Hammerson

Procurement policy
For large schemes, generally of more than £20m, Hammerson uses a two-stage bidding process. It will invite a few major contractors to work with its designers to develop the scheme and select one of them based on issues such as preliminary costs and overheads. When the design is 80% complete, it will novate the design team to the contractor. The contract then becomes a design-and-build contract with a target price guaranteed.

Major schemes account for 60-70% of the company's total capital programme. For smaller schemes, under £20m, the procurement route will be a JCT form of contract.

For straightforward projects, such as car parks and small office buildings of less than 2000 m², the company uses a design-and-build form of contract.

Current and future projects
Hammerson focuses on prime office and retail properties. The group operates in the UK and Europe, although close to 65% of its property portfolio is located in the UK. In 2001 the group's expenditure on development rose to about £190m as work continued on a number of major projects.

In the retail sector, which accounts for almost 60% of the group's portfolio, key developments are Birmingham's Bull Ring and Martineaux Place, both of which are near completion. Future projects in the retail sector include the redevelopment of Broadmead in Bristol, and a major retail-led city-centre redevelopment for Sheffield.

Hammerson has acquired a 33.3% interest in Moorhouse, next to Moorgate Station in London. The scheme will deliver about 30,000 m² of office space when completed in 2004. The firm has also bought a 33.3% interest in Spitalfields Development Group.

Projects scheduled for completion in 2003 include One London Wall – 19,300 m² of space due for completion in the summer of 2003. In the West End a new development was started at 10 Grosvenor Street to create 6100 m². Again, completion is due for summer 2003. Looking beyond 2003, developments in the office sector are expected to decline, and the recent downturn suggests office development could decline sharply.

Essential information
When announcing its latest interim results, Hammerson revealed lower profit as a result of falling office rents in London. Profit fell nearly 10% from that in 2001. Hammerson's office portfolio recorded a 2.9% drop in value, although this was partially offset by a 2.3% rise in the value of its retail estate.

Hammerson also recently announced its entry into the retail park market, with the £58m purchase of the Fforest-fach retail park near Swansea. This 13,400 m² development is expected to generate a rental income of £3.4m a year.