The British shopping center landlord Hammerson has sold its stake in Value Retail, the operator of Bicester Village, for 600 million pounds to the LVMH-backed private equity firm L Catterton. This marks a significant milestone in Hammerson's turnaround plan, which aims at reducing debt, selling non-core assets, and refreshing its large city-center retail properties.
This is truly a turning point," said Hammerson's CEO Rita-Rose Gagné. "We have been working on this for a long time.
Value Retail operates nine luxury outlets near European cities like Barcelona and Brussels, including the Bicester Village location near Oxford. Michael Chu, global co-CEO of L Catterton, stated that the firm is "eager to leverage our operational expertise and our global network of established relationships" to collaborate with the company.
The sale of the Hammerson stake to a vehicle founded by L Catterton comes after a challenging phase for shopping center owners, who were significantly impacted by the rise of online shopping and the COVID-19 pandemic, leading to a drastic decline in property values.
Recently, however, some investors have become more optimistic about these properties. Landlords like Land Securities are planning to buy more large shopping centers as their prices have fallen.
Hammerson has reserved £350 million from the sale for reinvestment in its core properties, including the Bullring in Birmingham and Brent Cross in London, and aims to increase its stakes in properties where it does not have full control.
The sale of the interest in Value Retail was complicated by the complex structure of Hammerson's investment, which included both a stake in the company and various shares in individual outlets. Hammerson's investment has been built up since the late 1990s.
The deal represents an enterprise value of 1.5 billion pounds for Hammerson's stake in Value Retail, which is 24 times the EBITDA. Eastdil Secured was the main financial advisor for Hammerson, while JPMorgan advised L Catterton.
Hammerson shares rose by about 4 percent in early afternoon trading on Monday.
Hammerson sought an exit from its minority stake, partly due to the lack of control over the company. Gagné said the investment had 'an extremely complex structure with little to no liquidity.'
L Catterton, a consumer-focused investment firm, was founded by Catterton, LVMH, and Bernard Arnault's family holding company. Gagné explained that it was "essential to find a buyer who was acceptable to Value Retail founder, New York businessman Scott Malkin.
After other asset sales, Gagné said the deal "really opens a new chapter after three years of intense turnaround work.
The company will use 95 million pounds to reduce net debt, resulting in a loan-to-value ratio of 23 percent after the deal closes. Additionally, it will return up to 140 million pounds to shareholders through share buybacks and increase the dividend to 80-85 percent of adjusted earnings, up from the previous 60-70 percent.
