Hammerson buys back Westquay at half the price

Hammerson has bought back a 50 per cent stake in the Westquay shopping centre in Southampton for less than half what it sold it for in 2007.
The listed landlord, which also owns Cabot Circus in Bristol and The Oracle in Reading, has paid £135 million for the stake, which will once again give it full ownership of Westquay.
The loser in the deal is GIC, the Singaporean sovereign wealth fund, which paid £299 million for its 50 per cent share in 2007.
That it is recouping less than half of its original investment is the latest evidence of the rapid drop in retail property values over the past decade or so. This summer, Land Securities bought a further 17.5 per cent stake in Bluewater that valued the Kent shopping centre at £686 million, barely a third what it was deemed to be worth in 2015. GIC was also the seller in that instance.
Hammerson is funding the Westquay purchase from the £600 million raised from selling outlet shopping centres including Bicester Village to LVMH and its billionaire founder Bernard Arnault in July.
Rita-Rose Gagné, Hammerson’s chief executive, said the latest deal was “in line with our stated strategy”.
Since taking the top job in 2020, Gagné, 62, has tried to tidy up Hammerson’s portfolio, getting out of complex joint ventures and selling off “non-core” shopping centres. She wants to focus exclusively on large city-centre arcades filled with not just shops but bars, restaurants and leisure, which she thinks will remain relevant in the era of online shopping.
Westquay, in Southampton city centre, is one of the country’s largest shopping centres, with 110 tenants spread across 1 million sq ft who between them pay £27.2 million a year in rent. Hammerson estimates that close to 19 million people visit it every year, heading to shops such as Apple, Marks & Spencer and Zara.
In keeping with Gagné’s ambitions to diversify away from pure retail, the mall has a bowling alley and cinema, as well as a bar-cum-cricket-nets, an axe-throwing and shuffleboard bar, and an escape room.
Like valuations, shopping centre rents have fallen sharply in recent years, in part because a number of major tenants, such as BHS and Topshop, have gone bust. Hammerson estimates that its rents are about a third lower than their peak in 2017, although there are signs that they might have bottomed out.
For the first time since 2018 it has “positive reversion”, meaning that if it were to renegotiate all of its leases and bring them in line with current market rents, it would get more money than it does at present.