Intu Properties plc Presentation to Trafford Centre Noteholders 28 - - PowerPoint PPT Presentation

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Intu Properties plc Presentation to Trafford Centre Noteholders

28 September 2015

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Intu Properties plc

Presentation to Trafford Centre Noteholders

• Corporate overview

– David Fischel

• Financial details

– Matthew Roberts

• Operational review

– Mike Butterworth

• intu Trafford Centre overview

– Mike Butterworth

• Questions
• Appendices

This presentation includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Intu Properties plc to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any information contained in this presentation on the price at which shares or other securities in Intu Properties plc have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance

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v Corporate Overview David Fischel, Chief Executive

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Our priorities for 2015

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First half highlights

• Positive underlying asset performance
• Broadening and strengthening retailer demand
• Momentum on UK development programme, now £1.5 billion
• Benefits from brand and digital initiatives
• Material progress in Spain

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Out-performed IPD; ERV growth

Optimising asset performance

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Significant progress

UK development momentum

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Making the brand count

Digital connectivity

• 19 million web site visits in last 12 months (2013/2014: 13 million)
• Over 250 retailers ‘shoppable’ on intu.co.uk
• Online marketing database of over two million individuals
• Email marketing performance well above industry standards

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Making the brand count

• Events on a national basis
• Access to over half the UK

population physically and digitally

• Third annual Everyone’s Invited

weekend delivered strong net promoter scores

• High quality brand partners in 2015
• intu Experiences revenues exceed

£15 million

Events with a difference

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Making the brand count

Tell intu shows that:

• Customers who are happy

with their experience, stay longer

• Customers who stay longer,

spend more

• !" #$%&

World class service

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Increased footprint

Seizing the growth opportunity in Spain

• Completed acquisition of Puerto Venecia

– Agreement for joint venture with CPPIB

• Exercised option to acquire land in Malaga
• Rebrand underway at intu Asturias

CGI – intu Costa del Sol Puerto Venecia

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Seizing the growth opportunity in Spain

The Spanish strategy

• Create a business of scale
• Focus on top ten markets
• Acquire, develop and manage

market leading retail resorts – Own and manage two top ten centres – Acquired land near Malaga for shopping resort intu Costa del Sol – Options on three other sites: Valencia, Palma and Vigo

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intu Costa del Sol

• Total development cost €425 million for a 175,000 sq m shopping resort
• Land acquired in May 2015 – carrying value €55 million
• Strong interest from key retailers and leisure operators
• Plan to start on site in 2016 for 2018 opening

Catchment map

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v Financial details Matthew Roberts, Chief Financial Officer

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• Valuation up 1.9 per cent (IPD up 1.2 per cent)
• Underlying earnings per share 6.8p (2014 6.4p)
• Interim dividend of 4.6p
• NAV per share 385p
• Debt raised on Puerto Venecia; re-priced SGS term loan saving 150bps
• Robust financial position: 4.5 per cent average debt cost, debt to assets ratio

45 per cent and 8.1 years average debt maturity

Key highlights

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Underlying earnings

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(1) Includes Group’s share of joint ventures

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Financial metrics

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(1) The EPRA cost ratio (excluding direct vacancy costs) is calculated in accordance with EPRA guidelines

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Growth from acquisitions

Net rental income

6 months to June 2014 189.2 Like-for-like (-1.0%) (1.7) Additions 25.2 Disposal (5.1) Total net rental income 207.6

• £1.7 million like-for-like decrease: impacted by units held for development at intu Victoria

Centre, intu Metrocentre and intu Eldon Square

• Expect modest like-for-like net rental income growth in 2015

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Underlying earnings bridge

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(1) Group including share of joint ventures (2) 2014 includes costs associated with acquisition of intu Merry Hill and intu Derby (£11m)

Items excluded from underlying profit

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4 per cent total financial return including dividend

Net asset value per share 385 pence

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£313m change in net external debt(1)

Currently 85 per cent hedged(2)

(1) Group including share of joint ventures; (2) Excluding forward starting swaps

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• €225 million loan for Puerto Venecia acquisition
• Re-priced £352 million SGS term loan saving 150bps and extending maturity
• intu Bromley refinancing progressing

2015 debt funding activities

£500 million of debt activity in the period

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• Weighted average debt maturity of 8.1 years
• Largely fixed, weighted average cost 4.5 per cent**
• £500 million of cash and committed facilities

Debt maturity

* 2017 includes £191 million relating to intu Merry Hill, which has initial maturity of 20 September 2016 extendable at the Borrower’s option to 20 September 2017. It is anticipated that this option will be exercised at the earliest possible opportunity; ** excludes RCF

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• 2015-2024 active management capex: £65 million approved; £444 million

proposed

• Developments: UK £1,020 million; Spain £463 million
• Stabilised initial yields of 6-10 per cent on active management projects; 7 per

cent on extensions

• Funded through

– Available facilities – Development finance – Capital recycling and bringing in partners

Capital expenditure

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(1) Group including share of joint ventures

Net debt to assets 45 per cent

Financial flexibility

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intu Trafford Centre – 30 June 2015

Valuation (1)

• Valuation of £2,108m
• intu Trafford Centre topped up net initial yield of

4.0% and nominal equivalent yield of 4.5%

• Ratio of outstanding loan note to intu Trafford

Centre valuation: 36% Rent (1)

• Annual property income of £86.2m; ERV of

£101.9m

• Headline rent prime ITZA psf £415

Occupancy (2)

• Current occupancy rate of 96% by rent as at 30

June 2015

(1) Excludes Barton Square and other land holdings (2) Occupancy defined as passing rent of let and under offer units expressed as a percentage of the passing rent of let and under offer units plus ERV of unlet units, excluding development and recently completed properties. Units let to tenants currently in administration and still trading are treated as let and those no longer trading are treated as unlet

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intu Trafford Centre operating cash flow

Year ended 30 June 2015 £m Year ended 30 June 2014 £m Year ended 30 June 2013 £m

Rents (including turnover rent) 84.9 87.6 78.1 Other income

(1)

2.6 2.1 3.1 Property and other costs (9.5) (1.8) (4.7) Operating cash flow 78.0 87.9 76.5 Net interest paid (48.6) (44.0) (43.6) Net operating cash flow 29.4 43.9 32.9

(1) Excludes premiums received (2015: £0.6m; 2014: £1.0m; 2013: £0.4m)

Source: The Trafford Centre Limited Quarterly Reports: Cash flow statement and management commentary.

Reduction due to positive timing of receipts and payments in 2014

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Debt Service Cover Ratio (DSCR)

Calculated using twelve months historic cash flows

June 2015 Quarterly report 1.19 : 1 Components:

• Rental and other income less costs

£78.1 million

• Interest payments and note amortisation

£65.7 million (£48.6m interest, £17.1m amortisation)

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Debt Service Cover Ratio and Interest Cover Ratio History

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Trafford Centre loan notes analysis

• Initial launch

February 2000

• Second issue

July 2005

• Third issue

March 2014

• Issue size (total)

£974.5m

• Outstanding amount – 30 June 2014

£804.6m

(1)

• Fixed: Floating

(2) ratio

70% : 30%

• Security Trustee

Deutsche Bank

• Hedge counterparties

Deutsche Bank & RBS

• Liquidity facility

Lloyds Banking Group

• Cash Manager

Deutsche Bank

(1) For analysis by class see slide 53 (2) Floating rate notes are fully hedged with interest rate swaps and caps

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Trafford Centre loan notes amortisation by class

50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 Jun-24 Jun-25 Jun-26 Jun-27 Jun-28 Jun-29 Jun-30 Jun-31 Jun-32 Jun-33 Jun-34 Jun-35 Principal Outstanding Pay Date

Amortisation Profile of Trafford Centre Notes

B2 - Floating A3 - Floating D1N - Floating A2 - Fixed 6.50% B - Fixed 7.03% D3 - Fixed 4.75% B3 - Fixed 4.25% D2 - Fixed 8.28% A4 - Fixed 2.875% A1N - Floating

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v Operational review Mike Butterworth, COO

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Improving rental prospects

• 96 new long term lettings
• £17 million of new annual rent
• 12 per cent above previous passing rent
• Over 120 lettings in solicitors hands
• Estimated retailer sales +3.4 per cent

The UK portfolio

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Optimising asset performance

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• Valuation +£162 million; +1.9 per cent

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Nationwide opportunities

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v Intu Trafford Centre overview Mike Butterworth, COO

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Overview of retail mix

• 200+ units (including over 65 catering and

leisure units); approximately 1.5m sq. ft. retail and 0.3m sq. ft. catering and leisure space over 3 levels

• Anchor tenants: Selfridges, Debenhams, John

Lewis and Marks & Spencer

• Opened to public in September 1998
• Significant redevelopment of main entrance for

additional catering in 2007 (The Great Hall)

• Major 0.2m sq. ft. homeware and leisure

extension (Barton Square) opened in 2008

• Retailers significantly expanding since 2011

include Marks & Spencer, Debenhams, Next, Superdry, H&M, River Island and Zara

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Catering and leisure

• c 310,000 sq ft devoted to catering and leisure

– over 50 catering units generating c £75m annual turnover – themed areas - The Orient, The Great Hall – adding a sense of theatre

• Continuous evolution with brands including Nando’s, TGI

Friday’s, Five Guys, Carluccio’s, Coast to Coast and wagamama

• An unrivalled leisure offer:

– Odeon Multiplex IMAX cinema, Paradise Island Adventure Golf, Laser Quest, Aerial Extreme (treetop adventure course) – Legoland Discovery Centre and SeaLife aquarium in the adjacent Barton Square

• Events include:

– Celebrity Christmas lights switch on – high profile fashion shows – firework displays – “big top’’ events like Cirque du Soleil

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Driving growth through active asset management

Letting strategy Improving tenant mix Sustainability with key retailers Achieving ERV on review / renewal + + 1 2 3 The right space at the right rent Goal Tenant re-investment and commitment to the Centre Consistent growth in rental income Outcome

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Intu – asset manager Recent asset management initiatives

Recent Asset Management Initiatives

• Zara
• in Q3 2015 Forever 21 elected to surrender their unit paying a

surrender premium to the Landlord. Forever 21’s unit will be combined with an adjacent vacant unit to enable a letting of the new c.32,000 sq.ft. unit to Zara. An agreement for lease is in place for the new unit with a passing rent materially in excess of that paid by Forever 21

• Zara’s existing unit will be split and new, longer leases are to be

entered into at the same passing rent with Zara sister brands Stradivarius and Pull & Bear. This Stradivarius store will be the first in the UK outside of London

• Moss Bros, Fat Face and Holland & Barrett: committed to significant upsizing
• River Island: combined with adjacent unit to create 18,500 sq ft store
• Karen Millen and Swarovski: renewed leases at an increased passing rent

and at ERV

• Footlocker: extended lease terms with an increase in passing rent and at ERV
• Cath Kidston, Kiko, Glamorous, Russell & Bromley and New Look Men: new

lease at an uplift to previous passing rent and at ERV

• Boost: new juice bar
• wagamama, Coast to Coast and Bill’s: restaurant offerings targeted to open in

Autumn 2015

• Lakeland: new 4,500 sq ft store opened in March 2015
• Improvement to access and footfall on Regent Crescent with new escalators,

fountain feature and remodelled Debenhams café outside, as well as a significantly enlarged Next store

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Recent openings

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Overview of Trafford Centre rent reviews and lease maturities

Rent reviews*

14% 10% 15% 11% 10% 12% 0% 2% 4% 6% 8% 10% 12% 14% 16% Pre 2014 2014 2015 2016 2017 2018

Lease maturities*

6% 8% 10% 9% 9% 36% 18% 0% 5% 10% 15% 20% 25% 30% 35% 40% 2015* 2016 2017 2018 2019 2020-2024 2025+

*As % of 30 June 2015 passing rent

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Significant asset management opportunities

Future-proofed structure

• Scope for asset management initiatives at

intu Trafford Centre including: – original structure built to accommodate additional floors enabling cost effective expansion, e.g. – above Debenhams – along link bridge to Barton Square – opportunities to introduce MSU flagship stores through conversion of space to additional retail, subject to planning permission – creation of space to enable unit re- configurations – scope for retailers to create cost-effective mezzanine floors

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Barton Square opportunities

Second storey retailing and roof

• Scope for asset management initiatives at Barton Square including:

– structure includes an additional floor enabling cost effective expansion – achieved retail consent for 93,000 sq. ft. on upper level – courtyard to be enclosed by glass roof to enhance environment – anticipate an increase in rental tone across Barton Square

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Appendices

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Source: PMA * Top shopping centres on basis of PMA Retail Score (Dec 2014). Intu shopping centres highlighted ~ Adjoined by intu Milton Keynes

UK’s top ranked shopping centres*

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Yield comparisons

Wide spread relative to corporate bonds

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intu Trafford Centre

Key catchment and demographic statistics

• Large catchment area
• 9.4 million people live within a 70 minute drive
• 4.8 million within 45 minutes
• Total available retail expenditure of £37.1bn
• Loyal customer base
• 19 times p.a. average visiting frequency
• 12% of visitors visit at least once per week
• 53% visit at least monthly
• Wealthy demographic1
• 65% ABC1
• 57% 16 – 44 years
• 71% female shoppers
• Metrolink
• agreement reached for Transport for Greater

Manchester to extend the Greater Manchester Metrolink line through Trafford Park to intu Trafford Centre

• construction work anticipated to commence in 2017

for completion in 2018 (subject to public enquiry) 70 minute drive time around intu Trafford Centre

• 1. UK social groups A, B and C1, defined as members of households whose chief earner’s occupation is professional, higher or intermediate management or supervisory

Source: ResearchCraft, Experian, CACI intu trafford Centre: Market Summary July 2015

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Key data and summary financials

Top 10 tenants (as at 30th June 2015)

Top 10 tenants represent 28% of Current Rent

Tenant Industry Sq ft Lease Expiry (yrs) Year First break (yrs) Current Rent (£m p.a.) Current ERV (£m p.a.) Current Rent (£per

• sq. ft.)

% Total Current Rent Cumulative % of Total Current Rent

1 Next Group Plc Fashion 44,487 7.4 2022 7.4 3.0 3.0 67.44 3.6% 3.6% 2 Selfridges Ltd Department 196,918 17.5 2032 17.5 2.7 3.4 13.51 3.2% 6.8% 3 Boots the Chemists Limited Health & beauty 54,632 7.7 2023 7.7 2.6 2.6 47.50 3.1% 9.9% 4 TopShop/ TopMan Properties Ltd Fashion 60,166 18.0 2033 18.0 2.6 2.7 42.83 3.1% 13.0% 5 Marks & Spencers PLC Fashion 108,125 10.5 2026 8.9 2.5 3.4 23.28 3.0% 16.0% 6 Debenhams Properties Ltd Department 143,020 17.6 2033 17.6 2.5 2.8 17.38 3.0% 18.9% 7 H & M Hennes & Mauritz UK Ltd Fashion 31,162 4.7 2020 4.7 2.0 2.1 65.46 2.4% 21.4% 8 United Cinemas Int (UK) Ltd Entertainment 77,039 7.7 2023 7.5 1.9 1.6 24.38 2.3% 23.6% 9 Forever21 (UK) Ltd* Fashion 18,041 6.8 2022 6.8 1.7 2.4 94.23 2.0% 25.7% 10 Victoria's Secret UK Ltd Fashion 17,460 12.7 2028 12.7 1.6 1.6 91.64 1.9% 27.6%

Top 10 Total / Weighted Av. Mostly Department

751,050 11.3 2026 11.1 23.1 25.6 30.7 27.6% 27.6%

Other Various

1,099,255

• 61.0

77.8 55.5 72.4% 100.0%

Total

• 1,850,305

8.6 2023 7.6 83.6 103.4 45.1 100.0% 100.0%

*surrendered in Q3 2015 (see p39 for details)

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intu Trafford Centre

Floor plan as at 19 August 2015

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intu Trafford Centre

Floor plan as at 19 August 2015

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intu Trafford Centre analysis of rental income by sales category

* Other includes banks, childrenswear, confectionery, electrical computer retailers, gifts / soft furnishings / furniture, health and beauty, opticians, outdoor clothing / equipment, music retailers, sportswear, toys, travel agents and office.

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Trafford Centre loan notes analysis by class

Class Amount Rating Coupon Maturity £m Fitch Moody’s S&P A1 (N) 1.1 AAA Aaa AA+ Libor +0.20% July 2015 A2 324.2 AAA Aaa AA+ 6.50% July 2033 A3 188.5 AAA Aaa AA+ Libor +0.29%(1) July 2038 A4 20.0 AAA Aaa AA+ 2.875% April 2019 B 81.7 AA Aa2 AA- 7.03% July 2029 B2 20.0 AA Aa2 AA- Libor +0.33%(1) July 2038 B3 20.0 AA Aa2 AA- 4.25% April 2024 D1(N) 29.1 BBB Baa2 BBB Libor +0.80%(1) April 2035 D2 50.0 BBB Baa2 BBB 8.28% Oct 2022 D3 70.0 BBB Baa2 BBB 4.75% April 2024

(1) From and including the interest payment date commencing on 28/7/15, the margin on the A3 notes has stepped up from 0.29% to 0.725%, the margin on the B2 notes from 0.33% to 0.825% and the margin on the D1(N) notes from 0.80% to 2.00%