Hammerson invests £277m in UK retail assets

UK REIT Hammerson has acquired a portfolio of six retail assets from St. Martins Property Investments for £208 mln (EUR 240 mln). Hammerson's initial commitment, including transaction costs, is £221 mln.

The assets acquired are Centrale, a 65,000 m² shopping centre in Croydon's town centre; Monument Mall, a 9,000 m² shopping mall in the centre of Newcastle-upon-Tyne; Elliott's Field, a 13,000m² open A1 retail park in Rugby; Three Spires, a 17,000 m² shopping mall in Lichfield; Cathedral Lanes, a 6,000 m² shopping complex in Coventry and Wickes, as well as a 4,000 m² retail warehouse unit in Folkestone.

The acquisition provides Hammerson with an opportunity to secure a group of good assets in strong trading locations, it said. 'There is scope for Hammerson to create value through the rejuvenation of the principal assets (Centrale, Monument Mall and Elliott's Field) via development and asset management initiatives,' the UK REIT added. Passing rents on the properties are £17.2 mln, and after taking vacancy charges and other direct costs into account, the yield on the purchase price is 7.0%.

The largest asset in the portfolio is Centrale in Croydon, which was purchased for £98 mln. It was constructed in two phases (1988 and 2004) and comprises 80 units with a 954 space car park.

'We have a clear strategy of selling mature assets to recycle capital into properties where we can use our skills to generate superior returns,' said Chief Executive David Atkins.

The acquisition will be accretive to earnings in 2011, and will be funded from existing bank facilities, increasing gearing by around 6%. Completion of the acquisition of all assets is expected by the end of March, with the exception of Three Spires which is expected to complete later this year.

Hammerson was advised on the transaction by CBRE and Nabarro.

Separately, Hammerson has announced the purchase of the remaining 75% of Central Retail Park, Falkirk from its partner TIAA-CREF for a consideration of £69 mln including costs. The 37,100 m² scheme, anchored by a Tesco superstore, has an occupancy of 98% and a diverse range of tenants including Argos, Boots, Cineworld, Homebase, Mothercare and Next. The scheme is at the edge of the town centre and has 1,350 parking spaces. Passing rents at year-end 2010 were £5.8 mn.

Hammerson's 25% stake, which was acquired in 2002 as part of the Grantchester acquisition, was valued at £22.6 mln at year-end 2010.

Following the acquisitions of Wrekin Retail Park and the remaining stake in Battery Retail Park, Hammerson's UK parks portfolio now comprises 16 properties worth over £1 bn, or 20% of its total portfolio.