Shopping centre owner Hammerson is aiming to raise more than £800m to see it through the coronavirus crisis, which has caused a collapse in rental income and raised questions over the future of the retail industry.
The FTSE 250 company announced plans on Thursday to raise £274m from the sale of its 50 per cent stake in its European shopping outlet business, VIA Outlets, and a further £552m from a rights issue. If it fails to raise the cash — which equates to almost double its current market capitalisation of £435m — it risks breaching covenants with its lenders.
Coronavirus has thrown many retailers and retail landlords into crisis, and precipitated the collapse of Hammerson’s biggest rival, Intu, into administration in June.
Hammerson struggled to recoup rent it was owed by tenants, which include John Lewis and Debenhams. It has collected 72 per cent of the rent owed for the first half of the year, and just a third of what is owed for the third quarter — which is paid in advance by tenants.
The company announced on Thursday that it would be introducing a new leasing model, providing more flexibility and lower rents to tenants.
“The pandemic has exacerbated structural shifts in retail, exerting further pressure on both property owners and brands, and provided further evidence that the UK’s historic leasing model has served its time. It is outdated, inflexible and needs to change,” said David Atkins, Hammerson’s chief executive.
Hammerson’s share price has fallen precipitously this year, from £3.10 at the start of the year to just 57 pence when the market closed on Wednesday.
The valuation of Hammerson’s portfolio, which includes London shopping centre Brent Cross and the Bullring in Birmingham, fell 11.7 per cent in the six months to the end of June, to £7.7bn. Its UK portfolio lost more than 20 per cent of its value. Hammerson’s loan to value ratio increased from 38 per cent to 44 per cent over the period. The company reported a loss of £1.1bn.
Mr Atkins, who is due to depart the company next year, has been at the helm for more than a decade, during which Hammerson sold off its portfolio of offices and, as recently as 2018, rebuffed a takeover offer from French mall owner Klépierre that valued the company at £6.35 a share.
More recently, a deal to sell seven retail parks to Orion European Real Estate fund fell through when the buyer backed out in May.
The company said on Thursday it would look to dispose of more assets to bring its loan-to-value ratio down.