Hammerson keeps £21m deposit after retail parks sale collapses
Under-pressure property giants have been selling off assets to raise cash and to exit underperforming business streams. But it seems that Hammerson has been frustrated in what it thought was a done deal for seven of its retail parks, with that deal now permanently off.
It’s a major blow to Hammerson, although on the plus side, it gets to keep the £21 million deposit that has been held in escrow by its solicitors.
Yet £21 million is small compensation for the collapse of a deal that would have furthered its ambition to exit the retail parks business in order to focus on flagship properties.
The company had announced the sale of the seven locations to Orion European Real Estate Fund V back in February. With a purchase price of £400 million, in was thought to be the largest single transaction of its kind in the past decade.
The deal came just a couple of months after the company completed its sale of a 75% stake in Parisian shopping destination Italie Deux to AXA Investment Managers - Real Assets for €430m (£362m).
But last month, Hammerson said Orion had notified it that it didn’t intend to complete on the retail parks sale. At the time, the UK firm set a deadline of May 6 for the completion, but late on May 5, Orion reiterated its decision.
So far, Hammerson (which owns Birmingham’s Bullring) has sold 14 retail parks, generating £764 million. But its chances of selling the seven properties in question could be lower today, given the coronavirus crisis. And even if the company can sell them, it's perhaps less likely that it would be able to get a price close to the £400 million it had agreed with Orion.
The collapse of the deal underlines the precarious nature of UK physical retail in 2020. Nobody is expecting a fast bounce-back from the severe downturn, even after the lockdown ends. And many observers have suggested we’re at a turning point that will mean much less physical retail space will be needed in future.
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