OREANDA-NEWS. Fitch Ratings says that Hammerson plc's (BBB+/Stable) recent 2015 results and its acquisition of Grand Central are in line with the agency's expectations.

Hammerson delivered good 2015 operating results with like-for-like rental income growth of 2.3%, above both its 2% target and the three previous years. Occupancy remains strong and improved slightly to a comfortable 97.7%. Shopping centres in France, which previously have lagged the company average growth, picked up with rental rising around 2.5% and retails sales growth turning positive, despite temporary negative effects from the Paris terrorist attacks in 4Q15. Rental income growth and occupancy ratios were close to our expectations.

Hammerson expects to complete its Irish acquisition by summer 2016 and already has a management team in place in Dublin ready to implement synergies (leasing for example) once ownership has been transferred. The acquisition was announced in September 2015, and we note the positive signs from retail activity and the positive economic backdrop in Ireland (strong GDP growth and declining unemployment).

Execution risks remain until the parties have reached a consensual agreement, which is the primary route for Hammerson, and an enforcement process against the borrower could delay the transfer of ownership and increase costs although moderate delays would have limited impact on the financial position of the company.

The acquisition of the Irish loan portfolio increased Hammerson's leverage especially when considering the related Irish assets are not yet investment properties (Hammerson still needs to take ownership of the secured assets). Nonetheless leverage is commensurate with the rating and is in line with our expectation. The loan to value (LTV) of Hammerson's portfolio of assets was around 40% at end-2015 (when including Irish assets as investment properties). Several consecutive years of yield shift (in 2015: GBP287m) has supported the LTV through higher valuations.

Hammerson is delivering on its assets disposal programme as the company proceeded with GBP357m of assets disposals in 2015 and early 1Q16 including the first GBP200m tranche of disposals previously announced and whose proceeds were not fully received at end-2015. A second GBP300m tranche is planned for the remainder of 2016. Nonetheless those disposals will only lead to a modest reduction in leverage as the company is still to pay GBP220 for the final part of its Irish acquisition and the Grand Central purchase in early 2016 (GBP175m following the use of external capital).

Hammerson continues to have a strong development pipeline with significant development such as Croydon Town Centre and Brent Cross. Nonetheless committed capex are at a low point as the company is finishing its current development and has yet to start work on the mentioned developments. While Hammerson has some flexibility in terms of timing for capex, its financing may have some impact on the company's leverage.