Hammerson Plc - The Investment Case
This post on the investment case for Hammerson Plc. It sets out to give
the facts on Hammerson Plc as an investment. It seeks as far as it is possible to explain
the current situation with regards to Hammerson's share price. It hopes to
provide a data based investment analysis of Hammerson Plc the UK's
largest dedicated retail property investment company and 3 largest
quoted property company.
To most investors Hammerson appears to be a strange contradiction as the UK's largest retail landlord trading at a massive discount to underlying assets. How have we got here and more importantly what's next for this colossus of retail property?
Hammerson is the UK's largest dedicated retail landlord and 3rd biggest listed property company.
It comprises of 5 different aspects to it's international property portfolio:
The two heads and leading lights of Hammerson are :
David Tyler (in the job since 9 May 2013 - 7 years) 67 years old
Base salary £855,000 this is without his share options & bonuses
David Atkins (in the job since 1st October 2009 - 11 years) 54 years old
Base salary £518,000 this is without his share options & bonuses
David Atkins according to his Wikipedia profile has done nothing of significance other than bagging a plum job at Hammerson and then holding on to it with all it's associated financial rewards.
Hammerson the future
1. Hammerson needs more cash
On a personal footnote
Firstly I would like to say I have never met any of the Hammerson Management board and therefore can only assume that they are thoroughly decent human beings with equally respectable and loving families. My critique of Hammerson Plc and any persons connected with the company is purely directed at their professional actions. More over I seek to highlight the financial reality that they can walk away tomorrow having received many millions of pounds in renumeration whilst the many thousands of small shareholders who have trusted them and invested a significant parts of their wealth stand to lose it all. As it stands the small Hammerson shareholders have no voice and cannot rely on a generous payout to their pension and private wealth pots if Hammerson disappears into the arms of it's lenders. This needs addressing and the people in charge of Hammerson Plc need to be held to account.
Hammerson investment the background
To most investors Hammerson appears to be a strange contradiction as the UK's largest retail landlord trading at a massive discount to underlying assets. How have we got here and more importantly what's next for this colossus of retail property?
Hammerson the company
Hammerson was established in 1942 by Lewis Hammerson, originally
developing residential property then expanding into commercial property
in 1948. Hammerson became a public company in 1954, and began a
programme of partnering with local authorities to redevelop UK cities’
retail offer. The Company opened Brent Cross, the UK’s first covered
mall, in 1976, and expanded into French commercial property in 1985. As
mentioned in the Chief Executive’s report, Hammerson focuses on
winning retail locations.
Hammerson is the UK's largest dedicated retail landlord and 3rd biggest listed property company.
It comprises of 5 different aspects to it's international property portfolio:
- Flagship destinatinons
- Premium outlets
- City quarters
- Retail parks
- Developments
Retail is in the doldrums 2020
There is no doubt that retail
is in the doldrums with the rise of online retailing. Retail patterns
are changing in that more of us are buying more stuff online. However,
will we all resort to buying everything off our phone or tablet?
Retail history has some lessons
Anybody
that can remember back to the rise of out of town shopping can probably
draw some useful comparisons in that out of town of speed and
convenience was going to be the future. The days of comparison shopping
on the high street were dead they said in the 1980's. We didn't want
the social experience of shopping and town centre but the atomised
reality of rocking up in a car and walking around a giant superstore on
an anonymous retail park. These were the days when Toy R Us was the
future. But you know what? Where are Toy R Us now (bankrupt) and
people in the end decided that they quite like the experience of
shopping, cafes, restaurants, galleries, museums civic life and the inconvenience of socialising all within the confines of attractive places. I
can only imagine once Covid-19 is over this will return in some form or
other so in theory the like of Hammerson with the Bull Ring, etc has
some valuable and important civic assets. They appear well run and are
on the whole good quality.
What is Hammerson's asset value?
Great store is placed by shareholders in property companies on the underlying assets of the business.
The latest figures produced show that Hammerson had net assets of £6.01 per share YES £6 so why are the shares trading at just over £0.50 less than a tenth of the net asset value?
There are a number of reasons for this massive discrepency in the net asset value of Hammerson in relation to it's share price.
These are:
The latest figures produced show that Hammerson had net assets of £6.01 per share YES £6 so why are the shares trading at just over £0.50 less than a tenth of the net asset value?
There are a number of reasons for this massive discrepency in the net asset value of Hammerson in relation to it's share price.
These are:
- The retail investment market has frozen so nobody wants to buy any seller of retail shopping centres would have to offer a massive discount to the previous net asset value to sell these assets probably well over 50%.
- A lot of the investments are held in Joint ventures or they only have a share of the investments so the options of who they sell to and who wants to buy are much reduced depressing the underlying net asset value further
- The business carries considerable debt and therefore the price reflect a default or breach of the lending covenants
How much are the assets of Hammerson really worth?
This
is the big question many Hammerson shareholders have been grappling
with and really there is NO accurate figures so it is about taking an
educated guess.
So if we say generously say that the assets were worth £6 a share. Retail rents will realistically after Covid-19 will probably have to come down 50% so at the previous yield that would halve the value to say £3 a share. However, to reflect the greater risk of holding these retail assets investors will probably need a doubling of the yield that halves the value again to say £1.5 a share. Given that now most property businesses are running at a discount to NAV of 50% that places a score on the doors of about £0.75 per share with all the risks priced in. Once we have more visibility then discounts and values should recover over time but we are talking years rather than months.
So if we say generously say that the assets were worth £6 a share. Retail rents will realistically after Covid-19 will probably have to come down 50% so at the previous yield that would halve the value to say £3 a share. However, to reflect the greater risk of holding these retail assets investors will probably need a doubling of the yield that halves the value again to say £1.5 a share. Given that now most property businesses are running at a discount to NAV of 50% that places a score on the doors of about £0.75 per share with all the risks priced in. Once we have more visibility then discounts and values should recover over time but we are talking years rather than months.
Retailers under big stress
No longer
are prime shopping centres the only 'platform' where shopping can take
place. Retailers are forced to slug it out over the internet to offer
the best value and shopping centres are struggling to compete with cheap
low cost online operations. There is a big challenge for shopping
centre owners as under pressure retailers will look for significant
reductions in their rents to more 'sustainable' levels. However, where
retail property owners are able to adjust to these new commercial
realities there will be a continued demand for high streets shopping and
quality places.
The commercial property lease
The
UK retail property market has been underpinned by the Landlord and Tenant Act and upward only rents. This has given property investment a
bullet proof gilt edged cache where rents were guaranteed to go up a
little every year. This underpinned investment values and made lenders
happy to lend large amounts of money on the back of it. This may be
about to change.
The current high level of uncertainty mean that commercial valuations of retail assets are 'challenging' to impossible. Without the ability to value accurately the market in property assets freezes both for sales and obtaining finance. This is a big challenge for Hammerson and other retail landlords.
Commercial valuations 'challenging'
The current high level of uncertainty mean that commercial valuations of retail assets are 'challenging' to impossible. Without the ability to value accurately the market in property assets freezes both for sales and obtaining finance. This is a big challenge for Hammerson and other retail landlords.
Property the ideal investment vehicle
The Landlord and Tenant Act has made property the ideal investment vehicle and meant that the
likes of Hammerson could be run as a hybrid of property company /
investment vehicle taking part shares in investments in the certainty that for little
effort they would be able to demonstrate rising returns (all be it at a
pedestrian rate) for their shareholders and a rising dividend. This bred a culture of complacency at the top. This
management complacency and acceptance of the status quo has been partly
at the heart of Hammerson's problem. The management of Hammerson have been insulated from
having to make tough decisions because for years landlords like Hammerson were
protected from their customers through bullet proof lease agreements and constant demand from tenants who were desperate to get access to footfall. These tenants had little choice but to pay
the landlord master guaranteed upward only quarterly rents in advance.
The current management team of Hammerson
Below is the current management of Hammerson Plc also along with a tick box setting out the managements supposed 'vast' skill sets:
So HOW with so many fantastically skilled people have they failed to get it right?
Corporate complacency starts at the top!
The two heads and leading lights of Hammerson are :
David Tyler (in the job since 9 May 2013 - 7 years) 67 years old
Base salary £855,000 this is without his share options & bonuses
David Atkins (in the job since 1st October 2009 - 11 years) 54 years old
Base salary £518,000 this is without his share options & bonuses
David Atkins according to his Wikipedia profile has done nothing of significance other than bagging a plum job at Hammerson and then holding on to it with all it's associated financial rewards.
He has never set up his own
business...one can only conclude he is a royal corporate lacky!
Gravy train for Hammerson 'fat cats'
These guys are on a fabulous gravy train and now looking at retirement.
Their role was to be figureheads of what was a well oiled investment machine where their skills set was to preside over a self perpetuating investment machine where being passive was a virtue and returns from the business were guaranteed from rents from blue chip tenants. It was just a case of keeping your merry band of loyal investors happy on a diet of what seemed assured and increasing dividends underwritten by cast iron commercial leases and tenants who had no option but to pay the rents to obtain the retail exposure to sell their products.
People who have set up a business and own a business. They control it, they own it, they feel it.. they are in charge.
These people are hired hands. They take the money, they play the game, they flatter when they need and they take the salary cheque and do a job but not necessary control.
To prove the point above here is the latest shareholding figures for the board and directors of the business:
Both Davids fall into the 2nd category and all the management team have pitifully low levels of share ownership in Hammerson in relation to their renumeration. Now you might point out that David Atkins has a significant number of shares now obviously much reduced in value. However, when you see that he took home nearly £1.5m in total earnings for 2019, up 33% on his previous year’s pay package. He was paid a base salary of £655,000 during the year, alongside an annual bonus of £522,000 and a further £73,000 from long-term incentive awards. Then you see that his real investment in the business is paultry compared to his salary and bonuses.
The up shot is that the management team of Hammerson are massively under invested in the success and survival of this business.
Track record of decisions
1. Only 2 years ago the 2 Davids were looking at buying Intu the rediculously indebted and practically bankrupt owner of UK shopping centres including the Trafford Centre. There were only prevented from doing this by the actions of one of their shareholders which saved them and the company.
2. Only 2 years ago the 2 Davids were in charge of a management team that rejected £6.35 share offer by Klépierre at a significant premium to the share price at the time which was trading at just above £5 a share
How much were both of these decisions guided by the fact that the 'Davids' were trying to enhance their own personal rewards from running in the first place an enhanced empire and then secondly not having their 'gravy train' terminated as a result of a successful takeover by another company.
Now clearly the people in charge don't know what they should be doing which happens when they bring in management consultants to produce a report on what they be doing to run a company they should be leading.
The upshot is that for the millions of pounds that have been handed over to the 2 Davids over the last 7-10 years shareholders should not have OK leadership but demand exceptional insight, strategic awareness and leadership not poor judgement and a pedestrian wait and see approach to what can only be described as a retail crisis.
Their role was to be figureheads of what was a well oiled investment machine where their skills set was to preside over a self perpetuating investment machine where being passive was a virtue and returns from the business were guaranteed from rents from blue chip tenants. It was just a case of keeping your merry band of loyal investors happy on a diet of what seemed assured and increasing dividends underwritten by cast iron commercial leases and tenants who had no option but to pay the rents to obtain the retail exposure to sell their products.
There are two types of businessmen
Business owners
People who have set up a business and own a business. They control it, they own it, they feel it.. they are in charge.
Employers of a business
These people are hired hands. They take the money, they play the game, they flatter when they need and they take the salary cheque and do a job but not necessary control.
To prove the point above here is the latest shareholding figures for the board and directors of the business:
 |
| Evidence that in relation to their large salaries equity ownership of Hammerson are pitifully low |
Both Davids fall into the 2nd category and all the management team have pitifully low levels of share ownership in Hammerson in relation to their renumeration. Now you might point out that David Atkins has a significant number of shares now obviously much reduced in value. However, when you see that he took home nearly £1.5m in total earnings for 2019, up 33% on his previous year’s pay package. He was paid a base salary of £655,000 during the year, alongside an annual bonus of £522,000 and a further £73,000 from long-term incentive awards. Then you see that his real investment in the business is paultry compared to his salary and bonuses.
The up shot is that the management team of Hammerson are massively under invested in the success and survival of this business.
A catalogue of incompetence at Hammerson
Track record of decisions
1. Only 2 years ago the 2 Davids were looking at buying Intu the rediculously indebted and practically bankrupt owner of UK shopping centres including the Trafford Centre. There were only prevented from doing this by the actions of one of their shareholders which saved them and the company.
2. Only 2 years ago the 2 Davids were in charge of a management team that rejected £6.35 share offer by Klépierre at a significant premium to the share price at the time which was trading at just above £5 a share
How much were both of these decisions guided by the fact that the 'Davids' were trying to enhance their own personal rewards from running in the first place an enhanced empire and then secondly not having their 'gravy train' terminated as a result of a successful takeover by another company.
Now clearly the people in charge don't know what they should be doing which happens when they bring in management consultants to produce a report on what they be doing to run a company they should be leading.
The upshot is that for the millions of pounds that have been handed over to the 2 Davids over the last 7-10 years shareholders should not have OK leadership but demand exceptional insight, strategic awareness and leadership not poor judgement and a pedestrian wait and see approach to what can only be described as a retail crisis.
Hammerson don't blame it on Covid-19
We all saw this coming and don't blame it on Covid-19!
So Covid-19 was clearly a black swan moment but it has only hastened what had started several years ago. You only have to look at Intu to see the affects of retailers under stress from unrealistically high rents because of upward only rents and an entitled landlord class thinking that they could keep milking their historic position of being the only platform in town.
Prior to Covid-19 the market in retail assets had frozen up. Anybody in the market could see this and also that Hammerson was going to need additional funds to put it in a strong position going forward.
Look at the Hammerson share price over the last 12 months.
A management team which was alive to the risks to the business and was in a position to lever Hammerson's blue chip credentials should have instigated a significant right issue to raise capital to either pay down debt or put them in a position to buy distressed retail property to enhance further investment returns.
Instead the PASSIVE management they have missed an important opportunity to bolster Hammerson's balance sheet and put the business in a STRONG position rather than being in a position to have to sell retail assets at a discounted prices. This is where a quality leadership team earns their money by getting the big decisions RIGHT.
There have been 3 MASSIVE mistakes by the top management over just over 2 years. They have clearly proven that they are not able to make the big calls and get the big decisions right for shareholders.
There needs to be a change of leadership at the top with a team that recognises that Hammerson is not a rudderless cruise liner that they just needs point in the right direction but is a business that has to be controlled and managed with management earning their large salaries to extract maximum value for the real owners - the shareholder.
I call on every investor small and large to pressurise for change at the top to ensure a management team that recognises the challenges not only of the changing property market but to change the culture of Hammerson to be an entrepreneurial property company trading to maximize the value of it's assets for it's shareholders
So Covid-19 was clearly a black swan moment but it has only hastened what had started several years ago. You only have to look at Intu to see the affects of retailers under stress from unrealistically high rents because of upward only rents and an entitled landlord class thinking that they could keep milking their historic position of being the only platform in town.
Prior to Covid-19 the market in retail assets had frozen up. Anybody in the market could see this and also that Hammerson was going to need additional funds to put it in a strong position going forward.
Look at the Hammerson share price over the last 12 months.
A management team which was alive to the risks to the business and was in a position to lever Hammerson's blue chip credentials should have instigated a significant right issue to raise capital to either pay down debt or put them in a position to buy distressed retail property to enhance further investment returns.
Instead the PASSIVE management they have missed an important opportunity to bolster Hammerson's balance sheet and put the business in a STRONG position rather than being in a position to have to sell retail assets at a discounted prices. This is where a quality leadership team earns their money by getting the big decisions RIGHT.
Three massive mistake by the management of Hammerson
There have been 3 MASSIVE mistakes by the top management over just over 2 years. They have clearly proven that they are not able to make the big calls and get the big decisions right for shareholders.
There needs to be a change of leadership at the top with a team that recognises that Hammerson is not a rudderless cruise liner that they just needs point in the right direction but is a business that has to be controlled and managed with management earning their large salaries to extract maximum value for the real owners - the shareholder.
I call on every investor small and large to pressurise for change at the top to ensure a management team that recognises the challenges not only of the changing property market but to change the culture of Hammerson to be an entrepreneurial property company trading to maximize the value of it's assets for it's shareholders
Is there a potential takeover of Hammerson?
Interestingly and this must be a major worry to the short sellers is the significant stake building in Hammerson by one of the worlds biggest retail investors APG.
APG is a Dutch pension fund that up until the crisis hit owned $48
billion of retail assets globally. From June to November 2019 it upped
it stake in Hammerson from 9 to 17%. Why is this significant? Well APG
has a history in building big stakes in listed retail owners and then
acting as king makers in merger or acquisition deals of companies such
as Hammerson. It was a major shareholder in the European shopping
centre giants Corio and Klépierre which merged in 2015 to make Europes
2nd largest shopping centre owner. It now owns 10.09% of Klépierre and
17% of Hammerson. Could it be that the management of Hammerson in
fairness to them were paralysed from acting to raise funds because a
takeover approach from APG or a merger was being brokered before the
Covid-19 crisis dramatically hit all retail owners derailing any deal
being struck.
The latest RNS feeds reveal that there has been stake building by another investor Lighthouse Capital Ltd has built a significant stake in Hammerson of just over 9% in a very short period of time.
Liquidate the assets now and they are going to be worth much more than 50p after paying off the debt even in a global fire sale of retail assets.
which merged in 2015 to make Europe’s second largest shopping centre owner
Read more at: https://www.bisnow.com/london/news/retail/one-of-the-worlds-biggest-real-estate-investors-has-doubled-down-on-hammerson-101933?utm_source=CopyShare&utm_medium=Browser
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which merged in 2015 to make Europe’s second largest shopping centre owner
Read more at: https://www.bisnow.com/london/news/retail/one-of-the-worlds-biggest-real-estate-investors-has-doubled-down-on-hammerson-101933?utm_source=CopyShare&utm_medium=Browser
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Dutch pension fund APG
owns $48B of real estate assets globally, making it the fourth-largest
real estate owner in the world, according to IPE Real Assets. Since
June, it has upped its stake in Hammerson from 9% to 17%, as of 12
November. That makes it the biggest shareholder in the company by a
factor of three.
With Hammerson’s £2.24B market capitalisation, APG’s stake is valued at
about £380M, and cost it around £150M to £200M to build this year. In
the past six months, Hammerson’s shares have been on a roller coaster
ride, dropping 25% in a fortnight at the end of July before recovering
in August and September. Overall its shares have risen about 2% in the
past six months, but still trade at a discount of 42% to the company’s
net asset value, as the stock market anticipates further falls in asset
values and income as retailers go bust or seek reduced rents.
APG declined to comment on why it upped its stake in the company.
The company has a history in building big stakes in listed retail owners
and acting as kingmaker in merger and acquisition deals. It was a major
shareholder in European shopping centre giants Corio and Klépierre,
which merged in 2015 to make Europe’s second largest shopping centre
owner behind Unibail Rodamco Westfield.
APG was a major factor in persuading Hammerson to pull back from buying
fellow UK-listed shopping centre owner Intu last year. Hammerson’s board
also last year rejected an approach for the company from Klépierre. APG
now owns 10% of Klépierre and 17% of Hammerson. Could it be a
matchmaker again?
Hammerson said earlier this month that it had met its 2019 disposal
target with the sale of the St. Oswald’s retail park in Glouster to the
local council. The £54M price tag represented an 8% discount to the
asset’s book value.
Hammerson set itself a disposal target following pressure from one of
its other shareholders, Elliot Advisors. The company has also appointed
new board members in the form of Gecina Chief Executive Méka Brunel and
former Carlye head of international real estate Adam Metz.
Read more at: https://www.bisnow.com/london/news/retail/one-of-the-worlds-biggest-real-estate-investors-has-doubled-down-on-hammerson-101933?utm_source=CopyShare&utm_medium=Browser
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Dutch pension fund APG owns $48B of real estate assets globally, making
it the fourth-largest real estate owner in the world, according to IPE
Real Assets. Since June, it has upped its stake in Hammerson from 9% to
17%, as of 12 November. That makes it the biggest shareholder in the
company by a factor of three.
With Hammerson’s £2.24B market capitalisation, APG’s stake is valued at
about £380M, and cost it around £150M to £200M to build this year. In
the past six months, Hammerson’s shares have been on a roller coaster
ride, dropping 25% in a fortnight at the end of July before recovering
in August and September. Overall its shares have risen about 2% in the
past six months, but still trade at a discount of 42% to the company’s
net asset value, as the stock market anticipates further falls in asset
values and income as retailers go bust or seek reduced rents.
APG declined to comment on why it upped its stake in the company.
The company has a history in building big stakes in listed retail owners
and acting as kingmaker in merger and acquisition deals. It was a major
shareholder in European shopping centre giants Corio and Klépierre,
which merged in 2015 to make Europe’s second largest shopping centre
owner behind Unibail Rodamco Westfield.
APG was a major factor in persuading Hammerson to pull back from buying
fellow UK-listed shopping centre owner Intu last year. Hammerson’s board
also last year rejected an approach for the company from Klépierre. APG
now owns 10% of Klépierre and 17% of Hammerson. Could it be a
matchmaker again?
Hammerson said earlier this month that it had met its 2019 disposal
target with the sale of the St. Oswald’s retail park in Glouster to the
local council. The £54M price tag represented an 8% discount to the
asset’s book value.
Hammerson set itself a disposal target following pressure from one of
its other shareholders, Elliot Advisors. The company has also appointed
new board members in the form of Gecina Chief Executive Méka Brunel and
former Carlye head of international real estate Adam Metz.
Read more at: https://www.bisnow.com/london/news/retail/one-of-the-worlds-biggest-real-estate-investors-has-doubled-down-on-hammerson-101933?utm_source=CopyShare&utm_medium=Browser
Read more at: https://www.bisnow.com/london/news/retail/one-of-the-worlds-biggest-real-estate-investors-has-doubled-down-on-hammerson-101933?utm_source=CopyShare&utm_medium=Browser
Dutch pension fund APG
owns $48B of real estate assets globally, making it the fourth-largest
real estate owner in the world, according to IPE Real Assets. Since
June, it has upped its stake in Hammerson from 9% to 17%, as of 12
November. That makes it the biggest shareholder in the company by a
factor of three.
With Hammerson’s £2.24B market capitalisation, APG’s stake is valued at
about £380M, and cost it around £150M to £200M to build this year. In
the past six months, Hammerson’s shares have been on a roller coaster
ride, dropping 25% in a fortnight at the end of July before recovering
in August and September. Overall its shares have risen about 2% in the
past six months, but still trade at a discount of 42% to the company’s
net asset value, as the stock market anticipates further falls in asset
values and income as retailers go bust or seek reduced rents.
APG declined to comment on why it upped its stake in the company.
The company has a history in building big stakes in listed retail owners
and acting as kingmaker in merger and acquisition deals. It was a major
shareholder in European shopping centre giants Corio and Klépierre,
which merged in 2015 to make Europe’s second largest shopping centre
owner behind Unibail Rodamco Westfield.
APG was a major factor in persuading Hammerson to pull back from buying
fellow UK-listed shopping centre owner Intu last year. Hammerson’s board
also last year rejected an approach for the company from Klépierre. APG
now owns 10% of Klépierre and 17% of Hammerson. Could it be a
matchmaker again?
Hammerson said earlier this month that it had met its 2019 disposal
target with the sale of the St. Oswald’s retail park in Glouster to the
local council. The £54M price tag represented an 8% discount to the
asset’s book value.
Hammerson set itself a disposal target following pressure from one of
its other shareholders, Elliot Advisors. The company has also appointed
new board members in the form of Gecina Chief Executive Méka Brunel and
former Carlye head of international real estate Adam Metz.
Read more at: https://www.bisnow.com/london/news/retail/one-of-the-worlds-biggest-real-estate-investors-has-doubled-down-on-hammerson-101933?utm_source=CopyShare&utm_medium=Brows
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Covid-19 is just a smoke screen for Hammerson's incompetence
The
senior management at Hammerson i.e. David Tyler and David Atkins need to
take a leaf out of the book of other much more Covid-19 effected
businesses to see what they need to do to earn their vast levels of
renumeration. IAG for example led by Willy Walsh who was just about to
retire so could have walked away from the problems have recognised the
need for more funds and taken dramatic action to shore up it's balance
sheet to ensure it survives much more challenging operating conditions
than Hammerson. They literally have no customers and no income unlike
Hammerson that is still receiving a significant amount of rental income
. The difference is that senior management recognise their
responsibility to run and direct their business. Unlike the senior
management of Hammerson who just feel they have a God given right for
the money to plop into their account and then redistribute it to
shareholders as a dividend. Another company that I hold shares in is
the excellent National Express. Their management has responded by a
swift placing with institutional investors to ensure they have
sufficient funds to come through a difficult period and restructure. Most recently look at the excellent management of Marstons who have stitched together a massively value enhancing deal with a rival brewer.
If
Hammerson do have a plan to refinance then at the very least they have
been incompetent in communicating and reassuring the market of this.
Short sellers are private equity companies that aim to make money by selling shares in companies that they don't own on the hope of siginficant share price falls to then buy back the shares and capital on the fall.
Hammerson is currently the second most shorted stock with 10.5% of their shares on loan
Short sellers are not the problem . They exploit the oxygen given to them because of lack of leadership and clarity for the underlying share. They exploit uncertainty which often result from financing to ply their trade and make huge fortunes for their backers. What short sellers don't like is a heightened risk to their exposure. They think that they can read the ineptitude of the current Hammerson management team not to act and therefore rightfully watch the shares fall to the bottom.
A 'fly' in the oitment resulting from some 'unkown' bit of information on the company or a change of direction in managment or management thinking would unerve them and rapidly undermine their position. Data is power.
With clear leadership of Hammerson a well capitalised business and removal of uncertainty they will be off to target another company. So don't blame the short sellers they are the symptom not the cause!
Hammerson short sellers are not the problem
Short sellers are private equity companies that aim to make money by selling shares in companies that they don't own on the hope of siginficant share price falls to then buy back the shares and capital on the fall.
Hammerson is currently the second most shorted stock with 10.5% of their shares on loan
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| Hammerson short positions as of 7th May 2020 |
Short sellers are not the problem . They exploit the oxygen given to them because of lack of leadership and clarity for the underlying share. They exploit uncertainty which often result from financing to ply their trade and make huge fortunes for their backers. What short sellers don't like is a heightened risk to their exposure. They think that they can read the ineptitude of the current Hammerson management team not to act and therefore rightfully watch the shares fall to the bottom.
A 'fly' in the oitment resulting from some 'unkown' bit of information on the company or a change of direction in managment or management thinking would unerve them and rapidly undermine their position. Data is power.
With clear leadership of Hammerson a well capitalised business and removal of uncertainty they will be off to target another company. So don't blame the short sellers they are the symptom not the cause!
A future vision for Hammmerson
A sensible way forward would be to sell off their shares in the Premium Outlets as
the most valuable part and lowest yielding part of the estate and then
use these funds to purchase the major regional centres from Intu as they
are reclaimed by their lenders. A perfect opportunity would be the
under construction Broadmarsh Centre in Nottingham. These assets could
be brought for a snip given the current market conditions. The vision
would then be to make Hammerson the UK's largest owner of large premium
city quarters and shopping centres in the country which was presumably
the aim when they looked to purchase Intu at the end of 2017 with
ridiculous levels of debt.
What can Hammerson shareholders do?
Is it too late for Hammerson shareholders to reclaim their losses?
Firstly,
it is not TOO late.
We are at the end of the beginning of the challenging times.
Hammerson shareholders need to act swifty. We need to organise into an action group to press the major shareholders and the senior management to come up with a plan. They need to engage with us and not patronise us by RNS feeds telling us they have failed to raise funds again but not addressing the central question of what are they going to do next.
Hammerson investors do not want to be in a situation in 12-18 months time when nothing has happened and the company is in an even more challenging situation. Private investors need to galvinise and organise before the crisis not after another corporate collapse.
Hammerson management needs to come clean with the City and shareholders and present a plan and more importantly raise capital quickly. This is not desperation it is being responsive to a new commercial reality. For any shareholder who is worried about having their shareholding diluted by a share placing or rights issue I would say another £500 million in cash will see Hammerson comfortably through this crisis. The dilution effect will be MORE than compensated for the certainty that it will provide the market with that Hammerson will meet all it's loan obligations. This will have the effect of undermining the short sellers of Hammerson stock and rebase and stablelise the share price and company to then enable it deal with the very great operational challenges it will face over the next 18 months.
To the board of Hammerson I would say if you have a plan tell us! The lessons from the stockmarket since Covid-19 hit is that the market accepts the fact that some businesses have found themselves in a challenging situations. Markets have responded where management articulate this and show that they have a plan including massive equity rasing events to bolster capital. What markets cannot take is inaction and NO plan!
We are at the end of the beginning of the challenging times.
Hammerson shareholders need to act swifty. We need to organise into an action group to press the major shareholders and the senior management to come up with a plan. They need to engage with us and not patronise us by RNS feeds telling us they have failed to raise funds again but not addressing the central question of what are they going to do next.
Hammerson investors do not want to be in a situation in 12-18 months time when nothing has happened and the company is in an even more challenging situation. Private investors need to galvinise and organise before the crisis not after another corporate collapse.
Hammerson management needs to come clean with the City and shareholders and present a plan and more importantly raise capital quickly. This is not desperation it is being responsive to a new commercial reality. For any shareholder who is worried about having their shareholding diluted by a share placing or rights issue I would say another £500 million in cash will see Hammerson comfortably through this crisis. The dilution effect will be MORE than compensated for the certainty that it will provide the market with that Hammerson will meet all it's loan obligations. This will have the effect of undermining the short sellers of Hammerson stock and rebase and stablelise the share price and company to then enable it deal with the very great operational challenges it will face over the next 18 months.
Hammerson Plc and it shareholders deserve more
To the board of Hammerson I would say if you have a plan tell us! The lessons from the stockmarket since Covid-19 hit is that the market accepts the fact that some businesses have found themselves in a challenging situations. Markets have responded where management articulate this and show that they have a plan including massive equity rasing events to bolster capital. What markets cannot take is inaction and NO plan!
If you
accept that the management team were blindsided by Covid-19 and the
rapidly changing events (which I don't) and if
you really believe in the business show it by owning the business then
buy shares and put some of your capital at risk.
If you are not
invested in Hammerson as a great british retail business; stop living
off the gravy train and 'bugger off' and let somebody who has a vision
and commitment do the job properly instead.
Hammerson CEO to exit in 2021
The latest 'shock' 'not' announcement is the CEO of Hammerson David Atkins is to fall on his sword or was he pushed and is no set to leave Hammerson by no later than spring 2021. No mention of the other David.....David Tyler who is equally culpable having presided over the Boards for almost as long. What makes me laugh or should I say cry as a shareholder is the mutual back slapping that goes on between people that have clearly made a complete hash out of running a business and leave it on it's knees. So in the words of the Chairman:
“On behalf of the Board, I would like to thank David for his enormous commitment in leading Hammerson during the past decade. He has led the Company with ambition, passion and integrity, creating a culture that will live far beyond his time. He has developed Hammerson significantly through the growth of our premium outlets business, the geographical diversification of ourportfolio, our market leading sustainability framework and the establishment of our City Quarters strategy. I look forward to continuing to work closely with him until a successor is appointed.”
In reply as a lowly shareholder and owner of the business I would like to respond by saying:
"I would like to thank both Davids for bringing to it's knees the third biggest property company in the UK. For selling off in 2013 it's prime office portfolio in a fire sale. Thank you for rejecting a fabulous £6 a share bid at approximately 10 times the current share price. Special big thanks that you were overuled by your shareholders and therefore failed to buy Intu that would have invariably bankrupted our business. Massive congrats for failing to sell the portfolio of retail parks at bargain prices but most of all thanks for not spotting the fact that Hammerson could have been the predator not the prey if you had of launched a right's issue to bolster it's finances pre-covid."
David Atkins might have been a great person to work for but he would have lasted 5 minutes in any of the businesses I set up over the last 20 years without going bust. I wonder if he will be considering giving back any of the £10 million + of income he has received over the last 10 years to compensate hapless investors....unlikely.
Hammerson the future
So after shooting my mouth off and critisising the current Hammerson management you would be right in saying what would you do? My strategy is simple and I am available for the top job now it clearly is available.
1. Hammerson needs more cash
Hammerson needs more cash.....it's not a good time to be selling retail assets but funnily it is not a bad time to be borrowing money either from banks, private equity or shareholders. You would have thought that the management of Hammerson might have noticed this as businesses far more impacted on than there's have raised billions in new equity.
2. Believe in your business
Retail property has a future. People like to shop, spend time together, socialise and eat and drink. Good well managed centres will continue to have good footfall so once you have the necessary cash you can buy the best in the current climate at a very good price of the likes of Intu, etc.
3. Be realistic on rents
Where many of the problems in retail property investment have stemmed is not so much the rise of online shopping but the fact that retail landlords have failed to respond by rebasing unrealistic rents. Cut your rents by between 25-50% (which will happen anyway by default) then you will have healthy vibrant shopping centres which are affordable to existing and hoards of new innovative retailers who want a route to market. Sure values will take a big hit in the short term but at least you then have a sustainable business model and you as the landlord are driving the debate and being open and honest with your customers.
On a personal footnote
Firstly I would like to say I have never met any of the Hammerson Management board and therefore can only assume that they are thoroughly decent human beings with equally respectable and loving families. My critique of Hammerson Plc and any persons connected with the company is purely directed at their professional actions. More over I seek to highlight the financial reality that they can walk away tomorrow having received many millions of pounds in renumeration whilst the many thousands of small shareholders who have trusted them and invested a significant parts of their wealth stand to lose it all. As it stands the small Hammerson shareholders have no voice and cannot rely on a generous payout to their pension and private wealth pots if Hammerson disappears into the arms of it's lenders. This needs addressing and the people in charge of Hammerson Plc need to be held to account.
I think the buyer will be Klepierre with the support of APG and Lighthouse.One thing you omitted to mention was Lighthouse's offer of 2.1 shares for one Hammerson share.This was clearly targeted at an institutional holder.It will be interesting to see how many Hammerson shares were picked up by Lighthouse in this way and from whom.
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