Hammerson is pleased to announce that it has exchanged contracts for the sale of the majority of its office portfolio to Brookfield Office Properties for aggregate cash proceeds of £518 million.
Earlier this year Hammerson announced a revised strategy to become a specialist retail property company, and the intention to sell its London office assets. The main assets being sold are: 99 Bishopsgate, EC2; the 50% stake in 125 Old Broad Street, EC2; Leadenhall Court, EC3; and the development site Principal Place (commercial and residential), EC2.
Transaction key points:
· Major disposal comprising six assets which represent 75% of London Group portfolio
· Gross sale proceeds of £518 million are 5% above proforma book value and represent a 5.2% initial yield
· Hammerson proforma portfolio now 97% retail
· Portfolio sale allows significant reinvestment programme to increase scale in successful retail property sectors
Payment of £329 million in respect of 99 Bishopsgate, Principal Place and two smaller assets will be received by 30 September 2012. 125 Old Broad Street and Leadenhall Court will complete by 30 June 2013 for £189 million. Further details on the individual assets are provided in the notes below.
The sale is expected to be broadly neutral to 2012 earnings. Hammerson will have proforma cash and unutilised facilities of around £1 billion, leaving proforma gearing and LTV ratios at 34% and 26% respectively.
The proceeds will be used to increase scale and focus through investment in retail developments and acquisitions in Hammerson's three chosen areas:
- Prime regional shopping centres. Hammerson is on site at Les Terrasses du Port, Marseille, a £400 million retail and leisure scheme which is on track to open in spring 2014, and is refurbishing Queensgate, Peterborough. Hammerson is making good progress with a number of its other major retail schemes in both the UK and France.
- Convenient retail parks. Hammerson plans to accelerate extension and refurbishment projects in its UK retail parks and smaller retail schemes. Hammerson has identified projects worth £320 million which show an average yield on cost in excess of 7.5%, and has recently commenced construction at Monument Mall, Newcastle, and Manor Walks, Cramlington.
- Premium designer outlets. Hammerson has an investment in the highly successful Value Retail business which owns premier outlet villages in nine of Europe's main cities. Having secured an additional stake in December 2011, Hammerson retains a close dialogue with the management team and believes there will be opportunities for further future investment.
David Atkins, Chief Executive of Hammerson said:
"In our strategic review announced earlier this year we identified the opportunity to enhance returns by focusing our energy and capital on the successful sectors of retail which cater to consumers' increasing desire for experience, convenience and value.
I'm delighted that we have been able to achieve our goal of becoming a pure retail business earlier than anticipated by arranging a single transaction for the majority of our London offices which secures excellent value for shareholders.
I am confident that at this point in the cycle we can reinvest successfully to increase scale in our three chosen areas of prime shopping centres, convenient retail parks and premium designer outlets."
For further information
David Atkins, Chief Executive Tel: 020 7887 1000
Timon Drakesmith, Chief Financial Officer
Morgan Bone, Director of Corporate Communications Tel: 020 7887 1009
Hammerson is a FTSE 100 Real Estate Investment Trust with a portfolio value of £5.7 billion at 31 December 2011. Hammerson's vision is to be the best owner-manager and operator of retail property within Europe. We specialise in the successful retail segments of prime regional shopping centres, convenient retail parks and premium outlet villages.
Hammerson was advised on the transaction by Herbert Smith as lead legal advisor, Clifford Chance, Nabarro, CBRE and Deutsche Bank.
99 Bishopsgate, London EC2, provides 31,500m2 of freehold office accommodation over 26 floors. Acquired by Hammerson in 1994 and redeveloped in 1995, the building has been refurbished in 2012, with 11,000m2 of space recently made available for let. Rents passing at 31 December 2011 were £11 million, with average rents passing of £600/m2.
125 Old Broad Street, London EC2, is a 50% owned 30,300m2 freehold office also over 26 floors, on the site of the former London Stock Exchange. The site was acquired in 2002 and the redeveloped office completed in 2008. The building is currently undergoing a full reglazing. Hammerson's share of rents passing at 31 December 2011 were £8 million, with average rents passing of £515/m2. There is a non-recourse credit facility of £132 million (£66 million Hammerson share) secured on the property.
1 Leadenhall Court, London EC3, is a 10,000m2 leasehold office at the corner of Gracechurch Street and Leadenhall Street. The building was acquired by Hammerson in 2010. Rents passing at 31 December 2011 were £7 million, with average rents passing of £760/m2. The building is let to Alliance Assurance Company until March 2014.
Principal Place is a mixed-use leasehold development scheme in London EC2, which has consent for a 57,500m2 office building and a separate 23,000m2 residential tower providing 243 private apartments. Legal ownership of Principal Place remains vested in Hammerson but will transfer at a later date. Brookfield will manage and fund the development in the interim period.
Also included in the sale are an interest in 1 Puddledock, EC4 and a block of buildings on Shoreditch High Street adjoining Principal Place.
The aggregate passing rent, at 31 December 2011, of the assets being disposed is £27 million. Hammerson's net rental income for the year ended 31 December 2011 was £296 million. The book value of these assets at 31 December 2011 was £468 million, and Hammerson has subsequently spent a further £24 million. The total consideration is £518m, which represents a 5% premium over the implied combined book value.
Hammerson intends to retain its 50% stake in The Goodsyard, E1 which offers a unique opportunity to generate value through the creation of a large mixed-use scheme with a significant retail element. Hammerson will also retain its 50% ownership of its London head office in Grosvenor Street, W1.
London Wall Place is an option held with the City of London, with consent for a 46,000m2 office development in London EC2. The option has no value in Hammerson's books and in line with its revised strategy, Hammerson intends to allow it to lapse by 28 June 2012 as the scheme does not provide sufficiently high returns to the company.
The remaining London office assets, with a combined December 2011 value of £113m, include: a 30% stake in 10 Gresham Street, EC2, held in a joint venture with CPPIB; Stockley House, SW1; and an interest in Harbour Quay, E14. We intend to dispose of these interests over the next 18 months.
Brookfield Office Properties
Brookfield Office Properties owns, develops and manages premier office properties in the United States, Canada and Australia. Its portfolio is comprised of interests in 110 properties totaling 78 million square feet in the downtown cores of New York, Washington, D.C., Houston, Los Angeles, Denver, Seattle, Toronto, Calgary, Ottawa, Sydney, Melbourne and Perth, making it the global leader in the ownership and management of office assets. Landmark properties include the World Financial Center in Manhattan, Brookfield Place in Toronto, Bank of America Plaza in Los Angeles, Bankers Hall in Calgary, and Darling Park in Sydney. The company's common shares trade on the NYSE and TSX under the symbol BPO.
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