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Worries over Hammerson shopping centre ‘monopoly’

Property sources have expressed concern over Hammerson owning the majority of shopping centres in the UK, following its £3.4bn deal to buy Intu Properties.

Hammerson, which counts Brent Cross and the Bullring shopping centres in its portfolio, estimates the purchase will create a £21bn portfolio of European retail and leisure destinations.

However, some industry sources said the bolstered company may now have too much sway, which may hamper rent and lease negotiations for retailers.

“The concern for us now is that they may end up jointly owning most of the major shopping centres in the country, as one landlord,” said one property director.

“It makes it very hard for the retailer when it comes to [managing] those relationships, should there be any conflict.”

One retail property director agreed: “It certainly puts them at the top of shopping centre deals they can do. It will give [Hammerson] more leverage in trying to get retailers to take certain units in certain centres.”

The director of one property agency said the move could give Hammerson a monopoly but added that tough trading and an increase in empty units means retailers still have strong negotiation powers.

“It’s been a pretty unusual 18 months, retailers probably have more power than they’ve had in the past 10 years,” he said.

Hammerson has identified at least £2bn worth of properties across both companies’ portfolios that it plans to dispose of “over the short to medium term”. This also raised concerns in the industry.

“Retailers will likely be feeling a lot of uncertainty when it comes to the impact the asset disposals might have – especially on the occupiers that aren’t doing so well,” said one shopping centre director.

“I think the properties to watch are the ones where there’s a lot of overlap geographically – the one that isn’t performing as well as the other will probably be scrapped.”

Data provider GlobalData said that it expected the combined group to “prioritise supermalls development”, since the combined group will own stakes in 12 of the UK’s 20 shopping centres measuring more than 20 million sq ft.

It added that the £2bn asset disposal was unlikely to comprise these large shopping centres, as retailers continue to invest in big, destination stores within them.

As part of the proposed deal, the larger company will keep the Hammerson name, and will be run by Hammerson chairman David Tyler and chief executive David Atkins.

Intu deputy chairman John Whittaker will become deputy chairman, while John Strachan, chairman at Intu, will join the board as senior independent director.

Hammerson posted £346.5m net rental income in the year to 31 December 2016, according to its latest set of full-year results. Its property portfolio during the period was valued at £9.97bn.

Profits dropped by more than half to £317m from £728m in the previous year, but adjusted profit grew by 9.4% to £230.7m.

During the same timeframe, Intu recorded £447m net rental income, but with profit for the year falling by just over two-thirds (66.8%) to £172m. Underlying earnings grew by 7% to £200m. Intu’s properties, including group joint ventures, were valued at £9.99bn.



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