Hammerson plc

100 Park Lane
London WIY 4AR
United Kingdom
Telephone: (+44) 20-7887-1000
Fax: (+ 44) 20-7887-1010
Web site: http://www.hammerson.co.uk

Public Company
Incorporated: 1953 as Hammerson Property and Investment Trust
Employees: 171
Sales: £141.1 million ($235.67 million) (2000)
Stock Exchanges: London
Ticker Symbol: HMSO
NAIC: 531311 Residential Property Managers; 531312 Nonresidential Property Managers

Hammerson plc’s more than £3.3 billion in property assets in the United Kingdom, France, and Germany make it one of Europe’s heavyweight real estate companies. Hammerson’s portfolio is tilted toward the retail sector, with nearly 60 percent of its assets represented by shopping centers. The remainder of the company’s real estate holdings is in the office building sector. Hammerson owns or holds long-term leases on a number of prime U.K. properties, including the 16 Old Bailey office complex, the 26-floor 99 Bishopsgate complex, the Brent Cross shopping center, a 50 percent share in the 800,000-square-foot West Quay shopping center in Southampton, and a share in the Bull Ring development in Birmingham, expected to be completed early in the new century. In France, Hammerson owns the Italie 2 shopping center, 54 Boulevard Haussmann, 56 percent of the Bercy 2 shopping center, and a 36 percent share of the Les 3 Fontaines shopping complex in Parisian suburb Cergy Pontoise. In Germany, Hammerson has concentrated on the Berlin market, where it owns a majority share of Forum Steglitz, and a 98 percent interest in Markisches Zentrum. In addition to the Bull Ring development, Hammerson has a number of other prominent developments under construction, including the 13-story One London Wall office complex expected to be completed by summer 2003, and two neighboring buildings in Paris’s seventh arrondissement, the former headquarters of Seita on the Quai d’Orsay and a nearly 12,000-square-meter building on the Rue d’Université, both offering frontage on the River Seine. Once present in a dozen international markets, including the United States and Canada, Hammerson has concentrated its portfolio on its three core markets since the late 1990s.

Building a Building Business in the 1950s

The Hammerson family, who had been operating a business in the garment industry, entered the real estate market during the years of World War II. Led by Lewis Hammerson, the family sold off its garment business and used that capital to begin buying up London-area properties. The company renovated the properties (often single-family houses), transforming them into apartment buildings and then reselling them. Incorporated as L.W. Hammerson & Co., the company’s steadily increasing profits enabled it to enter the market for retail and commercial properties by the end of the 1940s.

In the early 1950s, the company performed a reverse takeover of older company Associated Investment Trust, that not only boosted the company’s size but gave it a listing on the London stock exchange. Taking on the name of Hammerson Property and Investment Trust, the company slowly began to assert itself on the London market, building up one of the United Kingdom’s largest real estate portfolios.

Leading the company’s major growth was Sydney Mason, who took over after Lewis Hammerson’s death in 1958. Mason turned the company’s interest to a relatively new type of building development, that of the shopping center. As rising numbers of automobiles and better highways enabled more of the population to move outside of the city centers, the shopping center offered an alternative to the typlcal High Street urban shopping district. Hammerson began developing its own shopping centers. Its first center was built at the end of the 1950s in Bradford, in the Yorkshire region.

Hammerson had begun, meanwhile, to develop another interest: international growth. With financial backing from such institutional investors as Standard Life Assurance and Royal London Mutual Insurance, Hammerson started to acquire properties in other parts of the English-speaking world. During the 1960s, Hammerson expanded into Australia, New Zealand, and the United States. The company’s international growth was spurred on by the passage of legislation in the early 1960s. The so-called Brown Ban of 1964 had placed severe limits on the rate of new developments in the United Kingdom and especially Hammerson’s core London market. Hammerson’s overseas presence helped it to continue its growth.

Global Growth in the 1960s

By the end of that decade, the company had extended into Canada, a market that was to become one of the company’s most important foreign markets. Back at home, Hammerson also found a new headquarters building, at 100 Park Lane, in London. Formerly known as Dudley House, the building originally had been built in 1827 by the first Earl of Dudley. Damaged during the air raids of World War II, the building was only partially restored with funds provided by the War Damage Act. A full restoration of the property was not begun until 1969, when Hammerson, then seeking a new headquarters, agreed to carry out the needed repairs.

At the same time, Hammerson looked closer to home, across the North Sea, entering Dutch and Belgian property markets in the late 1970s. Back at home, the effects of the Brown Ban had cut deeply into the company’s new development efforts. Instead, Hammerson concentrated on renovating and improving its existing portfolio of properties. Hammerson’s revenues were by then generated by its net rental income rather than by its earlier practice of “flipping” its renovated buildings. If these factors meant that the company’s growth in the early 1970s had been more modest than in the decade before, they also helped protect the company during the long slump in the property market that began in 1974. Coupled with a long-lasting recession, itself brought on by the Arab Oil Embargo of 1973, the bottoming out of the property market spelled the ruin of many of Hammerson’s more speculative competitors. Hammerson’s own low vacancy levels helped to protect it from the worst of the downturn in the real estate market.

Not all of the company’s holdings were performing equally, however. The company’s Australian and New Zealand holdings left it particularly vulnerable to the struggling markets in those countries. The return to health of the European and United Kingdom markets encouraged Hammerson to turn its focus to those markets, which, toward the middle of the decade, had entered into a new boom period.

This time, Hammerson joined its competitors in the buoyant market for new property developments that was helping to transform the skylines of many of the world’s major cities. Hammerson built up a large portfolio of speculative developments, and its holdings boosted it to the rank of number five in the United Kingdom’s real estate investment sector by the end of the decade. The company averted one disaster—a hostile takeover attempt from Dutch property investment giant Rodamco in 1989—to rush headlong into a new building market crash. This time, Hammerson’s portfolio left it highly vulnerable to the sudden slump in rents and the soaring vacancy rates that marked the beginning of the 1990s.

Described by the Independent as “a hopelessly overextended, unfocused world-wide property investor,” Hammerson was hit hard by the crash in the worldwide property market that hit bottom in 1992. The company’s angry shareholders, which had seen their investments cut in half, agreed to help the company raise new capital in a rights issue with the condition that Hammerson shed its management, including longtime leader Sydney Mason. Taking Mason’s place in 1993 was industry veteran Ron Spinney, who previously had held the top position at rival property developer Greycoat.

Refocusing for the 21st Century

Spinney placed Hammerson on an immediate diet, leading a vast sell-off of the company’s holdings, including its entire Australian portfolio AMP Limited in 1994. Proceeds from that sale and from the sale of other properties in now noncore markets were placed in expanding Hammerson’s U.K. portfolio and developing its positions in just two carefully chosen foreign markets, those of Paris and Berlin. The company’s choices were to prove the right ones as those two markets began a return to health by the middle of the decade. Meanwhile, the refocus on a smaller number of markets helped the company cut its costs, improving its profit margins.

Hammerson coupled its property sales with the acquisition of new properties, enhancing its commercial and office building portfolio. In 1994, the company made a number of purchases, including 99 Bishopsgate, which had been heavily damaged in an IRA bombing in 1993, and the £140 million cash and share purchase of six buildings from the PosTel post office pension fund. The following year, Hammerson began boosting its French holdings, focusing on Paris, with the acquisitions of 54, Boulevard Haussmann, giving the company more than 10,000 square meters on one of the city’s busiest shopping streets. Just outside of Paris, Hammerson bought a share in the Espace St. Quentin shopping center, as well as a holding in the 3 Fontaines shopping center in Cergy Pontoise. The company added another Parisian site, 40-46, rue de Courcelles, in 1996, paying £67 million.

Company Perspectives:

Hammerson offers shareholders an exposure to key European real estate markets. Its strategy is to focus on major shopping centres and office buildings. The group is performance oriented, balancing the allocation of capital between income producing properties and developments and recycling its resources to maximise returns. Hammerson operates well managed properties which provide attractive and efficient environments both for occupiers and their customers.

In 1996, Hammerson boosted its small portfolio of German properties with the acquisition of a controlling interest in Berlin’s Markisches Zentrum shopping complex, for the purchase price of £81.5 million. Hammerson extended its new growth strategy not only to the acquisition of existing buildings but to the development of new office and commercial complexes. One such development was the new London landmark building Globe House, a 20-story structure with a view of the Thames River. The company also joined in with partners for the development of the ambitious Bull Ring development designed to revitalize the Birmingham city center. That development was slated to be completed by 2001. Unlike the company’s property developments during the speculative 1980s, most of its new properties were pre-let before completion. Such was the case with Globe House, for example, which had already found BAT as its major tenant.

Hammerson attempted to gain weight in 1997 when it began merger talks with U.K. rival MEPC, which held extensive holdings in the North American market. Although analysts greeted the idea of such a merger warmly, the merger fell through by the end of the year.

Hammerson’s realignment was more or less completed in 1998 when the company agreed to sell its Canadian assets, which accounted for some 17 percent of its total portfolio, to OMERS Realty Corp. for C$600 million. The company turned the proceeds of that sale toward boosting its presence in the Paris market, buying up two Parisian shopping centers and their management, including the Italie 2 shopping complex. Back in the United Kingdom, Hammerson reached an agreement with Land Securities, then developing the Martineaux Galleries in Birmingham, to combine that structure with the Bull Ring development, creating a single shopping complex worth some £800 million. Soon after, Hammerson paid £83 million to buy Euston Square, in London, from Japanese company Kajima.

Ron Spinney announced his intention to step down from day-to-day management of the company he had resurrected in May 1999. Taking instead a part-time position as company chairman, Spinney explained to the Financial Times: “I am 58 years old and the business is just about in the shape that I want it to be. It is the first time I have been able to say to myself that there are no buildings in our portfolio which I wouldn’t want to own.” Spinney was replaced by John Richards, who had already been serving to coordinate the company’s U.K. and European expansion efforts.

Richards continued to guide Hammerson along the strategy developed by his predecessor. At the beginning of 2000, the company acquired a new Berlin site, the 28,000-square-meter Forum Steglitz shopping center. In Paris, the company acquired the office and retail property of Les Trois Quartiers, in Paris, for £127 million, and then a majority interest in the Bercy 2 shopping complex, for £44 million. The company’s West Quay, Southampton shopping complex opened in September 2000. At the end of that year, Hammerson announced the start of construction of the One London Wall complex, a 19,300-square-meter office complex expected to be completed in 2003. Helping to finance these and future developments was the sale, in March 2001, of the company’s refurbished rue de Courcelles building, to Munich Re in a deal worth £101 million.

Principal Subsidiaries

Hammerson Cergy Pontoise SAS (France); Hammerson Europe BV (Netherlands); Hammerson GmbH (Germany); Hammerson Group Management Ltd; Hammerson Haussmann 54 SAS (France); Hammerson International Holdings Ltd; Hammerson Italie SAS (France); Hammerson Madeleine SAS (France); Hammerson Oracle Investments Ltd; Hammerson SA (France); Hammerson Saint Quentin Ville SAS (France); Hammerson UK Properties Ltd; MV Geschaftshaus Verwaltung GmbH & Co.; Markisches Zentrum KG (Germany; 98%); SCI SDPH (France; 64.5%).

Principal Competitors

Assurances Générales de France; American International Group, Inc.; Bail Investissement S.A; British Land plc; Capital Shopping Centres plc; CB Richard Ellis Services, Inc.; Credit Suisse First Boston; Foncière Euris S.A.; Gecina SA; Klépierre S.A.; Société Foncière Lyonnaise S.A.; Peel Holdings Plc; Société Immobilière de Location pour l’Industrie et le Commerce (SILIC); Simco SA; Wates City of London Properties.

Key Dates:

1942:

Lewis Hammerson sells garment business and begins real estate activity.

1948:

L.W. Hammerson & Co. is incorporated; company begins commercial property purchases.

1953:

Reverse takeover of Associated Investment Trust is accomplished; company is listed on the London Stock Exchange; name changes to Hammerson Property and Investment Trust.

1958:

Lewis Hammerson dies; Sydney Mason takes over company direction; shopping center development begins.

1960s:

Company undertakes foreign expansion into Australian, New Zealand, and U.S. markets.

1968:

Company expands into Canada.

1969:

Headquarters moves to 100 Park Lane, London.

1970:

Company expands into Europe.

1989:

Rodamco attempts hostile takeover.

1993:

Ron Spinney takes over as CEO.

1994:

Company sells Australian and New Zealand assets.

1995:

Company buys 54, Boulevard Haussmann (Paris).

1996:

Company acquires share in Espace St. Quentin and 3 Fontaines shopping centers (Paris region), Rue de Courcelle (Paris), and Markisches Zentrum (Berlin).

1998:

Company sells off Canadian holdings.

1999:

Company buys Euston Square (London).

2000:

Company acquires Forum Steglitz (Berlin), Les Trois Quartiers (Paris); begins development of One London Wall.

2001:

Company sells Rue de Courcelle.

Further Reading

Branson, Clive, “Spinney Refocuses Hammerson,” European, February 24, 1995, p. 25.

Pain, Steve, “High Street Hammering for Hammerson,” Birmingham Post, March 6, 2001, p. 17.

Roberts, Dan, “City: Hammerson Vows to Keep European Holdings,” Daily Telegraph, September 1, 1999.

“Ron Spinney to Step Down As Hammerson Chief,” Financial Times, May 14, 1999.

Stevenson, Tom, “Hammerson Gets into Shape,” Independent, March 19, 1996, p. 18.

Yates, Andrew, ed., “Hammerson Backs the Boom,” Independent, March 17, 1998, p. 24.

—M. L. Cohen