great job but unfortunately, all the great work from a share price performance point of view has been overshadowed by Brexit,” he said.
“They have grown their rent, earnings, net asset value and have achieved record leasing activity. They have further reduced the cost of debt and extended the debt maturity profile,” he said.
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