“You cannot continue to manage this sector and these properties as we did in the last 10, 15, 20 years. It’s just a different composition.”
If Rita-Rose Gagné feels any sense of relaxation after posting what she describes as a “strong” set of first-half numbers, it doesn’t show.
After almost three years as chief executive of the FTSE 250 REIT, Gagné said today that the company is looking ahead “with confidence”, a stance seen most clearly in the reinstatement of a cash dividend, its first since 2019.
The company swung to a loss of £1m for the six months to 30 June, compared to profit of £50m a year ago. But it pinned that on losses on disposal and impairment losses, with adjusted earnings coming in at £56m, 15% ahead year-on-year.
The “flight to quality” that Gagné has spoken of previously in the leasing market continues. The company signed 134 leasing deals in the six months, representing £18.3m of headline rent, and now has £15m of deals with solicitors.
“We’re looking at a second half as robust as the first half,” Gagné said of the leasing pipeline. “When we finished 2022, we had the best year in leasing since 2018. That momentum is flowing through. The best-in-class brands are focusing on targeting the best-in-class properties and locations, and reinventing their own concepts and formats.”
The task for Gagne and colleagues is to ensure that Hammerson’s portfolio provides existing and prospective tenants with the space they need to carry that reinvention through. She highlights leisure and food tenants as a focus. “What we’re doing is reaching that category of occupier that have razor sharp strategies about the future and are realigning their portfolios,” she said.
The company has a varied programme of repurposing projects underway across former department stores in its portfolio. It has achieved planning consent for Drum, a workspace-led scheme most of which occupies the former John Lewis space at Grand Central. In Reading, it has lodged a planning application for the regeneration of the eastern quarter of The Oracle, demolishing obsolete department store space and developing some 450 rental apartments. The company said that of the department store space it had in 2019, roughly a third has been repurposed or is in planning, a third has been sold, and the team sees “potential future opportunities” for the remainder.
“It’s a shifting mindset,” Gagné said of the repurposing drive. “There was a time when owners were just leasing up to collect rent. Now we’re leasing up to make sure that we create the maximum value for everybody in the property, meaning we have to be more mindful about understanding the catchment area and the consumer. We just need to be more granular and more thoughtful about the purpose of each asset.”
She added: “For us, it’s about getting down into the asset and the particularity of each city centre. In some city centres we’ll think about different uses because of how the population could use the asset. So the learning is not being scared of changing. We’re in a time where there are fundamentally changing trends in lifestyle and trends in technology. It’s about lifestyle, it’s about living spaces. The learning is to lean in on those concepts.”
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