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2017 Full-year results
26 February 2018
Agenda
01
2017 highlights, market backdrop and strategy David Atkins – Chief Executive
02
Financial results
03
Operational and portfolio review
04
Transaction update and conclusion
Timon Drakesmith – CFO; Managing Director, Premium Outlets
Timon Drakesmith – CFO; Managing Director, Premium Outlets Mark Bourgeois – Managing Director, UK and Ireland Jean-Philippe Mouton – Managing Director, France
David Atkins – Chief Executive
2
Strong financial returns driven by record occupier demand
Another year of strong growth EPS +6.5% DPS +6.3% NAVPS +5.0%
Preferred position with shoppers and retailers Record volume of new leasing, +34% Highest occupancy for 17 years Strong footfall outperformance Positive operational results LFL NRI: France +2.6%; Ireland +7.4% (1) Consistently strong Premium outlets sales +9%
Bicester Village
L’Occitane, Victoria Leeds
Les 3 Fontaines, Cergy
Riverside at The Oracle, Reading
Dundrum, Dublin
Consistent capital recycling Sold £400m; diversity of buyers Further £76m investment in Premium outlets announced today Significant acquisition aligned to strategy Advancing intu acquisition (1)
Proforma figure assuming properties owned throughout 2016 and 2017
2017 highlights
3
Delivering attractive income-focused returns
EPS (pence)
NAVPS (pence)
DPS (pence) +6.5%
35 30
31.1
25
+6.3%
30
+5.0%
800
776
750
25
25.5
20
700 650
20 15
600
15
550
10
10
500 5
5
450
0
0 2012
2013
2014
2015
CAGR +8.3%
2016
2017
2012
2013
2014
2015
CAGR +7.6%
2016
2017
400 2012
2013
2014
2015
2016
2017
CAGR +7.4%
2017 highlights
4
Market trends drive our clear, focused strategy
Focus on growing consumer markets
Create differentiated destinations
Promote financial efficiency and partnerships
Dundrum, Dublin
Les Terrasses du Port, Marseille
Bicester Village, UK
The acquisition of intu enhances strategic growth Advancing our strategy
5
Channel selection supports demand for the best physical space
Consumer branded products
Luxury goods
Aspirational/fast fashion
Fewer channels
Total focus on customer experience
Rapid response to trends
Reduce disintermediation from consumers
Risk of counterfeit
National store coverage
Flagship stores
Few, trusted, distribution partners
Shopping centre commercialisation opportunities
Scale efficiencies
Homeware showrooms
Multichannel interface
Large-ticket items
Accessible customer touch-points
Research / advice
Service pick up and delivery
Showrooms rather than shops
Frictionless retail
Clustering of retailers
Market backdrop and strategy
6
High-quality retail destinations are increasingly valuable in a multichannel landscape Shoppers are shifting towards large retail destinations and online UK catchment spend market-share split (%) 70%
-2%
(1)
2015
2017
60% 50% 40% 30%
+6%
+2%
20% 10% 0%
retailretail Hammerson UK shopping Rest ofOther catchment locations centres
(1)
Online spend
Source: MasterCard spend data (collected and analysed by Javelin Group)
Market backdrop and strategy
7
intu acquisition increases the proportion of high-quality UK shopping centres in the combined portfolio
Proportion of UK market (grey) and combined portfolio (blue/orange) per quality banding, by floorspace UK shopping centre market
Hammerson UK shopping centres
intu UK shopping centres
Proportion of UK shopping centre market (grey)
40% 35%
High-quality centres with further growth opportunities
30% 25% 20% 15% 10%
5%
Proportion of combined portfolio: Hammerson (blue) and intu (orange)
45%
(1)
0% 1
2
3 (1)
4
5 6 Quality banding
7
Source: Local Data Company data, collected and analysed by Morgan Stanley (November 2017). See slide 54 for full list of quality factors
8
9
10
Market backdrop and strategy
8
Successful track-record of capital recycling through varied conditions to a breadth of buyers Split of Hammerson’s disposals by category of acquirer (2015-2017)
Hammerson annual disposal proceeds (£m) 700
£1.2bn 8%
600
5% 33%
13%
500
400 17% 300
24%
200
European institutions 100
Private equity 0 2011
2012
2013
2014
2015
2016
2017
Global capital UK institutions
2011-2017 total £2.5bn; average £360m disposals p.a. £1.2bn over last 3 years, 2% below book value
Local Authorities Other Market backdrop and strategy
9
intu acquisition allows for agile capital recycling into higher-growth segments 2018 combined portfolio split (GAV, £bn) (1,2)
2021+ illustrative portfolio split (£bn) (2,3)
64% higher-growth segments
72% higher-growth segments
£2bn disposals
Premium outlets Ireland Spain Developments European shopping centres and retail parks (2)
(1) (2) (3)
Pro-forma GAV as at 31 December 2017 Darker blue indicates top 10 largest combined group ownerships in UK shopping centres by value Illustrative portfolio mix post disposals and reinvestment into Premium outlets, Ireland, Spain and Developments, assumes organic growth of 2% p.a. on largest 10 UK shopping centres and growth of 5% p.a. on Premium outlets, Ireland and Spain
Market backdrop and strategy
10
02
Financial results Timon Drakesmith – CFO; Managing Director, Premium Outlets -
Review of 2017 performance Analysis of cost:income ratios New debt facility 2018 disposal plans Drivers of future EPS growth
Headline results
Income statement
31 December 2017
31 December 2016
Change
370.4
346.5
+6.9%
246.3
230.7
+6.8%
Adjusted EPS (p)
31.1
29.2
+6.5%
Total dividend (p)
25.5
24.0
+6.3%
10,560
9,971
+2.2%(3)
776
739
+5.0%
36
36
n/a
Net rental income (£m) Adjusted profit (£m)
(1)
Balance sheet Portfolio value (£m)
(2)
EPRA NAVPS (p) LTV (%)
(1) (2) (3)
Does not include premium outlets. NRI including premium outlets is £468.0m Valuation for total portfolio including premium outlets Change reflects capital return, not absolute increase of 5.9%
Financial results
12
LfL NRI growth
2017 NRI growth by sector
(1)
LFL NRI growth (%)
UK shopping centres LFL NRI 2017
2016
2.3%
2.0%
UK shopping centres
+1.8
Net rents, commercialisation and other
UK retail parks
−2.5
Car parks (business rates)
−0.5%
0.4%
Total
1.8%
2.4%
2017
2016
2.4%
−2.1%
Surrender premiums
−4.9%
4.5%
Total
−2.5% +2.4%
France
+2.6
EPRA LfL NRI
+1.0
Ireland
+7.4
(2)
LfL NRI incl. Ireland Premium outlets
(3)
Total LfL NRI incl. Ireland and Premium outlets
(1) (2) (3)
+1.7 +15.3
UK retail parks LFL NRI Net rents, commercialisation and other
+4.4
Figures on a proportionally consolidated basis Proforma figure assuming properties owned throughout 2016 and 2017 LFL NRI growth includes the impact of extensions due to multiple tenant relocations from the existing scheme into new phases. Hammerson management estimate that the extensions have contributed approximately 1-2% to LfL NRI growth
Financial results
13
Strong uplift in profit
2017 adjusted profit movement (£m)
+6.8%
270
260
6.4
(2.0)
(10.9)
7.6
250
7.3
240
230
4.5
246.3
2.7
230.7
220
210
200
2016
LFL NRI
Net acquisitions
(1)
(1)
Premium outlets
Developments & Other
Includes change in Ireland income from interest (£14.0m) to net rental income (£22.9m)
Tax, MI & FX
Net Admin
Net Interest
(1)
2017
Financial results
14
Cost:income ratio reduced and further potential following acquisition Cost:income ratio 30%
26.5% 24.2%
25%
20%
11.9%
10.9%
2017 cost:income ratios
22.8%
23.1%(1)
22.6%(2)
21.6%(3) 19.4%(4)
10.0%
11.3%
10.7%
9.7%
13.3%
12.8%
11.8%
11.9%
11.9%
2013
2014
2015
2016
Hammerson
15%
10%
14.6% 5%
0% 2012
Corporate expenses
Operational costs
(1) (2) (3) (4) (5)
Excluding car park costs (£9.3m in 2015) cost:income ratio would be 21.1% Excluding car park costs (£9.5m in 2016) cost:income ratio would be 20.7% Excluding car park costs (£11.3m in 2017) cost:income ratio would be 19.4% Source: intu FY17 results presentation Pre-tax. Expected to reach c.£25m p.a. from 2nd year post-completion of the acquisition of intu
Intu
Corporate synergies of c.£25m p.a. (5) Financial results
15
Income growth driving valuation
2017 capital return (1)
Drivers of underlying valuation change
Value at 31 December 2017 (2)
(%)
Yield shift (%)
Income (%)
Other (%)(4)
(£m)
UK shopping centres
+0.7
+0.2
+1.1
−0.6
3,528
UK retail parks
−2.9
−2.8
−0.1
0.0
1,270
UK other
+3.8
+1.2
+1.3
+1.3
422
+0.3
+0.0
+0.1
+0.2
2,011
−0.3
+0.4
+3.5
−4.2
1,095
Premium outlets
+11.5
+1.2
+10.1
+0.2
2,234
Total
+2.2
+0.1
+2.5
−0.4
10,560
(3)
France Ireland
(5)
(1) (2) (3) (4)
At constant exchange rates. Developments included per geographical segment Figures on a proportionally consolidated basis. Principally assets held for development and non-core Other capital movements reflects the impact of changes in purchasers’ costs, development surpluses and capital expenditure Excluding stamp duty, proforma capital return 3.9%
Financial results
16
Financing ratios underpin our balance sheet strength
Financing policy
31 December 2017 31 December 2016
Net debt
-
£3,501m
£3,413m
Gearing
<85%
58%
59%
Loan to value
<40%
36%
36%
Cash and undrawn facilities
-
£958m
£592m
Weighted average cost of debt
-
2.9%
3.1%
Interest cover
>2.0x
3.4x
3.5x
Net debt/EBITDA
<10x
9.3x
9.5x
Fixed rate debt
>50%
78%
70%
GBP/EUR FX balance sheet hedging
70% - 90%
78%
79%
Financial results
17
intu debt refinancing opportunities
New Hammerson RCF
(1)
Illustrative annualised interest cost
(2)
Facility
Maturity
£1,500m
2021
£23.4m
Selected intu near-term debt maturities Facility
Maturity
Convertible bonds, 2.5% coupon
£160m
2018
SGS bank loan
£352m
2021
RCF
£600m
2021
Convertible bonds, 2.875% coupon
£375m
2022
Total Illustrative annualised interest cost
(1) (2) (3)
Opportunity for significant refinancing benefit
£1,487m (3)
£38.5m
Terms agreed with core Hammerson relationship banks for a new £1.5bn 3 year credit facility, subject to documentation. Assumed fully drawn, based on initial margin of 100bps plus 3month LIBOR of 0.65% Assumed fully drawn, based on in-place coupons and margins of intu credit facilities
Financial results
18
Capital recycling and funding flexibility
Deleverage through disposals ahead of phased development and reinvestment (£m) 2500
Disposals 2000
£2.0bn
Hammerson and intu total disposals 1500
Capex
+£2.0bn
Combined group disposals in shortmedium term
£1.3bn
Combined group medium term capex (1)
1000
500
£660m
Hammerson and intu annual run-rate of disposals
£500m
Average run-rate capex
Short to medium term
Capex 2018-2020
0
2015-2017
(1)
c.£440m
Hammerson target disposals in 2018
Includes intu committed capex and Spain (Source: intu FY17 results ). Further detail on slide 62
Financial results
19
EPS growth track record and future trends
Drivers of EPS growth 2012-2017
2012
Likely future trends, post intu acquisition
20.9p
Positive - Operational efficiencies
+13%
LfL NRI Developments Premium outlets
Positive – Secular growth
+17%
Net acquisitions Interest/leverage SG+A cost/other
2017
Positive – Pipeline projects
+18%
+13%
Negative – Disposals
(7)%
Positive – Interest savings
(5)%
+49%
Positive – Overhead synergies
31.1p
Financial results
20
03
Portfolio review Timon Drakesmith - CFO - Premium Outlets Mark Bourgeois - MD UK & Ireland -
UK and Ireland operational review
Jean-Philippe Mouton – MD France - France
Bicester Village, UK
Portfolio review:
Premium outlets
A strong performance and profitable investments
Value Retail
VIA Outlets
Hammerson share (GAV, £bn)
1.6
0.6
Sales growth YoY (%)
+8
+13
+5
+9
+19
+10
(1)
Sales density growth YoY (%) Total return (%)
(2)
(3)
Recent key investments
Value Retail LP acquisition £76m investment Economic interest in Bicester Village increased to 50% Increased ownership in Barcelona, Madrid and Paris Villages VIA Outlets acquisition of Norwegian Outlet, Oslo Hammerson share £47m New brands to VIA portfolio (which include Hoyer, Tiger of Sweden, Helly Hansen and Bjorn Borg)
(1) (2) (3)
Sales growth at VIA Outlets in 2017 includes sales at Mallorca Fashion Outlet for the second half of the year and excludes all other assets acquired in 2016 and 2017 Calculated on assets owned for 24 months Hammerson share
Portfolio review
23
Global tourism continues as a growth driver
2017 European tax refunded sales by nationality
(1)
YoY growth (%) 19%
1% 3%
Greater China
+16
South and East Asia
+17
Gulf/Middle East 48%
5%
10%
14%
+28
India
+38
USA
+22
Total
(1) (2)
Source: Global Blue, (Value Retail Villages) Other includes countries which are not in the top 15
-2
Russia
Other
(2)
(1)
+10 +14
Portfolio review
24
Premium outlets offer attractive yields and higher growth
NOI yield and ERV growth of selected premium outlets
(1)
10% 9%
Dec 2017 NOI yield (%)
8% Zürich
7% Paris
6%
Madrid Bicester
Frankfurt
5%
Porto
Barcelona
4%
Amsterdam
3% 2% 1% 0% 0%
2%
4%
6%
8%
10%
12%
14%
16%
2017 ERV growth (%)
(1) Data as at 31 December 2017 Source: Cushman and Wakefield
25
The Oracle, Reading
Portfolio review:
UK and Ireland operational review
Impressive volume of new leasing across the group
Hammerson new leasing volume 2017 (£m) Cumulative 2016
(1)
Cumulative 2017
40
+34%
35
30
25
20
15
10
5
0 Jan
Feb
Mar
Apr
May
Jun
(1)
Jul
Aug
Sep
Oct
Nov
Dec
Portfolio leasing on a proportionally consolidated basis, excludes developments and premium outlets
Portfolio review
27
Bullring, Birmingham
UK shopping centres
Rental levels are firm and retailers are investing in their stores
UK shopping centres 2017
Retailers are investing in store fits
Leasing vs. ERV (%)
+8
ERV growth (%)
+0.9
LfL NRI (%)
+1.8
Instore retail sales (%)
−2.7
Leasing activity (%)
+49
UK shopping centre tenant incentive packages
(1)
Penhaligon’s
100% 80%
Avg. 10 months
Avg. 9 months 60%
Paperchase
12+ months
6 - 12 months
40%
0 - 6 months
20%
0% 2016
2017 (1)
Quiz
Distribution of 2016 and 2017 UK shopping centre tenant incentive packages on principal 10-year leases
Paul Smith
Portfolio review
29
Our insights into consumer trends drive our leasing strategy
Hammerson UK shopping centre leasing growth and instore sales growth(1)
Change in share of leasing, by ERV (2015 -17)
8.0%
Leisure
6.0%
Aspirational fashion
Consumer brands
4.0%
Fast fashion
Personal luxuries
0.0%
-2.0%
Cosmetics -4.0%
-8.0% -15.0%
Convenient services Gifts
Menswear Aspirational homeware Confectionary Cafe Toys Hairdresser Casual Dept Health foods Household Travel agent dining store Accessories Books Stationer
2.0%
-6.0%
Ath-leisure
Footwear
Takeaway food
Jewellers
High street fashion Lingerie -10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Hammerson instore sales growth, 2017 (%) (1)
Includes leases signed across all Hammerson UK shopping centres 2015 – 2017, measuring change in proportion of new leasing signed; Hammerson same-centre instore sales YoY
Portfolio review
30
Apparel is a dynamic category; we are tilting our mix towards the winning brands Apparel is lower as a proportion of total leasing UK shopping centre leasing (£m) Apparel
100%
(1)
Non-apparel
New brands are replacing old: Evolving consumer preferences inform our leasing strategy UK shopping centre apparel leasing (£m) Example tenants
2015
2017
80% 4.5 4.0
60%
3.5 3.0
40%
2.5
39% 33% 20%
2.0 1.5 1.0 0.5 -
0% 2015
2017 (1)
‘Apparel’ includes clothing, footwear and lingerie
High street High-street and fashion fast-fashion
Ath-leisure Athleisure
Aspirational fashion Portfolio review
31
Healthy sales for F&B in our centres but a mixed picture for mid-market casual dining operators ‘Grab & Go’ and coffee
Mid-market casual dining
Aspirational dining
Performing well
A mixed picture
Performing well
Offers value for money and efficient service
Important to differentiate offer in a crowded market
High quality offer and strong reputation
2017 sales performance(1)
2017 sales performance(1)
2017 sales performance(2)
c. −15%
c. +1%
c. +2%
(1) (2)
Hammerson portfolio sales No LfL Hammerson sales data available. Based on ‘D+D London’ LfL sales, December 2017
c. +4%
Portfolio review
32
Retailer rotation provides positive opportunities
Less than 1% negative impact on income from tenants in administration, even at the peak in 2012 UK retail market administrations (no. of stores) and Hammerson impact on income (%) 4,500
10%
8%
3,500 3,000
Handmade Burger
Brent Cross
All 6 units re-let or reassigned
Jaeger All Saints / Ernest Jones / JD Sport
6%
2,500 2,000
4%
1,500 1,000
2%
500 0
% of Hammerson income
UK market administrations, no of stores
4,000
0%
2010 2011 2012 2013 2014 2015 2016 2017 Selected retail administrations 2011-13:
(1)
Source: Centre for Retail Research
Highcross House of Fraser Zara / JD Sport
Portfolio review
33
Progressing with key development projects
Brent Cross
Croydon
2017 milestones
2017 milestones
Detailed reserved matters planning application approved October 2017 Confirmation of CPO received December 2017 Agreements reached with two anchors – John Lewis and Marks & Spencer Preferred retail contractor selected
Resolution to grant outline planning consent secured October 2017 Scheme approved by GLA Next steps Total retail space
Next steps
175,000m2
Infrastructure contractor appointment Spring 2018 and pre-letting
Cost to complete (1)
(1)
£475-550m
Hammerson share
Secure remaining land interests 2018 Pre-letting, detailed design and construction tendering
Croydon Partnership retail
200,000m2 Cost to complete (1)
£650-700m Portfolio review
34
Elliott’s Field, Phase 2, Rugby
Retail parks
Profitable new developments and supportive leasing trends
Adding attractive high-yield space
UK retail parks 2017 Leasing activity (%)
+29
Leasing vs. ERV (%)
+11
ERV growth (%)
−0.1
LfL NRI (%)
−2.5
LfL NRI (adj for surrender premiums) (%)
+2.4
Total £105m
8% YoC
Elliott’s Field, Phase 2, Rugby Completed Fife Central, Kirkcaldy Completed Parc Tawe, Swansea Completed
Orchard Centre, Didcot 62% pre-let
Elliott’s Field Phase 2, Rugby
Adding further new profitable developments to the pipeline Portfolio review
36
POCO store launch, Dundrum, Dublin
Ireland
Confident consumer backdrop supports continued strong ERV growth Hammerson Ireland portfolio 2017
Uplift in Dundrum ERV since ownership
Leasing vs. ERV (%)
+10
ERV growth (%)
+2.7
LfL NRI (%)
+7.4
Consumer confidence at record high
c.€90m
+13% €9m
(1)
Consumer Sentiment Monthly Index
120
(2)
€65m
100 80 60
Acquisition ERV July 2016
40
Uplift at Dec 2017
Expected growth Forecast 2021 2018-2021 ERV
(1) (2)
Source: KBC/ESRI Dundrum ERV 100%
Jan-18
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
20
On track with targeted 4-5% ERV CAGR Portfolio review
38
Delivering value-add asset management initiatives
On track with Ireland strategy 1. Short term: rent reviews, leasing and commercialisation
2. Value-add asset management initiatives
Best-practice customer experience initiatives
10,000 sq. ft. speciality food hall
New brands introduced
2. Medium term: value-add asset management
Fallon & Byrne Food Hall
Ongoing
Reconfiguration of Pembroke Square
Signed Fallon & Byrne food hall Progressing with plans to redevelop Pavilions food court Pavilions food court
3. Long-term: development Masterplan at Dundrum phase 2. Target planning application 2019
Planning phase
Three new restaurant units Improving casual dining offer to drive dwell time
Supportive Court of Appeal ruling at Dublin Central
(1) Cushman and Wakefield
Portfolio review
39
Les Terrasses du Port, Marseille
Portfolio review:
France
Growing consumer confidence translating into sales and footfall outperformance Consumer confidence index
(1)
110 100 90 80 Jul-17
Jan-17
Jul-16
Jan-16
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
70
Les Terrasses du Port, Marseille
Retail leasing index (ILC) (%)
Hammerson France portfolio 2017
3.5 3.0
Leasing activity (%)
3.3
2.5 2.0 1.5
1.5
1.4
1.0 0.5 0.0
0.0
(0.2)
0.1
2014
2015
2016
1.0
-0.5 2012
2013
(1) (2) (3)
Source: INSEE By volume CNCC benchmark -1.0%
2017
Q1 2018
+9
(2)
Leasing vs. ERV (%)
+5
ERV growth (%)
+0.9
LfL NRI (%)
+2.6
Instore retail sales (%)
(3)
+0.1 Portfolio review
41
Refining our portfolio into leading centres
2017 capital recycling in France: £295m Largest three assets now 86% of portfolio
Investing to enhance leading assets (1)
Les Terrasses du Port, Marseille Consistently strong sales growth +9%
Growth outperformance from largest three assets Total France portfolio
Three largest assets
2017 LfL NRI (%)
+2.6%
+2.9%
2017 ERV growth (%)
+0.9%
+1.6%
New brands including Coach, Nespresso, Dim and Benetton
Italie Deux, Paris Transforming the centre into a cultural destination 900-seat theatre opened in 2017 Extension launching in 2018 Les 3 Fontaines, Cergy Acquisition of adjacent Cergy 3 unlocks development potential
(1)
Les Terrasses du Port, Les 3 Fontaines, Italie Deux; by value.
Portfolio review
42
Progressing with key development projects
Les 3 Fontaines, Cergy
Italie Deux, Paris
Co-ownership agreement, building permit and Size retail consent obtained
Size
Acquired adjacent centre, Cergy 3
33,000m2
Project to enhance tenant mix and F&B offer at central Paris scheme
Main contractor selected
Total development cost
Obtained planning consent and agreement with co-owners
Total development cost
Good pre-letting to fashion brands and F&B (Pret A Manger, Vapiano)
Target rent
Project commenced
£225m £16m
Pre-lets include Pret A Manger and M&S Simply Food Start on site Spring 2018
6,400m2 £38m Target rent
£2m
Portfolio review
43
04
Transaction update and conclusion
44
intu acquisition creates a pan-European leading portfolio of highquality retail and leisure property Increased exposure to higher-growth destination shopping centres Apply our best practice operating skills to unlock the performance potential of the enlarged portfolio Clear rationalisation programme - reinvest into higher-growth opportunities Approximate £25m of cost synergies with further operational efficiencies and opportunity for significant refinancing benefits
intu Trafford Centre, Manchester
Conclusion
45
Advancing the intu acquisition
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Shareholder meetings
Shareholder documentation and approval process
Year-end company accounts
Publish shareholder documents
Combined accounts + shareholder docs
EGM
Preparatory merger work and planning
Competition
Pre-notification engagement with CMA CMA Review
Asset strategy planning
Integration
Integration strategy planning Pre-close integration preparation
Conclusion
46
Our strategy continues to deliver success
Strong financial performance; positioned for structural change in retail
High demand for our premium retail destinations
Strengthening quality and future opportunities through intu acquisition Victoria, Leeds
Conclusion
47
Westquay, Southampton
Questions
48
This presentation contains certain statements that are neither financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed or
implied by these statements.
Disclaimer
Many of these risks and uncertainties relate to factors that are beyond Hammerson’s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental
regulators and other risk factors such as the Company’s ability to continue to obtain financing to meet its liquidity needs, changes in the political, social or regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, national or regional basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Hammerson does not undertake any obligation to publicly release any revision to these forward-looking statements to reflect
events or circumstances after the date of these materials. Information contained in this presentation relating to the company or its share price, or the yield on its shares, should not be relied upon as a guide to future performance.
49
Appendices
£10.6 billion leading pan-European retail platform (1)
57
European shopping destinations
14
Countries
7% 33%
21%
Top 3
Market position in all chosen sectors 12% 9%
18%
UK shopping centres - £3.5bn France - £1.9bn Ireland - £1.0bn UK retail parks - £1.2bn Premium outlets - £2.2bn Development & UK other - £0.8bn
43%
non-UK assets
2.3m
sq m retail space
440m visitors
4,900 Tenants
11 - UK shopping centres 8 - France shopping centres
3 - Ireland shopping centres 15 - UK retail parks 20 - Premium outlets
(1) As at 31 December 2017
51
Our Product Experience Framework
We create desirability
Iconic destinations
Retail specialism
Experience led
Customer first
Built environment
Optimal retail mix
Food & beverage
Insight driven
Placemaking
Fresh concepts
Leisure as anchor
Frictionless experience
Seamless technology
Innovative retail technology
Engaging events
Enhanced services
Flexible construction
Operational efficiency
Surprise & delight
Sensory experience
Positive Places:
Sustainability | Community | Positivity Appendices
52
Examples of our Framework in action Iconic destinations
Retail specialism
Experience led
Customer first
Victoria Gate awarded Best Shopping Centre at the MIPIM & MAPIC Awards
Delivered 20 new brands in 2017 across the portfolio(!), including the first VW brand experience
Christmas light switch on at Cabot drove a 10.6% increase in daily sales & reached 95k Facebook users
Nearly 450k downloads of the Plus app with over 3.3m app opens since launch
New leisure extension & events space at Westquay South attracted over 3.4m visitors across 2017
Launch of Style Seeker AI visual search tool with 90k product impressions since November 2017
Award winning Garden of Pure Imagination at Dundrum drove an 8% uplift in footfall
Over 130k click & collect parcels handled across our UK & French centres in 2017
(1)
UK shopping centre portfolio
Appendices
53
Local Data Company: property scoring methodology
Each location is scored according to 12 criteria:
1
Catchment size, based on drive time
2
Catchment spending power
3
Competing centres analysis
4
Department stores
5
Cinemas
6
Presence of ‘minor anchor’ retailers
7
Opening of new ‘minor anchor’ stores
8
Closure of ‘minor anchor’ stores
9
Proportion of charity shops
10
Dwell time
11
Vacancy rate
12
Persistent vacancy Appendices
54
Premium outlets portfolio Value Retail Villages
VIA Outlets centres
Bicester Village, Oxford GLA: 28,000m2 Boutiques: 157
Batavia Stad Amsterdam Fashion Outlet GLA: 31,900m2 Units: 119
La Roca Village, Barcelona GLA: 23,500m2 Boutiques: 136 Las Rozas Village, Madrid GLA: 16,500m2 Boutiques: 102 La Vallée Village, Paris GLA: 21,900m2 Boutiques: 107 Maasmechelen Village, Brussels GLA: 19,800m2 Boutiques: 104 Fidenza Village, Milan GLA: 20,900m2 Boutiques: 117 Wertheim Village, Frankfurt GLA: 21,200m2 Boutiques: 117 Ingolstadt Village, Munich GLA: 21,100m2 Boutiques: 112 Kildare Village, Dublin GLA: 16,700m2 Boutiques: 91
Fashion Arena Prague Outlet GLA: 24,000m2 Units: 99 Freeport Lisbon Fashion Outlet GLA: 35,700m2 Units: 142 Hede Fashion Outlet, Gothenburg GLA: 16,300m2 Units: 53 Landquart Fashion Outlet, Zürich GLA: 20,900m2 Units: 75 Mallorca Fashion Outlet GLA: 33,200m2 Units: 75 Seville Fashion Outlet GLA: 16,400m2 Units: 62 Wroclaw Fashion Outlet, Poland GLA: 13,700m2 Units: 89 Zweibrücken Fashion Outlet, Germany GLA: 29,300m2 Units: 112 Vila do Conde Porto Fashion Outlet GLA: 27,800m2 Units: 123 Norwegian Outlet, Oslo GLA: 13,300m2 Units: 77
Appendices
55
Hammerson’s total investment in Value Retail
(1)
Holding companies 25% equity
Hammerson €2m shareholder loan
Bicester Village
La Roca Village
Las Rozas Village
La Vallée Village
Maasmechelen Village
Fidenza Village
Wertheim Village
Ingolstadt Village
Kildare Village
36
26
23
14
14
23
33
2
28
50
39
35
26
27
35
45
14
41
Village ownership via LPs (%) Total Village ownership (%) (2)
(1) (2)
Pro-forma for February 2018 acquisition of LP economic interests Total Village ownership calculated as economic entitlement of directly held and indirectly held interests
Appendices
56
2017 operational statistics
UK shopping centres
Sales
(1)
Footfall
(2)
Rent:sales OCR
(3)
(3)
France
Sales densities(4)
UK £/ft2
France £/ft2
–2.7%
0.1%
2017
240 – 490
395 – 620
0.4%
1.6%
2016
250 – 515
350 – 715
13.3%
11.0%
2015
250 – 520
355 – 725
21.7%
13.8%
Occupancy (%)
UK shopping centres
UK retail parks
France
Ireland
Group
31 December 2017
98.1
99.4
97.9
99.7
98.3
30 June 2017
97.2
99.0
96.6
99.9
97.3
31 December 2016
97.8
98.6
96.5
99.5
97.5
(1) (2) (3) (4)
Retail sales on same-centre basis, includes all shopping centres. 2017 UK benchmark -3.0% (Source: Visa Face to Face index); 2017 France benchmark -1.0% (Source: CNCC) 2017 UK benchmark -2.8% (Source: Tyco Shoppertrak); 2017 France benchmark -1.8% (Source: CNCC) Excludes anchor stores. France data includes VAT (rent:sales and OCR) Excludes anchor stores. France data includes VAT; Jeu de Paume, Beauvais, excluded
Appendices
57
2017 portfolio leasing overview
Leasing vs previous passing (%)
Leasing vs ERV (%)
ERV growth (%)
New rent secured from leasing (£m)
UK shopping centres
+6
+8
+0.9
13.4
UK retail parks
+9
+11
–0.1
6.3
France
+8
+5
+0.9
9.8
Ireland
+4
+10
+2.7
1.9
Group
+7
+8
+0.9
33.3(1)
(1)
Including Ireland and UK Other properties (principally assets held for development and non-core)
Appendices
58
2017 valuation data
UK shopping centres
UK retail parks
France
Ireland
UK other interests
Total portfolio
True equivalent yield (%) 31 Dec 2017
5.1
6.2
4.4
4.4
7.2
5.0
31 Dec 2016
5.1
6.1
4.4
4.3
7.4
5.1
31 Dec 2017
186.7
75.4
91.7
43.3
14.1
411.2
31 Dec 2016
186.8
77.1
107.9
34.8
13.4
420.0
LfL change (%)
0.9
–0.1
0.9
2.7
1.6
0.9
ERV (£m)
Appendices
59
2017 components of valuation change
Components of valuation change in 2017, total portfolio (£m) 300
282 246
250
225 198
200
150
100
37
50
36
24
7
6
0
2
6
-50
-32
-19
-27
4
3
-1 -20
27
37
6
24 3
8
-2
-11 -41
-44
-100 UK shopping centres Yield
Income
UK retail parks Development and other
France (1)
Ireland
Developments and other
Premium outlets
Total Portfolio
Total
Note: Development and other includes the movement in the UK Other interests portfolio where valuations increased by a total of £13m during 2017 (1) Other capital movements reflects the impact of changes in purchasers’ costs, development surpluses and capital expenditure
Appendices
60
Breadth of buyers for prime European assets
Hammerson disposals 2015 - 2017
Buyer
Net proceeds £m
Monument Mall, Newcastle
Standard Life
75
Grand Central, Birmingham (50%)
CPPIB
173
Westquay South, Southampton (50-%)
GIC
45
Manor Walks shopping centre, Cramlington
Arch (local authority)
77
Bercy 2, Paris
Tikehau (Institution)
47
Grand Maine, Angers
French Institution
46
Villebon 2, Villebon-sur-Yvette
French Institution
124
Saint Sébastien, Nancy
AEW (private equity)
129
Place des Halles, Strasbourg
Fund manager
167
Westmoreland retail park, Cramlington
Arch (local authority)
36
Battery retail park
NFU Mutual
53
Drakehouse retail park, Sheffield
90 North (private equity)
61
Westwood and Westwood Gateway Retail Parks, Thanet
BMO (private equity)
78
Total
£1.1bn
Appendices
61
Hammerson and intu capex 2018-2020 Hammerson (£m)
2018
2019
2020
Brent Cross extension
67
94
96
Highcross reconfiguration, Leicester
14
2
0
Whitgift, Croydon
30
10
11
Retail parks schemes
48
34
9
Les 3 Fontaines, Cergy
70
61
56
Italie 2, Paris
35
20
5
Total Hammerson
264
221
176
Intu (£m)
2018
2019
2020
intu Trafford Centre
25
47
intu Watford
77
3
intu Lakeside
52
50
intu Spain
23
157
217
Total intu
177
257
217
2018-2020
1,300
Run-rate
440 Appendices
62
On-site developments
Scheme
Lettable area m2
Expected completion
Value 31 Dec 2017 £m(2)
Estimated cost to complete(3) £m
Estimated annual income(4) £m
Let %
Parc Tawe, Swansea
21,400
Q1 2018
n/a
3
2
91
Orchard Centre, Didcot
8,700
Q1 2018
29
12
3
62
Les 3 Fontaines, Paris extension
33,000
Q2 2021
n/a
201
16
22
Total
63,100
216
21
(1)
(1) (2) (3) (4) (5)
Group ownership 100% for all on-site schemes Values are not included for extension projects which are incorporated into the value of the existing property Incremental capital cost including capitalised interest Incremental income net of head rents and after expiry of rent-free periods Let or in solicitors' hands by income at 22 February 2018
(5)
Appendices
63
Development pipeline opportunities Scheme
Scheme area (m2) •
Brent Cross extension
90,000
Bristol investment properties
(1)
• • •
74,000
• Croydon Town Centre
Silverburn (Phase 4),
(1)
Victoria, Leeds (Phase 2) (1) Imperial Retail Park, Bristol
Oldbury, Dudley
Redevelopment of Whitgift Centre and refurbishment of Centrale shopping centre. Resolution to grant outline planning permission confirmed in November 2017 for the redevelopment of the Whitgift Centre subject to conclusion of a S106 agreement.
• •
Variation to planning condition consented in 2017 to permit phased delivery of a masterplan for a future extension of existing centre. Masterplan includes 31,250m2 retail, 8,500m2 leisure, plus a hotel.
27,800
• •
Extension of existing shopping centre for up to 11,000m2 of retail, 12,000m2 of leisure and catering, plus up to 294 car parking spaces and a hotel. Planning consent subject to conclusion of a s.75 agreement anticipated H1 2018.
95,000
• • •
Phase 1 Victoria Gate completed October 2016. Operator being sought for up to 200 bed hotel adjacent to new multi-storey car park. Phase 2 master planning underway to deliver a phased retail/leisure mixed-use scheme to complement Victoria Gate. Freehold control of 4.1ha Phase 2 site obtained.
7,350
• •
Planning consent granted in November 2017 for retail and leisure extension to Imperial Retail Park. Leasing progressing ahead of potential start on site in Autumn 2018.
10,900
•
Planning consent granted in May 2016 for new development of up to 11 retail and catering units. Leasing underway.
• •
4.2ha site on edge of the City of London. A planning application for a major mixed-use development of up to 270,000m2 was deferred by the GLA in April 2016 to allow further consultation. This work is progressing and we are now targeting a submission of the necessary amendments to the GLA by the end of 2018 to allow the Mayor to determine the scheme.
Glasgow 50,000
Union Square, Aberdeen
(1)
(1)
Resolution to grant planning permission subject to conclusion of a S106 agreement, confirmed in January 2018 for a 3.5ha area of joint ventureowned properties forming part of the Broadmead estate adjoining Cabot Circus. Masterplan includes up to 74,000m2 retail and leisure, 380 car parking spaces, and the potential for 150 residential units and a 150 room hotel.
• •
200,000
(1)
Extension and refurbishment of Brent Cross, forming part of wider Brent Cross Cricklewood regeneration plans, totalling 175,000m2 of retail, catering and leisure. Reserved matters planning application approved October 2017. The compulsory purchase order was confirmed in December 2017. Laing O'Rourke has been selected as the preferred contractor for the retail extension and leasing is progressing.
The Goodsyard, London E1
270,000
SQY Ouest, Saint-Quentin-enYvelines (1)
32,000
• • •
Opportunity to reposition existing shopping centre, creating a leisure-led destination. Trading consent obtained. Construction works and pre-letting on-going, Phase 1 launched to handover first units in first half of 2018.
Dundrum Phase II, Dublin
100,000
• •
2.4ha site located adjacent to Dundrum Town Centre. Masterplan in preparation for a residential-led mixed-use scheme including retail.
• •
Extension of duration of planning consent granted until May 2022 to create a retail-led city centre scheme including 60,000m2 of retail. The Court of Appeal in Dublin overturned the earlier ruling relating to buildings on Moore Street and their national monument status. Previously constrained by the court case, Hammerson will now engage with stakeholders on the future of the site.
• •
Extension of planning consent granted to August 2021 to create a mixed-use development including 124,000m2 of retail and commercial uses. Loan-to-own process complete. Masterplan for extension to be reviewed in 2018.
Dublin Central, Dublin
(1)
(1)
130,000
Swords Pavilions Phase III, Dublin (1)
272,000
Total
1,359,050 (1)
Schemes are on Group owned land. No additional land acquisitions are required. Excludes occupational and long leaseholds.
Appendices
64
UK shopping centre investment Hammerson UK shopping centre cash flow statement
2017 £m
2016 £m
2015 £m
Gross rental income
180.2
174.2
162.0
Service charge income
35.4
34.0
28.7
Total income
215.6
208.2
190.7
Service charge expenses (excl. investment)
−31.5
−32.9
−25.3
−25.4
−22.4
−20.6
158.7
153.0
144.9
−5.8
−4.6
−6.1
−15.6
−12.6
−9.6
Net cash flow from Operations
137.3
135.8
129.2
Maintenance capex: total income, %
10%
8%
8%
Other property expenses (Hammerson NRI)
1
Net cash flow before maintenance capex Investment spend (service charge maintenance projects)
2
Investment projects (capex on maintenance or ‘value-add’ projects)
Capitalised
Recoverable from tenant
3a + 3b
Direct/indirect return?
B
A
A/B
Selection of examples
1. 1 Hammerson operating expenses
n/a
Car park expenditure; landlord marketing; interactive hoardings, upkeep collection lockers/mobile phone charge points, research and marketing costs
2. 2 Service charge (maintenance)
n/a
Painting, flooring upkeep, footfall counters, CCTV, wifi upgrade, IT upgrades
3.a Investment 3a projects (hygiene)
Partial
Direct / Indirect
3.B Investment 3b projects (value-add)
Direct
Wayfinding projects, WC upgrades, LED lighting, public seating upgrades Creating new lettable space: e.g.Next reconfiguration at the Oracle, House of Fraser reconfiguration at Highcross, car park upgrade at Bullring Appendices
65
31 Dec 2017 Reported (£m)
Fully proportionally consolidated (£m)
Group
3,501
3,501
VIA Outlets
-
174
Value Retail
-
512
3,501
4,187
Group
8,326
8,326
VIA Outlets
-
600
Value Retail
-
1,634
Less minority interest
(14)
(14)
VIA Outlets net assets
361
-
Value Retail net assets
1,069
-
Value
9,742
10,546
LTV
36%
40%
Net debt
LTV methodology
Loan Property values
Appendices
66
Continuing to take advantage of refinancing opportunities
Debt maturity profile 31 December 2017 (£m) 1000 900 800 700 600 500 400
Revolving credit facilities
300
Private placement
200
Sterling bonds
100
Euro bonds Secured debt
0 2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Appendices
67
Tenants in administration
31 December 2017
% of passing rents 50 units in administration
0.9
9 units unoccupied
0.1
42 units in administration
0.8
8 units unoccupied
0.1
44 units in administration
0.7
9 units unoccupied
0.1
30 June 2017
31 December 2016
Appendices
68
Our new Positive Places objective is for Hammerson to be Net Positive for carbon, water, resource use and socio-economic impacts by 2030
Carbon
Resource Use
Net Positive for carbon means carbon emissions avoided exceed emissions generated.
Net Positive for resource use means waste avoided, recycled or re-used exceeds materials used that are neither recycled, renewable nor sent to landfill.
Water
Resource Use
Net Positive for water means water replenished by external projects exceeds water consumed from mains supply.
Net Positive for socio-economic impacts means making a measurable positive impact on socio-economic issues relevant to our local communities beyond a measured baseline.
“I am proud that Hammerson has become the first real estate company globally to identify such comprehensive targets and by extending our aims to tenant impacts we will be able to directly support our retail clients and deliver best in class retail assets that are fit for the future.” David Atkins, CEO, Hammerson plc
Steps to becoming Net Positive
2015 27,000 tonnes CO2e 539,082 m3 water
2016
18,243 tonnes waste 24,000 tonnes CO2e not recycled or reused 511,888 m3 water
2017 2018 – 2020 2021
17,293 tonnes waste Deliver carbon neutral not recycled or reused development at Rugby Install 3 further solar Work with tenants to 40,000 FTE jobs reduce tenant on site PV arrays supported across our energy demand Reduce energy assets demand by further 7% Major developments v 2015 baseline to support long term carbon reduction Achieve 85% recycling
Identify local carbon saving projects
CO2e reduced by at least 27,000 tonnes Embed net positive into new developments Increase renewable capacity
Appendices
70
Our 2017 sustainability highlights
Delivered the world’s first BREEAM Outstanding, carbon neutral retail park at Elliott’s Field, Rugby Developed the second zero energy Costa Coffee EcoPod at Parc Tawe, Swansea Managed exposure to Mimimum Energy Efficiency Standards (MEES) risk out of the UK portfolio Installed additional 910 kWp clean electricity capacity Achieved 3% improvement in the carbon intensity of the business, one of our corporate KPIs Recycled 73% of waste across our UK, France and Ireland portfolios Supported over 100 people with skills training and into employment at our shopping centres Supported over 70 business-start-ups in France and 400+ entrepreneurs in the UK through the Initiative France and Pop-Up Business
Appendices
71
