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The full year results were not particularly great imo.
Although valuations seem to have stabilised, there doesn't seem to be any real excess cash being generated. A lot of other property companies are using the cash being generated to buy back shares discounted to asset value. That doesn't seem to be the case here.
A large portion of Hammerson is now Value retail. Which is quite highly valued in terms of LTV. To actually exit any of these positions there's a most certainly a write-down especially considering a non-controlling share is being sold.
Then things such as 'During 2021 the secured loan at Highcross, Leicester, breached its covenants and therefore an impairment of the full equity value of £11.5 million was recognised against our investment in the Highcross joint venture.' I cannot see the loan being pulled, but no mention of this risk in previous reports.
The development portfolio of Hammerson had a write-down - building costs have gone up significantly is what I suspect the reason is. In the presentation Rita spoke of optionality and spending to get these projects to the point at which they can be started and adding value. It's a good thing that they are not starting them at any cost, but it is a large land bank for the size of the company.
Hammersons corporate costs are also now mis-matched to the size of the company. This is being reduced but it is a relatively slow process. Add into the mix the inflation and increase of costs to running shopping centres and the interest rate rises on the Horizon. I've decided to reduce my Hammerson position significantly. Gone into a smaller property company that is just as undervalued on net assets but is less retail-centric. Along with Alibaba which tanked today and is now ridiculously under-priced but will likely take a while to turn around, and some Gym group who I expect stellar results from next week.
I wasn't so keen on the Victoria properties being sold. Fast growing city population. Cost price on Victoria Gate was 165m in 2016. Replacement cost is more around 200m+ with todays construction cost increases. Victoria Quarter was purchased for circa 135m in 2012. So 300m of property being sold for 120m does not really seem the best idea to me.
On Hammersons website it shows 14m of rent from Victoria. Even considering it has been reduced due to rents dropping. it's being sold at a pretty high yield by the looks of it. Albeit with it not being fully occupied that will be affecting returns significantly.
The retail park sale to Brookfield last year is a bit of an example of a poor sale price. Although with that one i'm less concerned as it was necessary. Hammerson is supposed to no longer be in a forced seller position. Fourth Quarter letter of Brookfield extract:
The areas of the property markets that have exhibited “value investment characteristics” (primarily office and
retail) have been incredible places to acquire assets at a steep discount over the past two years, as there have
been very few competitive buyers. We bought numerous assets at a fraction of their replacement cost, including
a grocery-anchored retail portfolio in the U.K. that now generates a running cash yield of 18% on our cost basis.
Today, this portfolio could likely be sold for double our purchase price.
Hammerson has a lot of cash on hand especially if this sale goes through. A share buyback at these levels seems the smartest thing to do.
https://www.costar.com/article/986030237/hammerson-lines-up-aberdeen-and-leeds-malls-for-sale
They own both 100% fully so I suppose it is easier to make decisions on. Surprised they are selling Leeds considering the growth of the city and their adjacent development site.
Shorts have only reduced slightly and we've seen a relatively large increase in share price. Looking forward to the shorters being squeezed.
Pre covid dividend have no relevance as shares have all changed. I’m pretty sure Hammerson said they’d keep the scrips until the back end of this year. Although with more rent collection they may bring that forward.
Any cash divi will be more or less what the current scrip valued are so about 5p a year per share.
£1 is a little ambitious as assets have only just bottomed out by the looks of it.
The Leicester and Dublin planning being passed are an excellent result that I don't think has been priced into the shares just yet as there has been no rns/press release regarding it.
As Steve mentioned, C&R announced a solid update with 91% rent collection for the December quarter as well as valuations 'materially unchanged' from June 2021. Definitely seems we have turned a corner.
Hopefully we'll hear news of further re-financing so the pipeline that's building up can be completed without the risk of going bust. That is pretty much the key now imo.
Lighthouse has built up a good stake and are in control so it has been somewhat of a takeover anyhow. Problem with a takeover from another property company, say Kleppiere ,who were interested previously, is that they are having the same problems with retail and rent collection so their own shares are discounted just as much.
I think it more likely the smaller companies will get gulped up like land sec did recently.
On the Times:
LaSalle Investment Management, a subsidiary of the property giant JLL, has agreed to buy Cheshire Oaks and the Swindon Designer Outlet from Nuveen Real Estate for £600 million, representing a yield of 6 per cent.
Seems they got the price they were asking. Not so bad, maybe even no downgrade on the full year for Value Retail if is considered to be a better asset.
Should hear some sort of rent collection update for the December quarter and Leicester planning information this month. The moratorium end is in sight too and more disposals or refinances should be positive. If that coincides with Covid numbers reducing we could see a real run up in the share price like we did last year.
That being said, a lockdown happens and we're probably into the 20's.
No doubt it's being sold at a loss. With the purchase price being 300m. However these losses have been already taken into account over the years of write offs.
Looking at the annual report YE20. Page 61. Silverburn non-current assets = 158m. In June there was a further write off of UK destinations of approx. 13%. There's no breakdown in the half year I can see but if it was across the board around the same, that brings Silverburn to about 140m more or less.
Silverburn 9.4m rent passing. 140m sale = 6.7%. I wouldn't say that is a fire sale. A reasonable sale yield and probably around book value. Book value being twice current share price not to forget.
Hammerson is quite focused on it's city quarters concept. Silverburn was a bit of an isolated asset - Glasgow represents 1% of the portfolio exposure with no development pipeline around it.
I'd disagree with Bicester being non-core as it represents a significant chunk in valuation terms. Hammerson also don't really have the option to sell just this as Value retail is independently managed and a complicated structure.
@OWLS
Your options were to either take 0.2 cash or 2p scrip. So the point would be choosing the better option for yourself. On previous 80% took the scrip for whatever reason. So they benefitted slightly - at the expense of the cash takers.
Hammerson due to REIT rules cannot simply just cancel the dividend like a normal company. A scrip basically means they can ‘distribute’ without actually losing any cash. They want to hold onto until they are on more secure ground.
The current CEO seems to be making smart moves - i'm not sure if you've watched a webcast to the half year but she is quite impressive. Selling off some assets so they are not close to breaching covenants. Selling out of areas which they do not have control or a major interest. Refinancing to extend maturities. Pushing to let all vacant spaces - which reduces business rate costs. And now looking at staff headcount and cutting costs there.
When management are making sense in what they do then it usually leads to a good outcome. The today announced business rate relief in the UK will help collections too.
I do see the issue with opex and cashflow is always key. With a lot going on in the first half of the year in refinancing, sales of assets, lockdowns, and already committed capex, I don't think the cashflow for that period if necessarily representative of normal. However the second half of the year cashflow is something i'll be looking closely at.
Received a pretty comprehensive response back from Hammersons investor relations. Their rent collections are not far behind Klepierre for the third quarter - i'd been mistakenly comparing to the fourth. Was also informed the EU commission recently waived through the French government’s relief programme for retailers, hopefully there should be a further uptick in collections.
They are limited on what they can disclose as to Value Retail. The refinancing is not considered a risk by Value Retail's own auditors and the downside scenarios that led to the risk in HMSO's report (A further 3 month lockdown) has not happened nor does it seem like that will happen, at least not to that extent. They are however not expecting full earnings recovery until international travel returns.
Seems like we got to just wait this one out until the rent normalises and cash starts getting returned to investors again.
The case surge is only somewhat concerning. Seems the death rates are being suppressed by the vaccines and governments seem quite determined to keep things open - albeit we've heard that before.
In terms of asset valuations, it seems we are now bottoming out. The building focus across the country seems to have moved away from retail towards residential and the more resi that is built around Hammersons sites the higher the footfall.
And when it comes to inflation and the money printing that governments are doing. 'real' assets such as property and commodities hold their value reasonable well. It seems to me a bit of inflation would benefit Hammerson - a 10% inflation uplift in values, but debt stays where it is is a real positive for net assets. Would be even better if they manage to refinance more at long term fixed rates.
The update overall was decent. However I'm rather concerned that the France rent collection was so low for the third quarter. I may be wrong, but France don't have the same rent protections that the UK put in until March 2022? So i'd expect them to be higher.
Kleppiere released their update for the quarter yesterday and have managed 88.9% rent collection for the 3rd quarter. That's a stark difference.
It would be good if we could also get more information on Value Retail. Considering it's pretty much half owned by Hammerson and accounts for something like a third the share value, it's very opaque. I visited Bicester myself yesterday, had to drive around the (quite large) parking area twice to find a parking space. So it's busy, which is a good thing. It is about time cash went towards Hammerson and shareholders, not just focusing on growth (like they said last year but seem to have backtracked on)
I will be putting these question to Hammerson via email and hopefully getting answers at the AGM in 4 weeks as advised on the circular.
The planning for Leicester has been revised as of last week. Height was reduced which knocks off about 50 flats from the scheme but it is much more likely get passed.
Dublin was only submitted recently so looking more back end of the year.
They’ve already said it will be scrip divi’s til the end of this year. If the rent collection is higher as it should be, then they have no choice but to give a higher scrip divi due to reit rules.
NAV will probably come in evens or lower due to the actual valuations being a couple months ago. But we should not see as big write off as in the last updates - all the big luxury companies are showing sales soaring and Hammerson is at that top end.
Maverick Capital reduced shorts by 0.1% on Thursday and again on Friday.
RNS released today shows APG reduced their holding 0.1% to 21.95%. Not sure what the significance of that is as I don’t think above 22% is any sort of threshold.
But like shorters buying, low liquidity means any real selling would move the share price quite sharply down. Maybe linked to Maverick - giving them a way out. But hopefully APG go back to sleep and we can see the squeeze.
Can’t say CINE looks very appealing to me at all.
I have been looking into Shell however. From what I can tell it’s pumping out a lot of cold cash. Once it’s reached it’s debt target, which it seems like it will do in the next couple of months, that should come back to shareholders.
I don’t think we’ll see a tank if final stages of lockdown are extended a little. Risks of another lockdown now seem quite low with the vaccine preventing hospitalisations.
The next piece of news that will really affect things will be whether the rent moratorium gets extended past the end of this month. I believe property companies are pushing for some hybrid solution whereby rents for the last year are ringfenced to be enforced against but those due now are allowed to be enforced on. Either that or a no extension would be a positive.
The other piece of news Hammerson specific would be the Leicester planning. Target date was yesterday. Nothing on the planning portal. There is a Leicester plans panel on the 23rd of June. I would have thought it’d end up being decided there.
Further bond refinancing would be good to hear about too.
In terms of share price 100p is just dreams. Net asset value is 80p give or take. We are looking at further write downs based off the Land Sec and Brit land write downs. I’d say with net assets going to 70-75p.
So if things go well 50-55p range in the near term. Maybe rising to 60 by the end of the year as rents get collected.
There’s also the chance of a short squeeze and a very sharp spike up in price as for the amount of free floating shares, the shorted amount is substantial. In other words, 126million quid of shares shorted based (that have to be bought at some point) on a company that only trades on average 4-5 mil quid a day. All we need now is reddit traders to pile in.