UK-based property firm Hammerson Plc (HMSO.L) Tuesday issued an interim management statement for the period from July 1, 2009 to November 3, 2009. The company noted that the period has seen a degree of confidence return to property markets and that it has completed a number of property sales and made good progress on lettings in a difficult market environment.
Demand for commercial property in UK and France rose, aided by improvements in global financial markets, higher economic activity and low interest rates, the company said. In France, transaction levels grew, despite remaining low in absolute terms.
In UK, transactions stood at a higher level, which resulted in downward pressure on yields, and as a result, evidence of enhancing valuations. But, the market forecast continued to be uncertain, due in part to the high level of property debt which needs to be refinanced over the subsequent few years, Hammerson said.
With regard to occupational markets, retailers in UK continued to face challenging operating atmosphere, eventhough in the latest months, confidence of the customers rose and some retailers went into administration. The downward pressure on retail rents continued.
The level of vacant space, which helped to maintain rental levels, remained low in France, eventhough the retail sales fell. Parallel to lower rental levels, the returning of confidence in financial and business services sectors in London and Paris resulted in improving demand for office space. In London, net effective rents are becoming stable even in the increased level of vacancy.
The company has signed leases with various retailers with an objective to refresh its shopping centres with new brands. At September 30, occupancy in the company's retail portfolio slightly enhanced to 95.6%, from 95.2% in June 30. Meanwhile, the overall occupancy rate in the investment portfolio marginally dropped to 92.4%, compared to 92.6% in June 30, negatively affected by the expiry of a lease to a major office tenant in Paris.
At September 30, total income from tenants in administration sequentially decreased to GBP 7 million per annum from GBP 8.4 million or 2.3% of the group's total passing rent.
In retail portfolio, 69 units out of an aggregate of around 1,600 in the UK were let to tenants in administration, of which 36 are still trading. In France, number of retail units in administration were 21 and 16 units are still trading. Rent collection record remained strong.
In the four-month period, Hammerson completed the sales of Forum Steglitz, left over property in Germany, Seacourt retail park in Oxford, and two retail parks in France, thereby raising a total of GBP 122 million.
Further, the company said it continued to make good progress on its development pipeline through site assembly, planning and design. In Paris, Hammerson anticipates commencing a redevelopment of its retail property on Rue du Faubourg Saint-Honore in early 2010 at a cost of around GBP 30 million.
At September 30, 2009, the company had borrowings of GBP 2.2 million, with cash balances of GBP 96 million to give net debt of GBP 2.1 million, compared to GBP 2.06 million in June 30. Undrawn committed bank facilities at September 30 amounted to GBP 752 million, with only GBP 119 million due to mature by December 2011.
HMSO.L is currently trading at 386.70 pence, down 5.50 pence or 1.40%, on a volume of 173K shares.
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