Orion Capital Management pulls out of £400m Hammerson deal

Jessica Paige 7 May 2020 (Last Updated May 7th, 2020 16:26)

UK-based private equity firm Orion Capital Management has pulled out of its £400m deal with property development and investment company Hammerson.

Orion Capital Management pulls out of £400m Hammerson deal
Had the deal gone through, it would have been the largest UK retail parks sale in a decade. Credit: Hammerson

UK-based private equity firm Orion Capital Management has pulled out of its £400m deal with property development and investment company Hammerson.

Orion was set to buy seven retail parks from the investment company in February, however, Hammerson announced yesterday that Orion gave notice last month that it would not be completing the acquisition. Parks in Middlesbrough, Rugby, and Didcot were included in the deal; had it gone through, it would have been the largest UK retail parks sale in a decade.

Hammerson will be keeping Orion’s deposit of £21m. According to The Financial Times, Orion said that it would rather lose £21m than take possession of the seven retail parks and “shell out” a further £380m.

Hammerson exiting the retail sector

Last year, Hammerson was in talks to sell more than £900m of assets after selling £570m the previous year. Hammerson CEO David Atkins said that 2018 was a challenging year for the company, with tenant failures among other issues putting pressure on property values.

In February this year, Hammerson announced its intentions to exit the retail parks sector due to a “challenged retail and investment backdrop”, according to Atkins. Following this, Hammerson sold seven major retail parks to Orion’s European real estate fund for £400m.

Hammerson has sold 14 retail parks since 2018 and generated sales proceeds of £764m. The proceeds will be used to reduce the company’s debt and strengthen its balance sheet.

Understanding Orion’s withdrawal

Retail Insight Network has reached out to Orion for comment and is yet to receive a response. However, the Covid-19 coronavirus pandemic has been putting pressure on the already struggling retail industry and could theoretically indicate one of the reasons why Orion decided to pull out of the deal.

For example, in the UK, Oasis and Warehouse stores have permanently closed while other stores like Debenhams and Cath Kidston remain in administration. Other high-street stores are expected to follow.

A study of the projected impact of Covid-19 on European retail sales between 9 March and 21 April 2020 forecast a loss of £3.26bn across Europe. Germany is expected to see the biggest loss of £728m.

Statistic: Expected cumulative impact of lost retail sales caused by the coronavirus outbreak in the United Kingdom (UK), Germany, and France from March 9, 2020 to April 20, 2020 (in million British pounds) | Statista