Hammerson, the United Kingdom shopping centre and mixed-use destination REIT, has bought the remaining 50% stake it does not own in Birmingham's Bullring and Grand Central shopping centres and mixed use hubs from Canadian investment giant Canada Pension Plan Investment Board (CPP Investments) for £319 million.
The REIT said the acquisition, one of the largest in the shopping centre market for several years, allowed it to take full control of one of the United Kingdom's super prime destinations.
It said in 2024, footfall was up 3% at the Bullring - the principal, Selfridges-anchored mall in Birmingham - with 33 million visitors, and total sales up 11%, making it the strongest performer in its peer group.
Canada Pension Plan Investment Board (CPPIB) has sold the stake in Bullring and Grand Central. It completed its acquisition of an additional 33.3% stake in the Bullring from global investor Nuveen Real Estate, taking its ownership to 50%, in 2022.
Hammerson said that the transaction will be funded by the suspension of a share buyback programme, existing cash resources, and an equity placing of up to 10% of total outstanding shares.
It said Grand Central, located near to Bullring above Birmingham New Street station, represents a compelling redevelopment opportunity. Around 50% of the space, representing a former John Lewis & Partners store, is currently vacant, although strip-out was completed in 2023 and planning is in place for its Drum concept - an office-led mixed-use redevelopment of the space with a gross development value in the region of £100 million.
The deal for the two centres is expected to complete in early August and is in line with its stated strategy of buying out its partners at its shopping centres.
In a separate filing CPPIB said the 1.3 million-square-foot Bullring - a top five UK mall - forms the majority of the transaction and was sold at book value at a net initial yield of 6.4 % and a topped up net initial yield of 7.1%.
CPP Investments originally invested in a 16.7% interest in the Bullring in 2013 and increased its holding in 2022. The investment in Grand Central was made in 2016. CPPIB said that since the increase in ownership in 2022, the joint venture raised occupancy at the Bullring from 86 per cent to 95 per cent and lifted net operating income by 23 per cent.
"The Bullring has been a standout performer in our UK portfolio since our upsize in 2022, and we have worked closely with Hammerson to reposition the asset, increase occupancy and attract new anchor tenants" said Tom Jackson, managing director, real estate Europe, CPP Investments, in a statement.
Hammerson's acquisition of its joint venture partner's stake follows a similar move at Westquay in Southampton in November 2024 and the remainder of the Brent Cross shopping centre in north London recently.
The REIT also today reported half-year results to the end of June.
It said like-for-like gross rental income was up 5% and like-for-like net rental income up 4%, driven by active asset management and a strategic focus on high quality landmark destinations.
Total gross rental income was up 11% and net rental income up 10%.
It reported earnings of £48 million or 9.9p per share, ahead of expectations, and announced a dividend increase of 5% to 7.94p reflecting its confidence in its "earnings growth trajectory".
The portfolio valuation is up 11% to £3 billion and the net revaluation gain of £26 million is the first portfolio gain since half year 2017.
It sees opportunities to unlock further value, with "disciplined capital allocation strategy to enhance returns for shareholders.
Its earnings guidance for full year 2025 is raised to £102 million from £95 million.
Rita-Rose Gagné, the REIT's outgoing chief executive, said in a statement: “Demand for our space has never been stronger, reflected in high occupancy, growing footfall and sales, and another period of record leasing. I am pleased with our performance in the first half, which has been driven by our investments in recent years into repositioning and placemaking, and data and analytics which allows us to better understand and anticipate the evolving behavioural trends of consumers and occupiers.
"The consumer spend where we have focused our portfolio is resilient and growing for the right product in the best destinations, as brands are shifting towards fewer, higher-performing spaces. We have quickly recycled capital in a disciplined way to focus our portfolio on the top 1% of locations where retail spend is concentrated. In just nine months we’ve put to work £321 million to gain full control of two more of our landmark city destinations at an average yield of 8.5%, delivering a step-change in income and earnings.
Commenting on the acquisition, Rita-Rose Gagné said: "This is an exciting milestone for Hammerson. Full control of this super prime asset allows us to consolidate the position of our Birmingham estate at the heart of the UK’s second city and explore new opportunities to deliver enhanced value and risk-adjusted returns.”
Analysts at Panmure said the upgrade to earnings guidance to £102 million with expected gross rental income growth helped support its thesis that rental growth is embedded within prime retail real estate and is now translating into earnings upgrades and portfolio revaluation gains. "This justifies a re-rating of assets where operational leverage is visible and capital allocation is disciplined. We view the Bullring transaction as strategically sound, cementing Hammerson’s dominant position in Birmingham while enhancing income, future development optionality, and long-term value creation."
Nick Sherrard, managing director at Label Sessions, said the acquisition reflected growing confidence in the retail sector: “Retail seems to be the most resilient part of the UK property market – a fact reflected in some of Hammerson’s update. The acquisition of the remaining stakes in Grand Central and Bullring, along with the company’s progress on other projects, suggests a level of confidence not seen since before the pandemic.
“On top of that, by the time Hammerson’s new CEO is appointed, the company will surely be looking at an environment that is much more friendly to development than we have seen in recent times, given the direction of policy.
“Hammerson is a business that a lot of other people need to succeed. Retailers want to operate in the vibrant retail destinations it is good at creating. Consumers want to shop in these places. Politicians want retail to drive growth in cities around the country.
“There is only so long, though, that everyone can keep getting excited about jam tomorrow. The key question is now how much longer do we need to wait – but there are indications today that Hammerson may be on the cusp of that turning point.”