Real Estate Investor Magazine South Africa Real Estate Investor Magazine - July 2017 | Page 41

UK), and Batavia Stad Fashion Outlet (Netherlands)
The strongest segment in Hammerson’s portfolio
has been premium outlets. They have been achieving
7% to 8% rental growth. This compares to about 2%
from the rest of the portfolio. Hammerson has a
development pipeline of about £1.5bn. This, together
wit h the good rental growth prospects of the existing
portfolio, is expected to drive income growth.
In addition, vacancies have been declining. The
occupancy rate of the portfolio now stands at 97.5%
(i.e. 2.5% vacancies.)
Intu
Intu’s portfolio has 96% exposure to the UK and 4%
to Spain. The average occupancy rate is 96% (i.e.
4% vacancies.) The UK portfolio consists of super-
regional centres (65% of the total portfolio) and in-
town centres (31% of the total portfolio). Flagship
super-regional centres include Intu Trafford Centre,
Intu Lakeside, and Intu Metrocentre. In-town centres
include Intu Derby, Manchester Arndale, and
Intu Victoria Centre.
Management has been very active lately. Assets not
part of the long-term strategy, like Intu Bromely,
have been sold. Intu Watford is being extended. There
are three major projects due to start in 2017 at a cost
of £200m. These include the redevelopment and/or
extension of Intu Lakeside, Intu Broadmarsh, and
Intu Trafford Centre.
Intu’s venture into Spain was well-timed.
Spain is arguably the hottest property market in
Europe at the moment. It is one of Europe’s fastest
growing economies and has seen good reduction in
unemployment and increasing household spend.
Intu owns 2 retail centres in Spain at this stage
(Intu Asturias and Puerto Venecia). Intu is working
on increasing its Spanish footprint, which includes
the potential acquisition of the 153,000m² Madrid
Xanadu as well as the €700m development of the
175,000m² Intu Costa del Sol retail resort. Intu’s
Spanish portfolio experienced 12% valuation growth
last year. Footfall and retailer sales were up 2% and
there were 27 new lettings in the period.
The FindSimilar feature is an initiative that aims to enhance
the shopping experience, increase shopper engagement and
drive footfall by delivering an intuitive and convenient way of
browsing thousands of products offered by retailers in shopping
centres. Users can take pictures of fashion items, or upload
images already saved on their phones, to find exact or similar
products stocked in retail stores across the centre. Once the user
has selected their chosen product, the app then provides a map
which guides the customer directly to the store.
Shopping Centre.
In order to keep up with the competitive and changing
retail environment, and using Intu Merry Hill as an
example, Intu has been right in sizing the number
of anchors and major space users in its portfolio.
Additionally, it has done well in repositioning food,
retail and leisure offerings. Improving digital and
experiential shopping is part of management strategy
to grow long-term secure rental income. Intu Digital
showcases 480 retailers and has seen website visits
jump 15% year-on-year - to 28 million - and has
fetched about £6m in online sales. Intu did 1,300
promotional events last year in its retail centres. To
improve catchment, footfall and dwell times, Intu
Metrocentre, for example, increased the number of
restaurants by 9 last year.
Looking forward
Intu trades at a discount to net asset value (NAV) of
just over 30% and offers a one-year forward dividend
yield of around 5%. Earnings are projected to grow by
a muted 0% to 2% over the next year.
Hammerson has better growth prospects. Earnings
are projected to grow by a solid 7% to 8% per year over
the next three years. Hammerson trades at a discount
to NAV of about 20% and offers a one-year forward
dividend yield of just over 4%.
Keeping with the times
Hammerson has positioned its centres to be
defensive to the rapid growth in on-line shopping,
or alternatively, to work hand-in-hand with online
shopping. Food, beverage and entertainment is being
increased or enhanced across most of the centres.
Online pickup points, including “click and collect”
facilities continue to be rolled out, and technology
in the centres is being improved. For example,
Hammerson recently completed a beta trial of its new
visual search app tool, ‘FindSimilar’, at Brent Cross
www.reimag.co.za
JULY 2017 SA Real Estate Investor
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