The thirst among shoppers for knock-down designer goods from the likes of Mulberry, Prada and Gucci triggered a £100 million investment by property firm Hammerson today.
The company raised £518 million last month by selling off the lion’s share of its London office portfolio to focus solely on retail property. It began recycling the cash by raising its stake in Value Retail, which develops designer outlets across Europe in key tourist markets such as Paris and Barcelona.
The designer outlets, including Bicester Village near Oxford, sell off last season’s designer goods at discounts of up to 50%. Hammerson’s latest investment takes its stake to 22%, and its total spend on the company to £400 million, nearly 10% of its entire property portfolio.
Value Retail, founded and run by American Scott Malkin, has generated average tenants’ sales growth of 19% a year over the last five years, as well as double-digit returns for the landlords. Chief executive David Atkins said: “In the current climate, the idea of luxury and value at the same time is strong for consumers.”
Hammerson, which owns shopping centres including London’s Brent Cross, saw footfall across its UK shopping centres fall 2% in the first half of the year in a tough retail climate. But Hammerson still managed to raise its net rental income 2.4% and the landlord is signing up new UK tenants on leases 4.6% above estimated rental values. Occupancy remains above target at 97.5%.
Investec analyst Alan Carter said: “Given a very tough backdrop, it is doing pretty well in our view.”
The shares added 2.3p to 463.3p — impressive on a day of steep falls for the FTSE 100.
This week Hammerson, which also owns the Centrale shopping centre in Croydon, will unveil its plans for the overhaul of the nearby Whitgift shopping centre in a master plan that includes 1.5 million square feet of retail space. But it faces a battle with Australian shopping centres giant Westfield, which plans for its third major mall in the capital and won the backing of the Whitgift Foundation — owner of the freehold — earlier this year.
* Great Portland Estates tightened its grip on London’s Jermyn Street today after spending £60 million on five properties from the Great Capital Partnership, its own joint venture with Capital & Counties. GPE, which now owns the whole street, said the combined properties “offer a superb development opportunity”.
