Britain’s largest listed shopping center owner is preparing to ask shareholders for hundreds of millions of pounds to improve their chances of surviving the coronavirus pandemic.
Sky News found that Hammerson, which owns Bullring in Birmingham and Brent Cross in London, is working out plans for a rights issue that could increase more than its current market capitalization.
One investor said this weekend that Hammerson could fetch between £ 500 million and £ 600 million, which would come when the COVID-19 crisis wiped out owners’ revenues and decades of conventions around charging retail rents.
Hammerson, which saw its shares drop 70% last year, said last month that it had collected just 16% of rent due to retail tenants before the third quarter.
The pandemic has exacerbated tensions between landlords and commercial tenants, with prominent brands such as Sir Philip Green’s Boots, Burger King and TopShop, withholding rent payments for months.
Dozens of retailers and hospitality chains have gone bankrupt or resorted to insolvency mechanisms to reduce their rental bills in the past four months.
The crisis severely affected Hammerson’s finances, with the company’s equity now valued at just £ 491.8 million – a far cry from its days as a robust FTSE-100.
Its efforts to bolster its balance sheet will come just weeks after rival Intu Properties, which owns Manchester’s Trafford Center, collapsed in management.
Hammerson and Intu came close to merging in 2018.
Bankers said on Saturday that Hammerson, which is among the best-selling stocks in the London market, is also exploring other equity-raising stocks.
The company is understood to be in detailed negotiations with APG, a Dutch pension fund, over the purchase of its 50% stake in VIA Outlets, which has shopping destinations in European cities such as Amsterdam, Gothenburg and Prague.
One source said that, in total, the issue and sale of rights could generate revenues of more than £ 800 million.
A formal announcement may accompany Hammerson’s semester results, which are due to be announced on Thursday.
Together, the measures would provide sufficient financial margin to allow Hammerson to continue to reposition his portfolio and invest in faster-growing assets, they added.
APG is also a substantial shareholder in Hammerson and, together with Lighthouse Capital, a South African investor, owns more than 30% of the London listed group.
Lazard, the investment bank, is expected to advise Hammerson on measures to strengthen his balance sheet, while JP Morgan and Morgan Stanley are thought to be working on the rights issue.
Last weekend, the Sunday Times reported that Hammerson had also loaned £ 75 million using the Bank of England’s Covid Corporate Finance Facility.
A separate agreement to sell its UK retail parks to Orion, a real estate investor, fell apart earlier this year.
Fundraising will take place at an important time for the company, which is in the process of replacing the president and chief executive.
The company confirmed in June that David Tyler would step down as president and hand over to Rob Noel, former executive director of the Land Securities Group, owner of commercial real estate.
Hammerson also announced that David Atkins, his former chief executive, will be leaving no later than next spring.
Headhunters are involved in the search for their successor.
Hammerson has been under pressure to accelerate his review since Elliott Advisers, the leading activist investor, became a shareholder in the company in 2018, although it is unclear how much of that stake he retains.
The company has one of Europe’s largest retail property portfolios, including a stake in the development of destination shopping in Bicester Village, as well as assets in Bristol, Croydon and Middlesbrough.
Hammerson also has centers in France, Ireland and Portugal.
When the company rejected a cash and paper offer from Klepierre, a French company, worth 635p per share in 2018, Tyler and his colleagues argued that it significantly undervalued British business.
At the same time, Hammerson – shares that closed at 64.18p on Friday – abandoned a planned merger with Intu.
Hammerson declined to comment on Saturday.