Hammerson has sold its retail outlets business Value Retail for £1.5bn, generating cash proceeds of £600m.
The disposal of the stake in Value Retail, which holds nine outlet centres across the world including Bicester Village, was at a price that represented an exit cash yield of 3.4% and crystallised a 10-year IRR of 13%. It was, however, a 24% discount to its gross value of £2.0bn.
Hammerson said that the sale to L Catterton provides it with a clean exit from a complex structure, which was yield dilutive (with the five-year average cash yield of around 2%).
The company intends to use the sales proceeds for a combination of:
-
reducing net debt, with pro forma LTV of 23% and net debt EBITDA of 5.1x;
-
reinvesting into assets in its core markets at higher yields and stronger returns, with a priority on JV consolidation and repurposing asset enhancement initiatives; and
-
returning capital to shareholders via a share buy back of up to £140m, representing 10% of Hammerson’s market capitalisation
The board also announced the intention, following completion of the disposal, to adopt an enhanced payout ratio policy for ordinary dividends of 80-85% of adjusted earnings.
In addition, Hammerson is also proposing to simplify its share capital through a 1 for 10 share consolidation (a circular will be sent to shareholders before a general meeting is called to vote on the proposal).
Rita-Rose Gagné, chief executive of Hammerson, said: “This is a transformational deal for Hammerson, generating cash proceeds of c.£600m whilst removing an overweight, low yielding and minority stake, and positioning us for accelerated growth and value creation.
“The disposal focuses our portfolio on prime urban real estate with a transformed capital structure and the capacity and capability to advance our strategy in higher yielding opportunities with stronger returns, whilst enhancing returns to shareholders.
“I’m excited about the opportunity this gives us to build on our momentum and track record of the last three years. We are at a point in the cycle where I can now be on the front foot to capture the exceptional value creation opportunities I see in the near, medium and long term. This is exactly what this transaction will deliver.”