Hammerson Bets Big On Retail

Published in Company Comment on 23 July 2012

Hammerson's (LSE: HMSO) concentration on the retail sector looks to be paying off.

Specialising in retail properties looks like a dangerous gamble in the current economic climate, yet it seems to be working for Hammerson (LSE: HMSO). The property company revealed a 5.5% increase to its interim dividend this morning, despite a small slip in net rental income.

Hammerson now has 97% of its £5 billion investment portfolio in retail properties across the UK and France, following last month's announcement that it was selling most of its London office assets for £518 million.

Among its major new developments, department store Printemps has been signed as an anchor tenant at a site in Marseilles. In Leeds, John Lewis is heading the first phase on a new development that will begin construction in 2014.

Existing properties seem to be performing well, too. We still hear many headlines bemoaning empty high streets, but Hammerson's occupancy rate is currently 97.5%, ahead of its 97% target rate. The group is targeting what it calls "dominant" shopping centres and retail parks, such as Brent Cross in London and Birmingham's Bullring, with an emphasis on customer convenience and experience.

Gearing shrank from 52% to 50%, and will fall to 36% when the London office sale is completed, meaning Hammerson should have plenty of firepower to expand its property portfolio should the right deal come along.

The bad news for investors is that a lot of good news is in the share price already, with the shares up 30% so far this year.

At 463p, Hammerson trades on a 13% discount to its net asset value of 535p per share, and the shares yield 3.7%. Although some other property companies are trading at wider discounts right now, and also offer a better income, Hammerson is trading on pretty similar ratios to its larger rival, British Land (LSE: BLND).

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> Stuart does not own any of the shares mentioned above.

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spivvyfoot 23 Jul 2012 , 2:58pm

Hammerson is still in big at Shoreditch High Street station, isn't it? That will not be all retail, but maybe it will sell out after getting planning permission.

Brent Cross is more problematical. It only want to progress retail there, but its planning permission seems to have been designed so that this was not possible, and the resi and offices were part of the deal.

A s73 seems a bit of a long shot.

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