Interim Management Statement

RNS Number : 8309V

Hammerson PLC

09 November 2010

 



For immediate release 9 November 2010

Hammerson plc

Interim Management Statement for the period from 1 July 2010 to 9 November 2010

David Atkins, Chief Executive, said:

"We have made excellent progress since June. In line with our stated strategy we have realised cash through asset disposals and have substantial resources available for investment in assets offering good growth prospects. We have achieved an encouraging number of new lettings, improving occupancy, and made good progress with a number of our development projects.

We continue to benefit from our focus on modern properties in prime locations. Despite the uncertain economic backdrop, the trading performance at our regionally dominant shopping centres has been good and there is some evidence of a recovery in tenant demand. We are seeing strong investment demand for prime property in both the UK and France."

Improving the portfolio

The redevelopment of 54-60 rue du Faubourg St Honoré, Paris, is progressing well. The scheme is fully pre-let and some units have already been handed over to tenants. The renovation of the buildings' façades and the fit-out of the retail units are on schedule to complete in spring 2011. At Les Terrasses du Port, Marseille, which is almost 50% pre-let, enabling works have begun and the main construction works are due to start early next year.

In October, Glasgow City Council approved the application to extend Silverburn shopping centre, where year-to-date footfall is up 5%. The latest phase of the development will result in an additional 7,700m² of high-quality retail and leisure space. Also in October, following the signing of the Section 106 agreement, Barnet Council granted full planning consent for the project to extend Brent Cross shopping centre and create a new town centre in Brent Cross Cricklewood.

We have submitted a detailed application to Birmingham City Council for a new restaurant quarter at Bullring. The development, called Spiceal Street, will be set around St Martin's Square, creating 1,000m² of restaurant space for which we are seeing strong tenant demand. In Leeds, we have revised the Eastgate Quarters retail-led regeneration scheme. The revised scheme will accommodate around 93,000m² of new retail and leisure space making provision for John Lewis and Marks & Spencer as anchor stores. We intend to submit a planning application before the end of the year.

In our office portfolio, a detailed planning application was recently submitted for a new development at London Wall Place, London EC2 (the former St Alphage House site). The 46,000m² office scheme comprises two buildings in the heart of the City. 121 London Wall, a 28,000m² headquarter office building, will provide flexible office space for occupiers including large trading floors. 123 London Wall will provide 18,000m² of office space arranged over 16 storeys.

Subject to planning approval and occupier demand, practical completion of London Wall Place could be achieved by 2014 with the building ready for full occupation in 2015. Together with our proposed development at Bishops Place, London EC2, this gives us the potential to benefit from the improving London office market.

In our retail parks portfolio we achieved planning consent for the 5,100m² extension and redevelopment of Abbey Retail Park, Belfast and also for the 3,300m² redevelopment of the B&Q unit at Battery Retail Park, Selly Oak, Birmingham. Discussions have commenced with anchor tenants for a proposed 20,000m² extension to the Orchard Centre, Didcot.

During the period we completed the acquisition of a 30% interest in 10 Gresham Street, London EC2, and the disposals of Exchange Tower in London's Docklands, a 75% interest in Espace Saint Quentin, Saint Quentin-en-Yvelines, and a 51% interest in O'Parinor shopping centre near Paris. In aggregate these transactions raised approximately £420 million.

Maximising income from our assets

We continue to focus on reducing vacancy, increasing income and reducing costs in our portfolio. More than 50 new long-term leases were completed in the third quarter, with overall new rents marginally above ERV.

We have signed major retail and catering brands in our shopping centre portfolio, including Hugo Boss and Jamie's Italian at Bullring, Birmingham. We have strengthened the retail line-up at Les Terrasses du Port, Marseille, with lettings to Catimini and Fossil. Lettings to Poundstretcher at Drakehouse Retail Park, Sheffield, and to DSGi at The Orchard Centre, Didcot, have taken both parks to full occupancy.

Consequently, overall occupancy in the portfolio increased to 96.6% at 30 September 2010, from 96.2% at 30 June.

Occupancy (%)	UK Retail	France Retail	Office	Group
30 September 2010	96.0	98.1	95.9	96.6
30 June 2010	95.6	97.9	94.9	96.2
31 December 2009	94.5	98.5	91.6	95.2

The strong trading performance at our retail assets in the UK and France continued in the third quarter. The UK shopping centre portfolio generated a 5.3% like-for-like sales increase, and in France like-for-like sales in our shopping centres increased by 6.2%.

Financing

Borrowings were £2.4 billion at 30 September 2010 and cash balances were £0.2 billion to give net debt of £2.2 billion (31 December 2009: £2.1 billion). Disposals which completed in October reduced net debt by a further £0.3 billion. Cash and committed unutilised bank facilities at 30 September 2010 totalled £0.7 billion.

Occupational markets

Improving labour markets, low interest rates and healthier than anticipated household budgets in both the UK and France have led to a continued recovery in retail sales throughout 2010. In addition, a limited number of development completions has helped to stabilise occupancy rates in the UK, slowing the rate of rental decline across the retail sector. Vacancy levels at prime, modern properties such as Hammerson's remain significantly lower than the industry average, supporting both sales and rental levels. In France, where vacancy rates remained low throughout the downturn, rental levels have seen a return to modest growth this year.

Government deficit reduction plans in the UK and France may put pressure on consumer spending over the coming years and accordingly we remain cautious about the outlook. However, these plans should encourage business investment and increased employment in the private sector, thereby lessening the negative impact. Furthermore, we anticipate a continuing polarisation of retail sales to large, regionally dominant shopping centres and to retail parks.

Demand for space in the City of London increased in the third quarter, helping to maintain the growth in headline rents. Over the next two years, the supply of new space will fall sharply below historic levels, supporting further short-term rental growth.

Investment markets

With interest rates at historically low levels, UK commercial property remains an attractive asset class, encouraging continued investment over the third quarter.  Investor demand has been focused upon well-let assets in prime locations with secure income. In France, despite continued demand for high quality assets, investment activity has been limited so far this year, due in part to a lack of available supply.

Conference call

There will be a conference call for investors and analysts at 08.00 GMT today. To participate in the call, please dial:

UK	0800 901 2160
International	[phone]
US	1 866 602 0258
Netherlands	0800 020 3464
France	0805 770 154

Please quote confirmation code 468 1212

For a replay of the conference call, please visit: www.hammerson.com

For further information

David Atkins, Chief Executive Simon Melliss, Chief Financial Officer Morgan Bone, Director of Corporate Communications

Tel:  [phone] Tel:  [phone] Tel:  [phone] [e-mail]

Financial information

The financial information contained in this statement is based on unaudited management accounts for the nine months ended 30 September 2010.

Forward-looking statements

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond Hammerson's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Hammerson does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Company should not be relied upon as a guide to future performance.

 

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