Hammerson, together with its joint venture partner Allianz Real Estate, has successfully secured the ownership of Dundrum Town Centre, Ireland’s pre-eminent shopping and leisure destination as part of a portfolio of market-leading retail assets in Dublin, Ireland. Hammerson and Allianz acquired loans secured against a portfolio of retail assets in September 2015 from the National Asset Management Agency (“NAMA”) for EUR1.85 billion (GBP1.53 billion), a discount to the face value of the loans.
In accordance with its original objectives, Hammerson has achieved a consensual agreement with the borrowers to transfer the underlying properties delivering immediate ownership of Dundrum, the Dublin Central development site and land adjoining the Pavilions shopping centre, Swords. Hammerson and Allianz will take over direction of the Ilac Centre, Dublin and the Pavilions shopping centre, Swords pending a pre-emption process with the co-owners and regulatory approvals. On completion, Hammerson’s total consideration for its share of the portfolio, including fees, taxes and transaction costs, will be EUR1.23 billion (GBP1.01 billion), in line with expectations at the time of acquiring the loans.
- Delivers significant market share and ownership of the largest retail property asset in Ireland, Europe’s fastest growing economy
- Aligned with Hammerson’s strategy of investing in high-growth European retail markets and enhancing income growth prospects
- Accretive to 2016 EPS and with opportunities for valuation growth, the portfolio provides an attractive projected five year ungeared IRR of 7-8%, excluding development returns
- Portfolio acquisition equates to an initial yield of 4.0% and a reversionary yield of 4.6%
- Hammerson will apply its expertise in leasing and asset management to bring a fresh approach to the assets and drive returns
- Dundrum is an award-winning super-prime European retail and leisure destination with a modern retail environment and flagship store formats producing strong retail sales growth of 6% (12 months to 31 March 2016)
- Costs for the acquisition have been funded by recent debt issuance; group credit metrics will be strengthened by the ongoing disposal programme
Dundrum encompasses 140,000 m(2) of prime retail and leisure space and becomes the largest of Hammerson’s assets by lettable area. The centre provides 120 shops, 38 restaurants, a 12-screen cinema as well as 3,400 car park spaces. Hammerson has acquired 50% of Dundrum and the adjoining development site (“Dundrum Village”) and will asset manage the centre on behalf of the Allianz joint venture.
Hammerson has also acquired significant development land with a strategic site located adjacent to Pavilions and the Dublin Central development site offering the opportunity for significant future returns.
The wider portfolio also includes co-ownership of the Pavilions shopping centre, Swords and the Ilac Centre, Dublin. Hammerson’s ownership of Ilac Centre and Pavilions is subject to a co-owner pre-emption process and any necessary regulatory clearances and is expected to be concluded by the end of 2016. Pending that, a loan vehicle jointly owned by Hammerson and Allianz has direction of the 50% interests in Ilac and Pavilions.
In total, including Dundrum, the total portfolio of Dublin assets encompasses over 200,000 m(2) of high-quality shopping centre space, home to 320 tenants and achieving annual footfall of nearly 50 million with a further 27 acres of development land.
Dundrum, located in the affluent and densely populated southern Dublin catchment, is a unique retail location with excellent regional accessibility via the Dublin M50 ring road and LUAS light rail. The centre provides 120 shops, 38 restaurants, a 12-screen cinema and 3,400 car park spaces. The centre is anchored by Harvey Nichols, House of Fraser, M&S, Penneys and Tesco and is differentiated by its modern large-format flagship stores which position it well in light of current trends in retail. It is the gateway for international brands many of which debuted in Ireland at Dundrum including Hollister, H&M, Jamie’s Italian, Starbucks and Hugo Boss. As Ireland’s premier shopping centre, with annual footfall of 18 million, Dundrum is well-positioned to capture the growing retail spend and delivered like-for-like sales growth of 6% in the 12 months to 31 March 2016. The centre is currently at 99% occupancy with total passing rent of EUR60 million (GBP50 million) per annum. The centre has estimated reversionary uplift of over 15% and there is potential for above-trend rental growth. Rent reviews concluded in the last 12 months with Zara, Oasis, Pull & Bear, Bershka, Karen Millen and Coast provide clear evidence of this rental reversion. With a wealth of experience in managing assets to enhance the customer experience and in building the optimum tenant proposition, Hammerson has already identified a number of operational improvements around the car-park offering, commercialisation and food court to drive income growth at Dundrum. Hammerson has identified significant opportunities to enhance the retailer and restaurant line up, leveraging existing relationships with international retailers and caterers looking to enter the Irish market. Following the successful upsizing of Zara and the Massimo Dutti re-fit, fashion retailers including River Island, BT2 and H&M have begun discussions with Hammerson to enlarge their stores while a number of new brands have also indicated that they are interested in taking space at the centre. Popular restaurant brands which have rolled-out across the UK are now set to underpin rental growth at Dundrum and Hammerson is ready to introduce new dining concepts to the centre following successful openings across its UK retail schemes. Dundrum also has a significant development opportunity at Dundrum Village, an adjacent six acre site owned by the joint venture, which has previously been granted planning permission for a scheme with a gross area of 110,000 m(2) and would lead to a further increase in the centre’s prominence through delivery of a mixed-use scheme.
Pavilions, Swords is located close to the airport in Dublin’s northern suburbs, Pavilions is anchored by Ireland’s largest retailer, Dunnes Stores, and includes a strong tenant line up including international brands such as Zara, H&M, Next and Tommy Hilfiger. The centre is currently 99% let with contracted rent of EUR14 million (GBP12 million) per annum. The centre has benefited significantly from rising consumer confidence with sales up 10% over the 12 months to 31 March 2016. There is appetite from a number of the key fashion retailers to upsize their units. A planning application has recently been submitted for the reconfiguration of part of the first-floor to create three new restaurant units as part of a plan to refresh the centre’s catering offer. Ownership of Pavilions shopping centre is subject to a pre-emption process with the co-owners which is expected to be concluded by the end of 2016. Hammerson has secured ownership of 100% of the adjoining development land and the centre’s car park, which has a recently-extended planning consent for 110,000 m(2) of mixed-use development which would further enhance the centre.
Ilac Centre is one of Dublin city centre’s largest malls with footfall of over 18 million per annum. It is adjacent to Henry Street, the busiest shopping street in Ireland, and is home to 80 retail and catering units, including H&M, River Island, TK Maxx and Argos. The centre is currently operating at 98% occupancy with contracted rent of EUR10 million (GBP8 million) per annum. In recent months, Hammerson has worked with the current owners to achieve the successful conversion of a number of temporary lettings into long-term leases, improving the tenant covenants and introducing new brands. Footfall at the centre was up 2% in the 12 months to 31 March 2016. Ownership of the Ilac Centre is subject to a pre-emption process with the co-owners which is expected to be concluded by the end of 2016.
Dublin Central is a five-acre urban retail development site which offers significant regeneration potential within the city centre. The site fronts onto both Henry Street and O’Connell Street, Dublin’s main city thoroughfares. With planning consent for 130,000m(2) and a mix of uses permitted, the site provides the ability to pursue multiple development scenarios that are sympathetic to the neighbourhood’s history. Chartered Land will act as development manager for the site and has an option to purchase 50% of Dublin Central prior to 1 June 2017.
To support the new Irish platform and Hammerson’s role as asset manager of Dundrum, a new office has been opened in Dublin, headed by Simon Betty, Director of Retail (Ireland). Around 130 employees who have been working together on the assets to date, will transfer across to Hammerson, the large majority of whom are operational and centre-based staff working at Dundrum and will largely be covered by service charge income. Over the next 12 months, new Hammerson employees will be integrated into the Group’s operating structure with a focus on leveraging existing knowledge and relationships to deliver the asset management strategy. Hammerson will also utilise its central marketing, digital and retail teams’ expertise to run the centres.
In September 2015, Hammerson and Allianz jointly acquired a loan package on a 50:50 basis for EUR1.85 billion (GBP1.53 billion). Hammerson’s share of the consideration was EUR0.93 billion (GBP0.77 billion). Hammerson and Allianz will own Dundrum in a 50:50 joint venture. Hammerson is making a balancing payment to Allianz for the underlying interests in the non-Dundrum assets. The total additional cost including the balancing payment to Allianz, fees, taxes and transaction costs associated with the loan conversion, is EUR0.29 billion (GBP0.24 billion). Therefore, the total consideration for Hammerson is EUR1.23 billion (GBP1.01 billion), in-line with our expectations at the time of the loan acquisition. The payment of the additional EUR0.29 billion (GBP0.24 billion) will be phased over the next six months depending upon completion of the regulatory approvals and the co-owner pre-emption process at Ilac and Pavilions.
Hammerson’s consideration will be funded by available debt facilities and disposal proceeds. Since September 2015, Hammerson has raised almost GBP1.2 billion from two bond issues and a new five-year revolving credit facility. A disposal programme of GBP300 million was announced in February 2016. In June 2016 Thurrock Retail Park was sold for GBP93 million and discussions continue regarding future transactions.
HMSO : Hammerson takes control of Dundrum, Ireland’s leading shopping centre