Hammerson shifts its space odyssey changes

The one-time global landlord has cut the sprawl to refocus on Europe - and the retail sector

RON SPINNEY, joint founder of the Greycoat property group, has transformed Hammerson in the two years since he became chief executive.

Under the late Sidney Mason, it was a sprawling global landlord, concentrating on the US, Canada, Australia and the UK. The theory was that, by spreading its assets so widely, it would avoid the worst of the property cycle in any one country. But it found that the world property cycle moved in unison: when one country slumped, they all did.

Mr Spinney's policy has been to cut the sprawl, withdrawing from Australia and focusing on North America, the UK and continental Europe.

Typical of Mr Spinney's opportunism was his decision to buy the Hongkong and Shanghai Bank building in the City of London's Bishopsgate. The building took the brunt of the IRA blast on 24 April 1993, and Hammerson was able to buy it cheaply in March last year. The company has rebuilt it quickly and intends to welcome tenants back this autumn.

"It's got three attractions," Mr Spinney explained. "It's in a great location, we bought it at a time when the City property market was at its lowest in rental values, and we bought a building where 95 per cent was income-producing and we were receiving insurance cover."

But if that was opportunism, there is a deliberate strategy behind Mr Spinney's decision to concentrate on the Northern Hemisphere. He said: "What we have endeavoured to do is to achieve a portfolio distribution in a more limited number of territories, to provide us with the critical mass and economies of scale to enable the best people to manage it without spreading themselves too thin."

So last October the group dumped its entire Australian portfolio for £251m. A month later it diverted £111m of that to three deals in France.

One was the Espace St Quentin shopping centre in the new town of St Quentin- en-Yvelines, 12 miles south-west of Paris. Mr Spinney said: "With signs of a recovery in retail spending, continuing interest in the French retail sector from French and international investors, and a tight planning environment, we believe this is an opportune time to add to our French portfolio. We will consider buying offices, but only in prime Paris locations."

Leaving aside the currency play - and sterling has been a good currency to be out of lately - Hammerson bought the Espace on a yield of 8.3 per cent, better than the 5 per cent or so available on this side of the Channel.

The second deal was £32.6m for 66 per cent of the property subsidiary of Axa, the French insurer, which owns 55 Boulevard Hausmann in the centre of Paris.

The third deal, which was announced this January, was £24m for a controlling stake in Matignon Trois Fontaines, which owns 88 retail units in Les Trois Fontaines shopping centre in Cergy-Pontoise, a new town north-west of Paris.

In the same week, Hammerson sold more than a million square feet of offices in Calgary for £62m, and wants to sell its two remaining office buildings in the US. "But that does not mean we are pulling out of the US," Mr Spinney insisted. "It is just that we have been rebalancing our portfolio from offices towards retail."

Hammerson's office / retail split has changed from 55/45 to 40/60 in the past two years, as that is where Mr Spinney sees the value shifting, particularly as the European economies recover. He wants to have half the group's assets in the UK, with about a quarter each in North America and continental Europe, by which he means specifically France and Germany.

The notable feature of Hammerson's current investments is the preference for investment in completed properties, rather than going in for development.

"We are in a cash-flow business," Mr Spinney explained, "particularly if inflation remains subdued. In those circumstances developments are not viable, after allowing for building costs and land values. Instead we shall rely on buying properties with an income stream, where we can increase rental values and provide added services. We are fundamentally a service business."

That message has taken time to percolate into the consciousness of the investing institutions at the core of Hammerson's share register, conditioned as they were to the now-discredited previous regime. But as conditions improve and the Spinney strategy begins to prove itself, Hammerson shares should be in for an upward rerating.

Activities International property investment and development.

Share price 329p Prospective yield 4.1% Prospective price-earnings ratio 22.2 Dividend cover 1.4 1993 1994 1995* Income £118.9m £121.3m £124m Pre-tax profit £30.5m £52.7m £56.3m Net profit £21.7m £41.1m £44m Earnings per share 10.2p 14.3p 14.4p Dividend per share 10p 10p 10.5p (* forecast)

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent