LVMH, the luxury goods conglomerate, and its billionaire founder bought a stake of Bicester Village as well as eight other upmarket outlets shopping centres in Europe for £1.5 billion.
L Catterton is a private equity firm backed by Bernard Arnault’s family office and LVMH. It has bought a stake in Value Retail from Hammerson, which owns the designer outlet.
Michael Chu, the co-chief executive officer of L Catterton who previously invested in Sweaty Betty, Gant and other brands, said: “We have a deep understanding of luxury retail, and we’re eager to use our operational expertise, global network and established relationships to partner and drive Value Retail forward.”
Hammerson owns the Bullring shopping centre in Birmingham, Cabot Circus in Bristol and nine other “village” malls in Barcelona, Brussels and Dublin. It also has stores in London, Paris, Madrid and Milan.
Hammerson, which some consider to be the “jewel of the crown” in its portfolio, will only receive £600 million after accounting for debts. Hammerson shares rose by a penny or 3.3% at 30p, the end of trading.
Matthew Saperia, a broker at Peel Hunt said: “This long-awaited deal is positive and transformative for Hammerson.”
Rita-Rose Gagne has been the CEO of Hammerson since the start of the pandemic. She made it clear that she did not want to own a passive minority stake in shopping centres with designer outlets. In the last four years, she has sold several “non core” shopping centers in order to concentrate the business on large “destination malls” located in city centres.
Value Retail represents almost half of Hammerson’s total portfolio. When the deal with L Catterton, expected to close this year, is finalized, the company, along with The Oracle in Reading, and Westquay, in Southampton, will be in possession of ten shopping centers, worth approximately £2.7 billion.
Gagne, who is 61 years old, stated that “we have done a lot of work over the past two or three year to realign our portfolio.” Now it’s the right time to grow and turn that page. This deal is a great opportunity for us to grow.
Hammerson will return the rest of the proceeds to shareholders via a £140 million share buyback. Hammerson will also increase its dividend payments. Hammerson will return the rest to its shareholders through a £140-million share buyback. Hammerson will also increase its dividend payment. The company has paid out between 60% and 70% of its adjusted earnings in dividends. It will now increase that to between 80% and 85%.
The sale of Value Retail will have an “immediate and significant” impact on the balance sheet of the company, which is a long-time source of concern. Hammerson’s key property company metric, the loan-to value, will fall from 44 to 23 percent.
Gagne stated that the deal was a “transformational one”. We are now at a stage in the cycle when I can be in the lead to seize the extraordinary value creation opportunities that I see near, medium and longer term.
Hammerson’s recent missteps have been a constant, but Tom Howard believes that the sale of Bicester Village as well as its other “villages” for high-end retailing could be a turning point.
Hammerson, the previous management company, sold its London offices in 2012 to focus on retail. They missed out on a lot of the post-financial-crisis revival for offices.
Investors grew increasingly wary of shopping centers, as values and rents in the capital continued to rise. In 2018, following the collapse of several major retail chains, it became clear that shopping centre rents and valuations were declining. Hammerson wanted to continue its all-in-retail strategy, and bought Intu Properties in a deal which was ultimately cancelled.
Online shopping was growing quickly and was threatening to change the retail property future. Hammerson was over-leveraged as rents and values were falling. In comparison to the summer of 2014 its shares have lost nearly 90 per cent of value.
Rita-Rose Gagne, who has been in charge of the company for four years now, has sold assets to reduce debt. Hammerson’s debt-to-value ratio will drop to 23 percent after the sale of Value Retail. This is less than half of what it was two years ago. She said, “We have restored the balance sheet completely and given it capacity to grow.”
Hammerson, with cash in its bank account, has said it would look to buy any unsatisfied partners and develop some of their malls. Gagne also said that she was “alert” to other opportunities.
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