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Hammerson in talks with Brookfield to sell UK retail parks
By David Parsley Mon 12 April 2021
Propertyweek
Hammerson has confirmed it is in talks to sell its UK retail parks portfolio to Canadian investment giant Brookfield for around £350m.
Hammerson saw a £395m deal with Orion fall through as the pandemic struck
The portfolio comprises seven retail parks in Didcot, Falkirk, Merthyr Tydfil, Middlesbrough, Rugby St Helens, and Telford.
Following weekend reports of the deal, Hammerson said: “The company confirms that it is in discussions on terms of a possible disposal of its retail parks portfolio to Brookfield.
“There can be no certainty that a transaction will take place or the terms on which any transaction may occur. The company will provide a further update in due course, if appropriate.”
The bid from Brookfield is lower than the book value for the group’s portfolio, which was valued al £384m at the end of 2020. Last year a deal to sell the assets to Orion Capital Partner for £395m fell through as the Covid-19 pandemic led to uncertainty in the market.
However, Hammerson did retain Orion’s £21m deposit.
When added to the retained deposit from the aborted transaction, a £350m deal with Brookfield would delivers net proceeds of £361m, less than 10% shy of the figure from the Orion deal.
Colm Lauder, an analyst at Goodbody, said: “This is an important transaction for Hammerson as it is a critical element of their balance sheet strengthening process. This is also welcome news as the price mooted will be ahead of market expectations.”
Hammerson has been battling to avoid the same fate as its rival Intu, which collapsed in June. Last year it raised £552m via an emergency rights issue, and a further £274m through the sale of its stake in European business VIA Outlets.
It's good new for sure, but those who a saying that this is proof that RRG is some kind of strategic genius are forgetting that the exact same assets were sold a year ago, for a few million more.
She's just redone the same deal at a lower price.
I expect that she will come good, given the low bar of previous management and her high reputation, but *this* isn't it.
BTW regarding increasing cash in / reducing liabilities - you can do one or the other, but not both.
Selling the retail parks isn't getting rid of liabilities, they are assets and that cash may increase working capital or it maybe used to pay down debt, but not both.
They may not be part of the long term plan, but they have done well in the pandemic and you sell what you can at the best price you can when times are hard.
Ask any Hedge Fund manager!
Mike Ashley's Group has had a 'mare and is looking to pin it all on The Rona.
Or he sniffs picking up some other retail assets cheap and so is trying to manage the price down.
Who knows or care what Ashley 'thinks'?
He's a one trick pony and a thug.
Bot has a bad line of code?
These were the ones that HMSO had agreed to sell to Orion just before the pandemic for £400m and were in the books at £384m at 31 Dec 2020 (page 112 Annual report & Accounts) if it is the same seven assets.
Very positive news as cash is king at the moment and HMSO's debt has been a worry.
Assuming that there is a read across for valuations (big ask, but let's play) then that would suggest a further hair cut of 10% on the NAV of 82p and 5% for the Scrip Div (which was in essence a bomus issue) then you would get c70p if there was an orderly liquidation of HMSO over the next six months.
Obviously, that's a very crude measure, but should give some comfort that trading at a 50% discount, there's plenty of room for upside, even if it is just asset stripping!
@l0101270 - Aby1972 is right, the share consolidation and rights issue needs to be properly factored in.
In the link below (which is at the end of August 2019 and only selected because it shows the unadultered Share Price & Market Cap) you can see that the price was 204p which with 766m shares outstanding giving a Market Cap of £1.6bn
https://knowledge.sharescope.co.uk/2019/08/28/screening-for-my-next-long-term-winner-hammerson/
There are now over 4bn shares in issue, (c4.2bn after the latest rights issue) so on a like for like basis the equity was worth 38p in August 2019 which is close to where we are today.
Or more simply Market Cap in Aug 2019 £1.6bn, Market Cap today £1.52bn.
If you are invested in the share purely for a recovery play, there may be some more upside as Aug 2019 was a lowish point, but you have to believe that the management changes mark a fundamental break from the folly of the past to expect prices closer to NAV, and it won't see £2 for MANY years.
Thanks, I will, for six months, but longer term it's over leveraged.
That was apparent before Covid, and is now even more so after the latest debt raise and deferral of rent payments.
Short term I expect a rapid bounce over the summer, but longer term the management team have got their financial engineering all wrong.
Ollie, I'm not denying it generates lots of cash, it's just that a large tranche of that cash is already hypothecated to the debt holders. That means that the remainder, which belongs to equity, is very sensitive to operational performance.
(Say) 10% below expectations: disaster; 10% above expectations: to the moon!
Yes, the scenarios and warnings do demonstrate that with all the debt, this is a very risky stock. The equity could still be worthless, but it could also fly up towards 200p very quickly if everything goes right.
Sadly, a lot of those staff coming and going will be Insolvency Practitioners.
Goes to show what a disaster the last management were.
This from a decade ago, with the share price around two quid (in new money)
https://www.hammerson.com/media/press-releases/sale-of-london-office-assets/
It's about the fundamentals!
https://www.youtube.com/watch?v=XCSOsFe42P8
As a long term holder, I'm not particularly fussed.
The core offering is very sound, but I can see the confluence of a natural 2p drop in the SP allied to c40% of the assets being locked down and a smallish float leading to short term turbulence to the down side, which is of course a buying opportunity.
I'm an investor, rather than a trader, so this is all just an amusing aside in the long term journey.
France going into lockdown.
https://news.sky.com/story/covid-19-tough-coronavirus-lockdown-measures-widened-to-whole-of-france-says-macron-12261849
This plus the share going ex-Div tomorrow means we could be back in the 20s for a short period.
Hold onto your hats!
In the absence of any real news, it could be quarter end rebalancing.
Some pension funds and endowments have to rebalance to stay within their mandate which means taking a profit on anything that's raced up and putting it to work in relative underperformers.
Fidelity's response is bovine manure.
I use AJ Bell (youinvest) and they run a pooled nominee account and for every "Corporate Action" they offer you a choice for scrip divs, rights issues etc. If you don't respond then they make a default choice for you. Then they tell the relevant company's registrar we want 200million cash dividends and 900million scrip dividends please (or whatever) and then credit the correct version to your account.
My advice would be to change your broker - might be too late this time, but at least you would be covered for next time.
Just been reading through the annual report and accounts (they were published today) and there's lots of good stuff in there, but one high level takeaway that should give us all some comfort is that nearly £1.6bn of the loss is attributed to a downwards valuation in the property assets.
A valuation occurring at 31 Dec and written up by the valuers (in accordance with RICS Red Book, but these people are human) during the longest lockdown.
As theer are 4bn shares in issue, that equates to c40p per share.
It is highly likely that that valuation will rebound at least some of the way by half year and maybe 80 to 90% by the 2021 year end.
So if one values HMSO as an unloved retail REIT but accepts it won't go bust and has a new management team in place then a discount to NAV of 30% may be appropriate based on a NAV at the end of the 2021 year of c100p to 110p then a SP north of 70p over the next 6 to 12 months isn't that hard to imagine.
Re email
Personally, I doubt that the market makers engage in the level of price manipulation that they are often accused of and if they did the ex-scrip div date wouldn't be a huge driver.
Much more likely is that hedge funds are driving the price changes through a variety of strategies, which is especially effective when you look at the free float taking into account Lighthouse's, APG's and institutional holdings.
I wouldn't want to day trade this stock, but a six to 12 month time horizon could be a double or treble bagger from today's SP - IMHO etc
Hi oilmanmike, I take your point, and in normal times that would likely be the case as it would be just rolling up the income.
However, I think given that the rent collection has been dreadful, and costs have continued unabated, I doubt that there is much leftover income to roll up. And besides , that view is based on trying to impute a NAV as of today's date.
All I was pointing out is that we know that the NAV was 82p on 31 Dec 2020 and since then it will have been diluted by c5% so the new reference value would be c78p.
In coming to a conclusioin as to whether the current SP is reasonsable one would need to estimate further value accretion or destruction since then and assess what is a reasonable discount to NAV in the current market.
Personally, I think that valuations of the assets will tick up at the half year after re-opening but that a market rerating of HMSO will have to wait until RRG has published her strategic plan and demonstrated traction against that via disposals etc.
Re NAV - I agree, although 78p is the new 82p!
The next couple of weeks might be rougher than hoped for judging by the way things are unfolding in France.
In the end, 50p is inevitable, and I can wait as I bought in not long after the rights issue and have averaged in at 21p.