Hammerson Profit Changes Little as Sales Mask Rental Gains

Hammerson Plc, Britain’s third-largest real estate investment trust, said first-half profit excluding items was little changed as higher rents reduced the effect of disposals.

Earnings before changes in asset values fell to 67.8 million pounds ($98 million), or 9.6 pence a share, from 68.3 million pounds, or 9.7 pence, a year earlier, the London-based company said today in a statement. Net asset value rose 5.1 percent from six months earlier to 5.20 pounds a share.

Chief Executive Officer David Atkins sold 555 million pounds of real estate last year to cut debt and finance acquisitions and development projects. Net rental income generated by properties owned throughout the first half increased 3.9 percent while acquisitions lifted leasing revenue.

“The emphasis of the group has moved from disposals to acquisitions and developments,” said Robert Duncan, an analyst at Jefferies International in London with a “hold” rating on the stock. While net asset value exceeded his 5.08 pounds a share estimate, pretax earnings were less than he expected.

Hammerson advanced 6.7 pence, or 1.4 percent, to 472.5 pence in London trading, lifting the value of the company to 3.37 billion pounds. The shares rose 7.9 percent in the six months through the end of July, lagging behind the 11 percent gain for the 17 members of the FTSE All-Share Real Estate Investment Trust Index.

New Leases

Net rental income rose 2.8 percent to 143.9 million pounds, including 13.4 million pounds from acquisitions, the company said. A total of 125 leases were signed in the first half, either for new space or renewals, lowering the vacancy rate to 2.8 percent from 3.3 percent three months earlier.

Acquisitions totaled 373 million pounds in the first half, including six malls and retail parks from Kuwait’s St. Martins Property Investments Ltd. Hammerson bought the freehold to Deutsche Bank AG’s headquarters building in the City of London financial district last month for 100 million pounds.

Hammerson said it has about 181,400 square meters (1.95 million square feet) of “near-term” development projects planned, which will cost about 1.1 billion pounds to build. These include les Terrasses du Port mall in Marseille, southern France, as well as Principal Place and London Wall Place in the City of London financial district.

Leeds Mall

Hammerson plans to build malls in Leeds and Sheffield. The timing “depends on retail demand,” Atkins said on a conference call with journalists.

In addition, Hammerson has 198,800 square meters of refurbishments and extensions to shopping centers and its out-of-town “big box” retail parks.

Net financing costs were little changed at 53.1 million pounds, while net debt rose by 395.5 million pounds to 2.19 billion pounds as a result of the acquisitions. Hammerson’s average borrowing rate was 5.4 percent, up from 5 percent at the end of 2010.

Increased borrowing lifted Hammerson’s debt to 38 percent of the value of its real estate, from 34 percent six months earlier.

Gains in the value of its real estate added 122.6 million pounds Hammerson’s first-half profit. Net income fell to 188.3 million pounds from 333 million pounds a year earlier as its real estate appreciated by less than a year earlier. Hammerson said it will pay a first-half dividend of 7.3 pence a share, up from 7.15 pence a year earlier.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE