Project Jewel deal helps soften credit rating blow for Hammerson
Published 03/07/2016 | 02:30
The acquisition by UK property giant Hammerson along with its partners, the German insurer Allianz, of the Dundrum Town Centre along with other relevant assets owned by developer Joe O'Reilly's Chartered Land has helped to soften the blow dealt to it by Brexit.
The benefit of Hammerson and Allianz's €1.85bn purchase of the south Dublin retail mecca along with 50pc stakes in Dublin's Ilac Centre and Pavilions Shopping Centre in Swords is reflected in a ratings action issued by Moody's last Wednesday.
While the agency changed its overall outlook on Hammerson's Baa1 rating from stable to negative, it notes its investments in the Irish and French retail markets as a "credit positive".
In its note, Moody's states: "Hammerson's geographical diversification in the French and Irish retail markets in particular are a credit positive because they dilute the impact of any possible weakness of the UK commercial real-estate market that may follow from the referendum results."
With 64pc of Hammerson's £7.9bn (€9.4bn) portfolio located in the UK, however, the change in Moody's ratings outlook was hardly surprising and mirrored the experience of the UK's real-estate sector generally in the wake of the Brexit vote.
Explaining the rationale behind the negative rating, Roberto Pozzi, a Moody's vice president, senior credit officer and lead analyst said: "We changed our outlook on Hammerson to negative because uncertainty created by the outcome of the referendum could dampen prospects for the UK real-estate sector. This could make it tougher for Hammerson to maintain its leverage in line with requirements for the current rating."
While Hammerson is expected to reduce its debt through a combination of assets sales and the completion of a joint venture for the Grand Central Shopping Centre in Birmingham, Moody's expressed the view that the economic uncertainty caused by the outcome of the UK referendum could have a detrimental impact on that plan.
Here in Ireland, Hammerson's plans along with its partners, Allianz, for the Dundrum Town Centre could yet see a significant element of housing built on an adjoining six-acre site which has been earmarked for development of phase two of the centre.
Citing the recovery in the Irish housing market, Hammerson's Director of Business Improvement, Simon Betty, referred to the possibility of a "residential-led scheme" on the site in the course of a conference call with analysts from investment banks JP Morgan, UBS, Morgan Stanley, Barclays and others late last year.