Hammerson has given its strongest signal yet that it is preparing to sell its stake in Value Retail, Property Week can reveal.
A sale of the group’s 25% stake could fetch around £1.2bn, which would mean wiping out the company’s current net debt of £1.3bn almost entirely. Chief executive Rita-Rose Gagné said the group’s holding in the retail group was “not part of our long-term proposition”.
The joint venture business owns a range of outlet centres, including Bicester Village in Oxfordshire, and outlets in Belgium, France, Germany, Ireland, Italy and Spain.
Gagné said: “While Value Retail is operationally and financially strong, and is actually recovering from the pandemic extremely strongly at the moment, it’s not part of our long-term proposition. We’ve always said that we wanted to see the recovery of Value Retail and that is coming through.”
In its half-year results last Thursday, Hammerson revealed the recovery in Value Retail led to it receiving a £43m dividend from the group. “It’s a question of benefiting from that,” added Gagné. “Value Retail is not a long-term hold, and we will realise value from that at the right time.”
Hammerson is the second-largest shareholder in Value Retail’s parent company after founder Scott Malkin, whose ownership is around 35%. The two other major shareholders are Dutch pension fund APG and Simon Property Group, with stakes of between 15% and 20%.
Not all stakes in Value Retail have equal rights, given that the economic interest of each party varies depending on ownership at the asset level. While Hammerson owns 25% in Value Retail, it’s stakes in various assets within the portfolio give the company an overall economic interest of around 39%.
According to the latest valuations, Hammerson’s share of the Value Retail portfolio is worth around £1.9bn. This would value the entire company at around £5bn, including debt. However, net debt in Value Retail rose from £675m at the end of last December to £698m at the end of June, meaning any sale of Hammerson’s stake is likely to be closer to its share of the portfolio’s net asset value of £1.2bn.
Footfall across the Value Retail portfolio leapt 13% to 17.3m in the six months to the end of June, while spend per visit nudged up 1% to €85.30 (£73) compared with the same period last year. Sales of branded goods also rose 14% to €1.5bn during the period.
The complicated ownership structure of Value Retail means that analysts believe a move to sell its stake could prove difficult, but not impossible, for Hammerson. Sam King, vice-president of real estate at investment bank Stifel, explained: “This makes a sale difficult, given the structure would need to be untangled, and it limits potential buyers to either large-scale, sophisticated investors or those already with significant holdings.
“It would also constitute a Class 1 transaction given its size and would require majority shareholder approval, which is no guarantee given the unstable register.
“The price would also have to be agreed with Value Retail shareholders, where there are pre-emption rights for every asset. This all makes for an arduous task. That said, Value Retail is arguably Hammerson’s best-performing asset, and we expect there to be some investor demand.”