Hammerson, the owners of Centrale, and one corporate half of the “Croydon Partnership” which was supposed to be starting work on the £1.4billion redevelopment of the Whitgift Centre in central Croydon this autumn, has this morning announced that it has put all its major construction projects on hold, and is instead focusing on flogging off more than £500million of property assets to pay down its company debts while the values of its properties continue to fall.
The company’s 2018 results make grim reading, especially for anyone – such as Jo “We’re Not Stupid” Negrini, the council chief exec in Croydon – who had staked so much on the regeneration of the town centre.
“We are currently reviewing the scheme to ensure it responds to changing retailer requirements and is appropriate for the future,” Hammerson’s report said of their involvement in the Croydon project, which is appearing increasingly doomed.
Calls for Negrini, and for Croydon council leader Tony Newman, to reveal what they have for a “Plan B” for the town centre will surely now grow louder, with the prospect of the new Whitgift Centre being built receding fast in the face of the uncertainties over Brexit and the deepening troubles of the retail sector.
The political Establishment in Croydon, Tories and Labour, both with their all-too-cosy ties with the Whitgift Foundation, the landowners of the Whitgift Centre, have been uncritical cheerleaders for the “Hammersfield” regeneration scheme since Hammerson was first forced to join up with Westfield seven years ago in a deal brokered by Conservative Mayor of London Boris Johnson and gaffe-prone Gavin Barwell, then the MP for Croydon Central.
Now, other developers and property owners in the town centre have lost patience with the slow progress over the seemingly permanently stalled Westfield project, with its negative impact on their own investments, with some, such as Stanhope at Ruskin Square, being forced to mothball their own multi-million-pound schemes.
Major employers, such as the Body Shop, are leaving Croydon, the lack of progress over the town centre scheme – which was originally to have been completed in 2017 – a major cause of their frustration.
Hammerson’s 2018 results confirm that they have been taking a hammering for the past 12 months and more.
The shopping centre developer which depends on retailers paying rents for their income has been hard-hit by department stores and High Street chains going bust or seeking new, reduced payment deals on their leases.
According to the results, Hammerson’s rents were down 6.2 per cent in 2018, to £347million, trading profit down 2.4 per cent to £240million, and they reported an overall loss of £268million (compared to a £388million profit in 2017) due to 5.9 per cent (£622million) being wiped off the value of their property portfolio, from £10.56billion to £9.94billion.
Hammerson confirmed last summer that it will be delaying the start of a planned a large extension of the Brent Cross shopping centre in north London. “Reflecting the heightened uncertainty levels, particularly in UK retail markets, in July we decided to defer the start on site at Brent Cross.
“Given our focus on reducing debt during 2019, we do not expect to commit to any major projects until markets stabilise.” They don’t say when that might be. But then again, no one really knows…
There was more bad news for Croydon: “Capital expenditure is tightly controlled and we will only commit to projects when the balance of risk and reward is acceptable.
“Factors evaluated include funding and financial returns, cost and programme certainty, leasing confidence and pre-letting performance.”
David Atkins, the chief executive of Hammerson, said: “2018 was a tough year particularly in the UK. Tenant failures, the structural shift in retail and a more considered consumer created a difficult operating environment, putting pressure on property values.
“We believe that a successful de-leveraging programme will best position Hammerson for the current environment and beyond. Disposals…”, which means flogging off some of their existing shopping centres, “… will also enable us to prove the inherent value of this business – which we believe is not recognised in the current equity market.”
They added: “We remain committed to exiting retail parks over the medium term”.
But the red ink all over Hammerson’s books is the strongest indicator yet that the era of big venue shopping malls being built could be over. Indeed, Hammerson themselves appear to be moving away from their dependence on retail, announcing something called “City Quarters”, meaning a move to more profitable residential developments which “will see us transform many of our city venues beyond pure retail into successful, thriving neighbourhoods”.
Which could mean that Croydon Wesfield Mark III, if it ever happens, will have even more flats, and even less space dedicated to retail.
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