Hammerson plans new leasing model alongside Via sale

A year ago, Hammerson’s premium outlet subsidiary Via was a core part of its strategy going forward. Today the company confirmed the disposal of most of its holding in Via to the joint owner of the portfolio, Dutch pension provider APG.

Yesterday’s announcement that Hammerson is selling Via is hardly a surprise as the company last week confirmed press speculation that the disposal was indeed on the table.

Photo: Clay Banks, Upstream

And, to state the obvious, a lot has changed in a year in retailing and retail real estate.

Announcing the disposal in conjunction with the publication of its first-half results and a massive proposed rights issue, the company explained that it wants to raise £825 million in total. This comprises £552 million from the rights issue and c£274 million from the €301 million sale of its stake in Via, actually to a fund managed by APG Asset Management.

Hammerson’s two largest shareholders are APG and Lighthouse Capital – owning respectively 20% and 14% – who both support the rights issue.

Hammerson’s plan is to reduce debt and increase liquidity in the face of the structural changes to retailing accelerated by the Covid-19 pandemic.

Now that its planned focus is evidently entirely on its more traditional shopping centre portfolio the real interest from property professionals will be on what the company plans to do to address the continuing pressure on retail businesses from the structural change brought by online sales. The company does after all represent something of a bellwether for retail real estate, both in the UK and beyond.

Apart from ‘increasing the scope of its disposal programme’ when market conditions stabilise, the firm is introducing a new leasing model which it says is based on experiences with brands, existing leases that it has in Continental Europe and the collaborative approach adopted in the premium outlet market.

New approach to leasing

The firm says that the new approach comprises more flexible leases, more affordable rents, rent indexation in place of the more traditional system of rent reviews and what it refers to as an ‘omnichannel top up’ element.

Hammerson’s results and the accompanying disposal announcement follow hot on the heels of Unibail Rodamco Westfield’s H1 results published at the end of July. URW’s like-for-like income had slipped -14.2% on the same period last year although this was -34.1% in its UK centres. The company was also part way through a disposal programme when the pandemic hit and says it has another €4bn to sell in the next two years.

Meanwhile it has cut back its development programme to €6.2bn.

By mid year, URW had managed to collect 67% of the rent due to it in the first half and had collected half of that owed by the late July. In negotiations for the outstanding rent it says it is seeking concessions from tenants that include lease extensions, increased percentages of sales based rents, waiver of co-tenancy provisions in the US and the inclusion of new landlord break options.

The extent to which such measures will be a long term solution to retailers’ woes remains to be seen but there is increased emphasis on sharing the burden.

URW said that bricks and mortar sales were returning to more normal levels and that online-only brands were struggling with profitability even though turnover had increased owing to the pandemic. Furthermore it said omni-channel retailers are eager to reopen stores and selectively to take new ones.