Hammerson Proposes $1.4 Billion London Mall To Rival Westfield

Hammerson Plc (HMSO), the U.K. and France retail property specialist, announced a plan to develop a shopping mall at the Whitgift center in south London, a site that Australia’s Westfield Group (WDC) also plans to build on.

Hammerson is proposing a 1.4 million square-foot (130,000 square-meter) project for the Croydon site that would cost as much as much as 900 million pounds ($1.4 billion), the company said today in a statement.

Britain’s third-largest real-estate company by market value was appointed in April by leasehold owners Royal London Asset Management Ltd. and Irish Bank Resolution Corp.’s IBRC Assurance unit to manage and redevelop the Croydon center. Sydney-based Westfield is planning a development on the same site after signing a deal in November with the Whitgift Foundation, which owns the site’s freehold.

Hammerson’s proposal “is a very significant investment in a part of London that is crying out for regeneration,” Chief Executive Officer David Atkins said on a call to reporters today. Further details on the plan will be announced “in the next few days,” he said.

The company agreed to sell most of its London office portfolio to Brookfield Office Properties Inc. (BPO) in June for 518 million pounds betting that shopping malls will outperform other real estate. It said the value of its properties rose in the first six months of the year on increasing demand for shops and offices in the U.K. and France.

Adjusted net asset value increased to 535 pence from 530 pence through December, the London-based company said in a statement today. Adjusted earnings per share gained 6.3 percent to 10.2 pence.

Retail Focus

“We have created a focused retail business by accelerating our plans to sell the London office assets through a single transformational deal,” Atkins said in today’s statement. “We expect to deliver further growth to shareholders by building scale in our chosen retail sectors through extensions, developments and acquisitions.”

Hammerson has gained 29 percent in London trading this year, the second highest in the 11-member FTSE350 REIT Index (F3REITS), behind Great Portland Estates Plc. (GPOR) The stock was little changed at 463.1 pence as of 9:46 a.m., giving the company a market value of 3.3 billion pounds.

Net income fell to 47.2 million pounds from 188.3 million pounds a year earlier after a one-time gain wasn’t repeated. Like-for-like net rental income increased by 2.4 percent in the period as group retail occupancy climbed to 97.5 percent from 97 percent. The interim dividend increased 5.5 percent to 7.7 pence a share.

“Overall, these are a good set of results, with Hammerson beating the market and our estimates,” said Harm Meijer, an analyst at JPMorgan Chase & Co., who rates the stock at overweight, meaning he expects it outperform the average total return of stocks covered by him over the next six to 12 months. “But they also highlight the weakness in the broader market.”

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