Shares in Hammerson, the shopping centre owner, have experienced a sharp decline of over 7% as the company’s plan to raise £400 million through the sale of a portfolio of retail parks has failed to be completed by the agreed deadline. The transaction with Orion European Real Estate Fund V, which was anticipated to be the largest sale of UK retail parks in the past decade, was scheduled to conclude on April 23. However, Hammerson revealed in a statement to the London Stock Exchange that Orion had informed them they would not be able to finalize the transaction by the required date outlined in the sale and purchase agreement.

The deal encompassed the sale of seven retail parks, including prominent locations like Central Retail Park in Falkirk, Cleveland Retail Park in Middlesbrough, Elliott’s Field Shopping Park in Rugby, and Forge Shopping Park in Telford. Hammerson initially planned to generate net proceeds of £395 million from the sale. In the event that the completion does not take place by May 6, the company will take measures to terminate the agreement. As a result of this setback, the value of Hammerson’s shares experienced a significant decline of 5.6% on Thursday, and on Friday morning they were trading at 56.7p.

If the deadline is not met, Hammerson will gain immediate access to Orion’s £21 million deposit, which is presently held in escrow. This deposit could assist the company in overcoming some of its challenges, particularly if they need to remarket the portfolio in a retail property market that is already struggling due to the impact of the coronavirus lockdown.

The decision to sell the retail parks is part of Hammerson’s strategy to focus on their larger shopping centres, premium outlets, and City Quarters. Additionally, the proceeds from the sale will be used to significantly reduce the company’s substantial debt, which is estimated to be approximately £3 billion.

Hammerson’s failure to finalize the sale of its retail parks exemplifies the difficulties faced by the retail industry in the current economic climate. With consumers increasingly turning to online shopping and traditional retailers grappling with declining footfall, property owners such as Hammerson are compelled to reevaluate their portfolios and prioritize properties that are better equipped to withstand these challenges. While the impact of the COVID-19 lockdown measures has worsened these challenges, it remains uncertain how the retail industry will recover and adapt in the aftermath of the pandemic.

Useful links:
BBC – Hammerson shares hit by portfolio sale delay
Financial Times – Hammerson’s retail park sale suffers delay