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Hammerson Plc and Liberty International Plc, two of Britain's largest shopping center owners, fell in London trading on concern their malls will perform worse than expected as consumer spending slows.
Liberty International said today it set aside 4.5 million pounds ($8.8 million) unexpectedly in the first half for potential lost rental income after 24 tenants, including shoe chain Stead & Simpson, sought creditor protection or encountered financial difficulties.
The bad loan provision was the ``first of several that we are going to see in the sector,'' said Deutsche Bank AG analyst John Perry, who has a ``hold'' rating on Liberty shares.
Liberty's disclosure, as it reported a 21 percent slide in net asset value, is a sign that large out-of-town shopping centers aren't escaping the slowdown in U.K. consumer spending. The retail centers Liberty and Hammerson own have typically performed better in an economic decline because they attract more consumers than properties in other locations.
Hammerson, owner of Birmingham's Bullring and London's Brent Cross shopping centers, issues first-half earnings tomorrow at 7 a.m. London time.
Liberty fell 7.2 percent, to 900 pence, the biggest decline since its shares were listed on the London Stock Exchange in July 1992.
Hammerson shed 2.8 percent to 989 pence. Other U.K. real estate companies with retail-related properties Land Securities Group Plc and British Land Co. Plc also fell 2.5 percent and 2.8 percent respectively.
``We remain nervous about the outlook for U.K. retailers into 2008-9 and we doubt even Liberty's shopping centers will be immune,'' said Harry Stokes, an analyst at Citigroup Inc., who has a ``sell/high risk'' recommendation on the shares.
Liberty owns the MetroCentre in Gateshead, Europe's largest shopping mall, and the Lakeside Shopping Centre near London, also one of the U.K.'s five largest centers.
Liberty's shares had fallen 4.5 percent in the 12 months to yesterday's close, compared with a 31 percent slide for the FTSE All-Share Real Estate Index in the same period. That's because of its perceived ``defensive'' characteristics, said Perry at Deutsche Bank. Hammerson shares have fallen 13 percent in the same period.
The slump in the U.K. housing market, accelerating inflation and banks' reluctance to lend caused consumer confidence to sink by the most in at least four years in July, deterring shoppers from spending more in stores. The U.K.'s economy expanded at the slowest rate in eight years in the second quarter.
``We do anticipate weaker consumer spending,'' said Liberty Chief Executive Officer David Fischel in a conference call with reporters today. The number of visitors to its malls was little changed from a year ago, he said.
Liberty's management team has ``experience from the previous downturn'' in the U.K. real estate market in the 1990s, he said. The company is less affected by the slump in business for tenants leasing retail warehouses, like home improvement and furniture stores, which are feeling the brunt of the housing market slump and lower consumer spending, he said.
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