Hammerson PLC (LON:HMSO) has "bought some time" with a new agreement with its lenders but with UK retail property values continuing to fall fast analysts wondered if the shopping centre owner was not just on the same course as collapsed rival Intu.
Two working days after Intu called in the administrators, former suitor Hammerson said lenders have agreed to relax part of their terms for the next 18 months and it has increased its levels of available liquidity.
READ: Hammerson to continue selling off properties after lenders relax covenants
However, the owner of the Brent Cross shopping centre, Birming Bullring and Bicester Village retail park has so far collected just 16% of UK rents for the June quarter, while on the same day British Land Company PLC (LON:BLND) said it had so far received 36%.
Neither figure is particularly impressive, reassuring or that surprising after the coronavirus lockdown has laid waste to the retail sector.
Moreover, industry data from MSCI/IPD shows shopping centre property values are down 15% so far this year.
"We would need to see evidence of disposals before becoming more comfortable that today’s announcement isn’t just delaying the inevitable, which would be an equity cure," said analyst Tom Musson at broker Liberum.
"We still do not think a market exists in the UK for major retail transactions, but time has certainly been bought, perhaps to sell its portfolio of retail parks one-by-one to selective buyers."
Matthew Saperia at broker Peel Hunt said: "The rent collection stats highlight the impact Covid-19 is having on retail landlords.
"The relaxed covenant is clearly helpful, but we forecast a peak LTV of c.55%, which we believe is still too high and a dilutive equity issue remains a real risk."
Saperia estimates Hammerson will be able to take a valuation decline of around 30% during the 18-month window after the relaxation of the covenent, while Musson put it nearer 34%.
He said he also expected the 16% rent collection figure to increase materially in the short-term as it is three days after the quarter rent day, as Hammerson has now collected 73% of total first-half rent in the UK, 53% in France and 72% in Ireland.
Furthermore, since the lifting of the lockdown on most non-essential stores, 80% of eligible shops in Hammerson's flagship destinations have reopened.
"We remain cautious on the outlook until we see evidence of disposals bringing in cash to better secure Hammerson’s most sensitive covenant," Musson added.
The shares trade on an 85% discount to spot net asset value but Peel Hunt retained its 'reduce' recommendation and Liberum remained at 'sell'.