Shopping Centre

Retail helps Hammerson stem losses

Published:  22 February, 2010

Hammerson's UK retail holdings contributed to an improved performance at the Anglo-French REIT. The pre-tax loss for the year ended 31 December 2009 was £453.1m, down from £1,611.5m in 2008.

For Hammerson's retail division the twin highlights occurred in Scotland in the final quarter of 2009. On 29 October, Union Square, the 533.900-sq ft shopping and leisure development in Aberdeen, opened to the public. The scheme received its one millionth visitor just three weeks after opening and was 79 per cent let or in solicitors' hands at the end of December.

And in December Hammerson completed its first major acquisition since 2007, with the purchase of a 50 per cent interest in Silverburn, a million-sq ft shopping centre in Glasgow. The scheme, which opened in 2007, is a single-level covered mall anchored by Debenhams, Marks & Spencer, New Look, Next and Tesco Extra. It has 98 retail units let to high quality retailers and is 97 per cent occupied with an average unexpired lease term of 12 years. The centre is held in a 50:50 joint venture with the Canada Pension Plan Investment Board and Hammerson is the asset manager for the joint venture.

In 2009, Hammerson successfully completed a number of extensions in its retail parks portfolio. The extension of Westwood Retail Park, Thanet, was completed in June and was fully let on opening to Bhs Homestore, Brantano and Dunelm. The extension to Cleveland Retail Park, Middlesbrough, was finished in July and the scheme was fully let by the end of the year. At Fife Central Retail Park in Kirkcaldy, a 120,000-sq ft extension completed in August which is fully let to tenants including B&Q, Mothercare and Toys R Us. The total cost of these three projects was £59m million and the annual rent receivable is £4.8m.

The vacancy rate at 31 December 200 across Hammerson's UK shopping centre portfolio was just 6.4 per cent, and across its retail parks portfolio it stood at 3.6 per cent. But some centres have performed even better: at Highcross, Leicester voids stood at 6 per cent with 5 per cent at Cabot Circus, Bristol. Footfall trends have been mixed with growth at Highcross, Leicester, following the opening of the extension and at WestQuay, Southampton, as a consequence of the opening of an Ikea store next door which also attracted customers to the shopping centre. Elsewhere footfall declined slightly, suggesting a general picture of fewer visits but higher spending per visit.

Hammerson has been appointed as development manager for the Rock in Bury, on behalf of the administrators of Thornfield Ventures. The 600,000-sq ft retail and leisure scheme is due to open in Summer 2010. But Hammerson has deferred construction work on all its other town centre retail projects.

However in April, Southampton City Council granted outline planning consent for Watermark WestQuay, a project set on a 4ha brownfield site adjacent to its existing WestQuay Shopping Centre. The consent was subject to confirming S106 provisions, which were agreed in February 2010, and a development agreement with the council is now in place. The mixed-use scheme will include up to 250,000 sq ft of retail space, a hotel, a residential building with up to 240 apartments and leisure facilities.

Chairman john Nelson promised 2010 would see an increase in activity. “Our reinvigorated management team, under David Atkins, is focused on creating value by maximising the income from our assets and improving operational efficiency,” he said. “We rigorously evaluate the projected performance of our properties against financial benchmarks and will progress selected developments. We will continue to capitalise on opportunities which are being presented by the markets. This is likely to lead to more active management and evolution of our portfolio."