Contemplating stabilising British assets?

As per its continental peers, Hammerson avoided any negative revaluations in H1 23. A number of transactions enabled a reduction in debt to the less risky level of 46%.

47% LTV ratio (proportionate)

Despite a couple of positive items on the operational side, the LTV ratio was broadly flat. It is still too high in absolute terms when looking at the proportionate level.

Awaiting further downwards adjustments in FY 23?

The Q3 22 trading update provided little in the way of significant information. Will rising concerns in the UK make for something more significant in FY 23?

Don't shout "Victory!" too soon

Improving occupancy stalled in H1 22 in almost all areas. Even Value Retail (luxury travel retail) experienced vacancy up 100bp within this half year. The path to recovery is anything buy linear.

Not far enough away from the waterline

By releasing a low level of negative revaluations coupled with improving operational parameters in H2 21, Hammerson demonstrated a landing performance. Looking in more detail at the company’s report, it is far from showing signs of a strong restart.

Landing negative revaluations

Occupancy’s degradation is slowing. Despite the encouraging level of new lettings, ERVs were down in the UK. Both France and Ireland look safer.

Nearing the red line again

End market rents (ERVs) were down 11% in FY 20, i.e. a 17% three-year cut. The LTV of 46% will require further adjustment measures soon. The UK flagship has lost half of its value since December 2017.

First recap: done. Waiting for a second one?

Vacancy strongly increased in Q2 20. LTV surpassed the 50% mark on 30 June 2020 due to strong value destruction in H1 20. Hammerson announced a £550m cash capital increase coupled with a disposal of £270m. Its ex-post pro forma net debt should be £2.2bn, i.e. LTV of 42% on a proportionate basis. Too high?

First quarter of 2020

The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.

Are we still far from the bottom of the hole?

Negative revaluations accounted for £1bn in FY 19 (£828m once the positive contribution of Premium Outlets was included) vs. £10bn of gross assets in FY 18, or a c.9% loss of FY 18 GAV in a single year. As for all the British Property sector, keep in mind that FY 19 valuations do not account for the entire consequences of either 2019-nCoV or Brexit.

Is the British's sell-off in sight ?

Hammerson has disposed of new assets in the UK at a price 22% below their June 2019 book value, or a yield of 8.7% from the buyer’s side. The crisis is not over.

Retail ready for a renaissance?

There have been few structural shifts in the property sector as profound as the one currently taking place in retail. Consumer spending patterns have drastically changed over the past five years, with online sales now accounting for 19.7% of all retail spend in the UK (August 2019, source: ONS), compared to 11.5% in August 2014. When you look at fashion retailing specifically, online sales accounted for 26.8% of consumer spend on clothing in 2018 (source: Mintel).

Retail ready for a renaissance?

There have been few structural shifts in the property sector as profound as the one currently taking place in retail. Consumer spending patterns have drastically changed over the past five years, with online sales now accounting for 19.7% of all retail spend in the UK (August 2019, source: ONS), compared to 11.5% in August 2014. When you look at fashion retailing specifically, online sales accounted for 26.8% of consumer spend on clothing in 2018 (source: Mintel).

Hard H1 19; and Brexit was still not accounted for

There were both strong declines in rents (lfl) and negative revaluations in the UK. The yield decompression explained the bulk of the 7% NAV drop in H1 19 and the impact of the coming revenue decline is not fully accounted for in our view. As expected, the healthy Outlet asset pocket and the French cushion were insufficient to compensate the now worrisome context in the UK (Idea Kicker Hammerson, 22 May 2019). Another downgrade is to come.

Act 1. New Disposal Programme.

Continental exposure protected Hammerson from a bloodbath (read Intu Latest). Nevertheless UK valuations are down by 9% on H2 2018.

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