Dundrum Town Centre owner cuts €2.3bn from shopping centre values
Hammerson, which co-owns Dundrum Town Centre, has cut €2.3bn from the value of its shops and shopping centres, as the Covid-19 pandemic had a severe impact on the retail sector.
The company said its portfolio is now valued at £6.3bn (€7.35bn), down from £8.3bn in 2019.
Hammerson operates in seven different countries, with a number of flagship retail centres including the Bullring in Birmingham, UK.
It co-owns Dundrum Town Centre, along with German insurer Allianz. The group also owns half of the Pavilions shopping centre in Swords, the Ilac Centre in Dublin city centre and 40pc of the Kildare Village premium outlet mall.
Net rental income of £158m last year was down 49pc as a result of Covid-19 closures, tenant restructuring and higher provisions for bad debt and tenant incentives, according to annual results from the group.
In Ireland, its rental income fell by 30pc year-on-year.
A total of 76pc of rent has been collected in respect of 2020, as the pandemic has battered retailers already struggling with the rise in online shopping.
Hammerson reported a loss for the year of £1.7bn, an increase on the loss of £781m in 2019.
With the Covid-19 pandemic forcing the temporary closures of all non-essential retail for a number of months last year, footfall at Hammerson-owned shops was severely affected, the company said.
During the year, the group reduced its net debt by £609m to £2.2bn.
Hammerson has liquidity of £1.7bn, including cash of £503m.
“As our results show, Hammerson was hit hard. The retail sector, already in the grip of major structural change, has been significantly impacted by the restrictions imposed to tackle the pandemic, and we've also seen an increasing number of retail failures,” said Hammerson CEO Rita-Rose Gagné.
“Combined, this has resulted in the largest fall in net rental income and UK asset values in the group's history.”
She said the company’s immediate focus is “leading Hammerson through Covid-19 to safety”.
“This means further disposals to strengthen the balance sheet, managing refinancing, and sharpening our operations to maximise income.”
“We are currently working on a thorough strategic and organisational review that will map out a route to future growth to transform the business in the context of what will remain a tough economic and structural backdrop."
The company said it will continue to target disposals to further strengthen the balance sheet this year.
So far in 2021, it has sold three minority stakes in Brent South Shopping Park, London and French centres Espace Saint-Quentin and Nicetoile for a total of £73m (€85m).
Hammerson said it would meet its liabilities at least for the next 12 months, but flagged that the impact of the virus on the retail sector and broader economy could cast significant doubt on its ability to carry on as a business.
“More adverse outcomes relative to those assumed in the scenario modelling, could result in breaches in the group’s unsecured gearing and interest cover ratio covenants,” the company said.
Goodbody analyst Colm Lauder said the results were “always going to make difficult reading given the unprecedented challenges faced by Covid-19 lockdowns on top of an already tested retail sector”.
“Despite this, NAV [net asset value] and EPS [earnings per share] were marginally ahead and debt levels stabilised year-on-year. New management and the acknowledgment that the worst is over present a considerable opportunity to reshape the business in FY21,” he said.
Additional reporting Reuters