Hammerson, the retail-focused REIT, saw its profits plunge by over 56% year-on-year to £317.3 mln (€372 mln) in 2016 compared with £726.8 mln (€853.5 mln) the previous year.
The company, which is active in the UK, Ireland and France, saw its shopping centres and retail parks suffer a net revaluation loss of £13.4 mln (€15.8 mln), compared with a net gain in 2015 of £367.5 mln (€431.6 mln).
However, the group announced that net rental income was up 8.8% and adjusted profits rose by 9.4%, in line with EPRA guidance on accounting for valuation movements, disposal losses and other one-off exceptional items.
'During the year we have significantly grown and enhanced the portfolio, adding new retail space in faster-growth markets including Dublin, Leeds and Birmingham, and extending our presence in the European outlets market. To fund these growth opportunities, we successfully refinanced over £1.2 bn of debt and executed our planned disposal programme, generating £635 mln,' commented David Atkins, chief executive of Hammerson.
2016 saw Hammerson open two large schemes, Victoria Gate in Leeds (pictured), which served to complete the 56,300 m2 retail destination in the Yorkshire city, as well as Watermark in Southampton. It said that it was making tracks with the development of its large-scale London projects and had inked leases for 142,000 m2 of new space.
Premium outlet investment
During 2016, the group increased its premium outlets investments in Value Retail (VR) and VIA Outlets after making a number of acquisitions across Europe. VR currently operates nine high-end shopping-tourism Villages in the UK and western Europe with over 182,000 m2 of floor space in more than 1,000 stores. VR reported slightly lower sales growth of 8% in 2016, compared with 11% in 2015, 'against a more challenging macro-economic environment and a slowdown in long-haul tourism growth, particularly from China', according to Hammerson. While operations at Bicester, Oxford, La Roca, Barcelona, and Kildare, Dublin performed well, La Vallée Village, Paris saw a more subdued performance, with reduced tourist visits associated with the continuing terrorist threat in Paris.
The €1 bn VIA Outlets portfolio displayed a 19% growth in sales densities, with occupancy at 92%, 5% higher than last year. Hammerson has a 47% stake in this joint venture, which was formed with APG, Value Retail and Meyer Bergman in 2014.
Brexit effect
Hammerson is one of the largest direct owners of retail parks in the UK and said that sector yields had been affected by the Brexit vote. 'Sellers have outnumbered buyers during the year, particularly in the second half of 2016 when a number of open-ended funds sought to sell assets to generate liquidity following the EU referendum decision', the company noted. 'This situation has forced investment yields to increase by approximately 100 basis points during the year, although there have been signs of stability returning to the market at the beginning of 2017'.
Retailer sales were down 1.1% in its UK shopping centres but rose by 3.1% in France. The group noted that UK consumer spending grew by 3.8% in the final quarter of 2016 but anticipated a rise in inflation in 2017 which might adversely affect spending power at its centres.
'Looking ahead, despite some UK retail headwinds and geopolitical uncertainty, I am confident that we have a resilient and adaptable business with multiple opportunities to drive similar levels of growth and therefore continue to deliver sector-leading income-focused returns,' concluded Atkins.
