Hammerson Plc, the third-largest U.K. real estate investment trust, will sell its 624 million-pound ($981 million) office portfolio and reinvest the proceeds in shopping malls. Its shares rose the most in more than a month.
The stock gained as much as 4.2 percent. Hammerson plans to sell its 548 million pounds of existing office buildings, mostly in London, over the next three years, Chief Executive Officer David Atkins said on a conference call. Hammerson will proceed with office projects in progress, valued at 75.3 million pounds at the end of last year, before selling them as well, he said.
“This specialization will benefit shareholders, providing them with a credible 100 percent retail-focused alternative to Capital Shopping Centres and enabling management to generate superior returns,” Oriel Securities analyst Miranda Cockburn said in a note to investors. She has an “add” recommendation on the shares.
Offices represented 11 percent of Hammerson’s 5.72 billion pounds of assets at the end of last year. Atkins announced the shift in strategy as the London-based company reported a 2.2 percent decline in full-year profit excluding items. The company has two office developments in London’s main financial district: 99 Bishopsgate and Principal Place.
Hammerson was up 2.4 percent at 395 pence at 9:07 a.m., the biggest gain on the FTSE 350 Real Estate Investment Trust Index. Hammerson advanced 9.6 percent in London trading in the three months through yesterday, exceeding the 8.6 percent gain for the 11 members of the FTSE 350 Real Estate Investment Trust Index.
Earnings before changes in asset values and items fell to 137 million pounds, or 19.3 pence a share, as an end to a management contract and a dozen job cuts lifted administrative costs. Net asset value rose to 5.30 pounds a share from 5.20 pounds six months earlier.
“Our numbers today show that there are real positives out there for retail,” he said on the conference call. The shift plays to the company’s strengths of “prime assets and expert management.”
Net rental income rose 4 percent to 296 million pounds. Properties owned throughout the year increased net rental income by 2.5 percent before acquisitions. Purchases, including six malls and retail parks from Kuwait’s St. Martins Property Investments Ltd., contributed 30.1 million pounds, the company said.
Hammerson’s vacancy rate fell to 2.1 percent from 2.7 percent a year earlier as the company signed 355 leases at higher rents.
Full-year net income fell to 335.7 million pounds from 615.4 million pounds a year earlier. Gains in the value of Hammerson’s real estate added 186.3 million pounds to the total, less than the previous year.
Hammerson will pay a second-half dividend of 9.3 pence a share, up from 8.8 pence a year earlier. That took the total payout for 2011 to 16.6 pence, up from 15.95 pence.