Hammerson Plc (HMSO) plans to add to its retail assets in France and may buy a shopping center near the Eiffel Tower as the company anticipates a pickup in consumer spending, Chief Executive Officer David Atkins said.
“It’s easy to be caught in the immediacy of recession: low productivity, low growth,” Atkins said in a Sept. 6 interview in Paris. “My job is to look further ahead.”
Hammerson, based in London, also plans to expand some of the eight malls it already owns in France, the CEO said. The company’s Italie 2 shopping center in Paris is due to open today after a 30-million-euro ($40-million) refurbishment.
A recovery in spending, combined with rising exports, helped the French economy to grow 0.5 percent in the second quarter, the most since President Francois Hollande came to power in May 2012, the national statistics office Insee said Aug. 14. Rents for tenants in French malls are linked to retail sales, construction costs and product prices, reducing the risk to revenue for property owners.
Hammerson is considering a bid for a mall in downtown Paris called Beaugrenelle that was built by Gecina SA (GFC) and its partners. Gecina plans to sell the mall in the medium term, Chief Executive Officer Philippe Depoux said in a July call with analysts.
“It comes down to price and our overall evaluation,” Atkins said. “It’s a large new shopping center in central Paris and these opportunities don’t come along too often.”
The real estate investment trust is also looking for sites to develop malls in the country. The company will open a 465-million-euro shopping center in Marseille next year that’s about 90 percent leased to retailers including Printemps in advance of completion. Hammerson also plans to spend as much as 100 million pounds ($158 million) expanding malls in the U.K. and France in 2014, Atkins said.
“From a personal indebtedness point of view, France doesn’t have a problem. The French have never borrowed personally, they’re a cautious lot,” Atkins said. Economic recovery, when it comes, “could be very quick and could be quite a bounceback.”
In the U.K., Hammerson and Sydney-based Westfield Group (WDC) have sought preliminary approval to develop about 1 billion pounds of homes, shops and leisure facilities in the English town of Croydon, ending a tussle over the development.
“The pragmatic and sensible business decision was to come together,” Atkins said. Croydon borough council is due to decide if the project will be approved later this year.
The developer will increase the amount of leisure space at its malls to as much as 20 percent from 10 percent to 15 percent. That will include adding restaurants and cinemas in France, Atkins said.
Hammerson plans to boost revenue by 25 percent within three years and “that will flow through into a growing dividend,” he said.
Mike Prew, a London-based analyst at Jefferies Group LLC, is more skeptical. “The retail market, despite what Hammerson and Intu say, has to be repriced by Amazon,” he said. “Many shopping centers in this country are fundamentally too big. We don’t know how much trade will be lost from the physical market to the Internet.”
Atkins said Hammerson is considering investing in Value Retail’s Chinese unit as the luxury outlet-mall operator expands in the country through 2015.
“We will continue to evaluate whether we should actually put our own capital into that opportunity,” he said. Value Retail Chairman Scott Malkin “runs his business based on relationships. If he’s looking for capital, the first thing he does is approaches current investors so, whether you have formal pre-emption or not, you’re offered the opportunity.”
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