The troubled UK shopping centre landlord Hammerson is expected to announce a programme of asset sales this week as it seeks to appease angry shareholders after a failed attempt to buy its largest rival.
Hammerson, which part owns the Dundrum Towncentre and other Irish assets, is due to unveil a new strategic plan on Tuesday as it also faces the intervention of activist hedge fund Elliott Management, which has used derivatives to acquire an interest in the group of more than 5 per cent.
The FTSE 250 company and its chief executive David Atkins face pressure to sell assets in order to return value to shareholders and prove the book valuations of its portfolio, with its shares trading at a steep discount.
Two years ago, Elliott's intervention prompted the departure of the chief executive at the UK investment company Alliance Trust and secured an overhaul of the way the 130-year-old trust was run.
Hammerson has been in talks to sell a stake in the Highcross shopping centre in Leicester and has said it is looking at disposals more broadly as part of its “options to accelerate the delivery of value for shareholders”.
It is also reconsidering plans for big capital expenditure, such as an extension to the Brent Cross shopping centre, and an upgrade of the Whitgift Centre in Croydon, both co-owned with other investors. Hammerson could cancel those works or sell its share.
If asset sales are successful, Hammerson plans to return cash to shareholders, potentially through share buybacks, although analysts said it would need to ensure its loan-to-value ratio remained stable.
"The market is cautious around Hammerson's financial gearing [AND]the underlying asset values," said David Brockton, an analyst at Liberum.
The company has been trading at a discount of about 30 per cent, reflecting investors’ gloom about retail property after a string of retailer insolvencies and store closures in the face of the ecommerce threat.
Few major UK shopping centres have changed hands in recent months, leading to concerns about the sale value of such assets, although smaller centres have continued to trade.
But Colm Lauder, analyst at Goodbody, said that with Hammerson's Irish, French and outlet store portfolios taken into account, the share price "implies a discount of almost 50 per cent of the UK proportion of the assets".
“This is a discount we feel overestimates the expected value declines in the UK shopping centre and retail park portfolios,” he added.
In April, Hammerson retracted a proposal to buy rival Intu as the retail climate deteriorated. One shareholder, APG, had gone public with its “substantial concerns” about the all-share offer, which it said was “insufficiently attractive” to shareholders.
At the same time, Hammerson rebuffed two takeover approaches from France’s Klépierre, the second of which valued the UK group at 635p a share, more than £5 billion, a price Hammerson said “very significantly” undervalued the company.
But with Hammerson now trading at 530p, it faces pressure to show how it can generate more value ahead of October, when Klépierre could potentially return with a fresh bid.
It has brought in McKinsey as an adviser and said it may also invest further in its most successful divisions, outlets and Ireland.
Copyright The Financial Times Limited 2018
