Investor & Analyst Retail Day 26 September 2011 Agenda Welcome - - PowerPoint PPT Presentation
Investor & Analyst Retail Day 26 September 2011 Agenda Welcome David Atkins, CEO Retail Overview Lawrence Hutchings, MD UK Retail Tour of The Oracle Travel to The Orchard Centre, Didcot Retail Parks Overview -
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Welcome – David Atkins, CEO Retail Overview – Lawrence Hutchings, MD UK Retail Tour of The Oracle Travel to The Orchard Centre, Didcot Retail Parks Overview - Andrew Berger-North, Director Retail Parks Tour of The Orchard Centre Travel to St.Oswald‟s Retail Park, Gloucester Tour of St. Oswald‟s Retail Park Return train to London Paddington
3 David Atkins CEO Timon Drakesmith CFO Lawrence Hutchings Managing Director UK Retail Andrew Berger-North Director Retail Parks Morgan Bone Director of Corporate Communications Simon Betty Investor Relations Manager Colin Farrow Assistant Director Retail Parks
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Comparison Luxury Convenience
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36 retail assets
71% UK, 29% France
2,300 shop units
170 million visitors per annum
£2.4bn of sales each year*
69 leases signed H1
80 rent reviews signed H1
* shopping centres only
Group UK
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Globalisation Consolidation
Prime Retail Venues
Convenience Flexibility Retail Parks Click & Collect Experience Experiential retail
Exciting brands Leisure Events
Value Polarisation
Customer strategy
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Consumer trends Retailer response Hammerson response
Technology Multi-channel
Marketing initiatives Improved websites Path Intelligence
Globalisation Consolidation
Prime Retail Venues
Convenience Flexibility Retail Parks Click & Collect Experience Experiential retail
Exciting brands Leisure Events
Value Polarisation
Customer strategy
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Consumer trends Retailer response Hammerson response
Technology Multi-channel
Marketing initiatives Improved websites Path Intelligence
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Globalisation is intensifying:
International players entering the UK market: Victoria‟s Secret, Crate & Barrel, Pottery Barn, Coach, The Kooples, Club Monaco
Expansion into new formats: Zara, H&M home, Gilly Hicks
Mall merchandising to provide incubation opportunities
Clear shift from secondary shop units to primary shop units Strongest demand is for MSU’s (8-10,000 + ft2) Bespoke units < 1,500 ft2 Retailers now occupy 300,000 units (1973: 473,000) Retailers can generate 50% of profit from their 5 best stores
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Globalisation Consolidation
Prime Retail Venues
Convenience Flexibility Retail Parks Click & Collect Experience Experiential retail
Exciting brands Leisure Events
Value Polarisation
Customer strategy Consumer trends Retailer response Hammerson response
Technology Multi-channel
Marketing initiatives
Improved websites Path Intelligence
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Consumers want convenient local venues as well as dominant regional destinations
Only 25% of retail floor space is now in town centres Emergence of mini-formats: John Lewis at home, mini Waitrose, HOF.com,
Beauty Bazaar (Harvey Nichols), Amazon collection lockers
Supermarket product ranges continue to widen
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Globalisation Consolidation
Prime Retail Venues
Convenience Flexibility Retail Parks Click & Collect Experience Experiential retail
Exciting brands Leisure Events
Value Polarisation
Customer strategy Consumer trends Retailer response Hammerson response
Technology Multi-channel
Marketing initiatives Improved Websites Path Intelligence
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Consumers looking for experiences, not just products
100 customer events organised in our centres in 2011 to date Growth in catering
Cinema an increasingly integral element of shopping centres (5 to date) Apple now the second most important tenant in terms of sales in our
shopping centres, behind John Lewis
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Globalisation Consolidation
Prime Retail Venues
Convenience Flexibility Retail Parks Click & Collect Experience Experiential retail
Exciting brands Leisure Events
Value Polarisation
Customer strategy Consumer trends Retailer response Hammerson response
Technology Multi-channel
Marketing initiatives Improved websites Path Intelligence
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Consumers are becoming more sophisticated but at the same time savvy
Bullring anchored by Selfridges and Debenhams Brent Cross has the highest basket spend (£105) however Primark is the
most frequently requested absent retailer
Primark signed at Queensgate to co-exist with M&S and JLP
Centralised strategy
Leasing driven by customer insight
Key customer management
Improving our efficiency and ways of working
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Investment in customer proposition
Acknowledge asset lifecycle – Value add initiatives to capitalise on retail and leisure trends
– Small extensions
Focus on PPM and operational standards
Income growth
Time Rental Growth
Development Maturity Value Add Recycle
2011 2012 2014 2013 2016 2015 Committed Near Term Longer Term
Principal Place Office £290m London Wall Place £345m The Goodsyard Sevenstone, Sheffield £290m Brent Cross Cricklewood Eastgate Quarters, Leeds £550m Les Terrasses du Port £305m Faubourg St.Honoré £2m
Note: Hammerson Share of cost to complete depending on JV Structure Indicative timings only – earliest start on site to completion Extensions and redevelopments cover UK and France Retail, and London Office
France London UK Retail
Principal Place Residential £195m
Extensions
Portfolio Extensions/Redevelopments £335m
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Globalisation Consolidation
Prime Retail Venues
Convenience Flexibility Retail Parks Click & Collect Experience Experiential retail
Exciting brands Leisure Events
Value Polarisation
Customer strategy Consumer trends Retailer response Hammerson response
Technology Multi-channel
Marketing initiatives Improved websites Path Intelligence
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Social & Digital Media Marketing Driving Footfall Maximising Customer Sales
Single platform
websites
Mobile enhancement Click & Collect Path Intelligence Vente Privee Targeted to demographic Self-proliferating Cost effective
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Globalisation Consolidation
Prime Retail Venues
Convenience Flexibility Retail Parks Click & Collect Experience Experiential retail
Exciting brands Leisure Events
Value Polarisation
Customer strategy Consumer trends Retailer response Hammerson response
Technology Multi-channel
Marketing initiatives Improved websites Path Intelligence
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Portfolio positioned to capitalise on structural retail
Ongoing investment to ensure vibrancy and relevance Customer facing strategy delivering results Continuing to attract successful retailers
High quality portfolio combined with management expertise generating consistent outperformance of benchmarks
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Simultaneous transactions deliver tenant mix improvements and financial returns
1 upsize, 2 surrenders, 3 new lettings & 1 relocation
New tenants; Hollister, Apple, TM Lewin and Paperchase
Zone A rents increased from £232 to £240
Footfall up 11% on Apple opening day
Refreshed Riverside for aspirational catering
26 September 2011 Andrew Berger-North
Consumers increasingly choosing “convenient” retail locations Bulky goods retailers remain under pressure Many retailers have re-activated expansion plans Department stores looking to Out of Town formats Discount retailers competing aggressively for units and driving rents Flourishing “pod” and drive-thru markets
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1 2 3 4 5 6 2005 2006 2007 2008 2009 2010 2011
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Vacancy rates stable at 2% for open consented schemes
Market dominated by UK funds looking for long-term secure income in prime location
Rental growth is asset specific driven by reconfigurations, redevelopment and leasing
Few distressed owners in retail warehouse sector
Transaction volumes remain low
ERV Growth Equivalent Yield (%)
Source: PMA, CBRE, Property Data 90 95 100 105 08 09 10 11 12 13 14 15
(Dec 2010 = 100)
Retail Warehouses All Retail 4 5 6 7 8 2005 2007 2009 2011 2013 2015 Retail Warehouses
Transaction Volumes (£bn)
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Under Construction (H1 & H2)
Source: CB Richard Ellis, PMA
Retail park construction at record low
Only 320,000ft2 under construction – just 9% of previous peaks
Restrictive Planning Policy limits new supply - NPPF
Construction set to remain constrained
Presumption in favour of sustainable development will benefit edge of centre sites
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21 retail parks
4.5 million sq ft
Annual passing rent £67.2 million (as at June 2011)
£1.1 billion capital value
97.4% occupancy
Average rent £16 sq ft
ERV / Reversion £70.4 million (2.4%)
63% of floorspace „open A1‟ unrestricted
2010 total return 18.5% (IPD 16.3%)
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100,000 sq ft extension
B&Q Anchor Store 55,000 sq ft
Total development cost £26 million
Gross rental income £1.7million
Completed September 2009
Redevelopment of vacant Homebase and Currys
100% Pre-let to Bhs Home, Brantano and Dunelm
Total development cost £16 million
Gross rental income £1.3 million
Completed June 2009
Redevelopment of first generation retail terrace
Lettings achieved to Next, Boots, Arcadia
Total development cost £18 million
Gross rental income £1.5 million
Completed July 2009
Phase II,Central Retail Park, Kirkcaldy Westwood Retail Park, Thanet, Kent Cleveland Retail Park, Middlesbrough
Foodstore extension and construction of cinema anchored leisure area
Total development cost £33 million
Profit on cost c.30%
Yield on cost > 8.5%
IRR > 40%
Program:
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Exchange anchor lettings Q4 2011
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Secure planning consent Q1 2012
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Commence leisure development Q2 2012
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Practical completion leisure Q4 2012
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Commence retail development Q3 2012
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Practical completion retail Q3 2013
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Redevelopment and extension
Total development cost £21.7 million
Profit on cost c.40%
Yield on cost > 9%
IRR >50%
Major existing tenants Tesco, B&Q, DSG
Program:
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Planning application submitted Q1 2011
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Secure anchor lettings H1 2012
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Commence construction Q3 2012
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Practical completion Q4 2014
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Redevelopment of B&Q unit
Total development cost £17 million
Profit on cost c.13%
Yield on cost > 7%
IRR > 30%
Program:
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Open A1 Planning consent granted Q4 2010
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Vacant possession Q4 2012
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Commence construction Q4 2012
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Practical completion Q2 2013
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Relocation and redevelopment of existing B&Q
Total development cost £35 million
Profit on cost c.20%
Yield on cost > 7.25%
IRR > 30%
Program:
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Secure anchor lettings Q4 2011
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Submit planning application Q4 2011
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Commence construction Q4 2012
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Practical completion Phase II (B&Q) Q3 2013
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Practical completion Phase I (M&S) Q2 2014
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park
ft
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Submit planning application Q1 2012
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Commence redevelopment Q2 2013
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Practical completion Q2 2014
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Consumers adding convenience to regular shopping patterns
Fashion retailers and catering continue to move out of town
Robust occupational demand
Constrained supply underpins value
Low overhead expenses
Strong track record of value creation
26 September 2011 Simon Betty
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Simon Betty - Hammerson Andrew Berger-North - Hammerson David Buckle – CEO, South Oxfordshire District Council Anna Robinson – Strategic Director, South Oxfordshire District Council
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Acquired in 2006
260,000 sq ft retail accommodation, anchored by 70,000 sq ft Sainsbury‟s
550 free car parking spaces
Major tenants include; Next, Argos, Currys and New Look
Average rents £18 sq ft
Convenient and accessible retail location
Large & affluent catchment population
High concentration of hi-tech businesses at Harwell under “Science Vale” brand
Centre of growth for South Oxfordshire
Park and Harwell
Didcot by 2026
at Great Western Park
Supportive local planning policy position
Diamond Light Source, Harwell Business Park
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Shopper population anticipated to increase to 513,000 by 2015
Available comparison expenditure anticipated at £109 million
41% are “secure families” & “wealthy executives”
High demographic correlation with M&S, JLP and Debenhams shopper
Dominant local retail destination
Highly accessible with close links to M4, A34 and M40
2.4 million passengers use Didcot Parkway annually
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200,000 sq ft extension creating a shopping park of 470,000 sq ft
Top 20 shopping park location
50,000 sq ft anchor store
5,000 sq ft–7,000 sq ft retail stores
15,000 sq ft catering and leisure
1,000 free car parking spaces
200 residential units
Improved public realm
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2008 – Exchange Co-
with SODC 2008 – Opening of Cornerstone Arts Centre 2008 –25% of expansion site secured from PRUPIM 2009 – Planning Policy support confirmed through Didcot Town Centre SPD 2011 - Development Agreement exchanged with SODC 2011 - Solicitors instructed for 50,000 sq ft anchor letting to M&S 2011 – Residential Development Partner shortlisting
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Total development cost £71 million
Annual rent £5 million
Profit on cost c.15%
IRR > 25%
Yield on cost > 7%
Liquidity maintained through Development Agreement provisions
Program
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55 acre Brownfield site, former cattle market
Planning granted October 2003
64 interests acquired by negotiation
Long leasehold interest
Phased completion 2005-2010
Profit share with Council
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Hammerson produced masterplan for the comprehensive redevelopment in 4 phases: Phase 1 – Retail and Leisure Phase 2 – Residential Phase 3 – Food store Phase 4 – Final residential phase
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Completed September 2005
120,000 sq ft B&Q warehouse
100,000 sq ft terrace: JJB, Comet, Argos and Mothercare
HomeSense unit and four catering pods constructed in 2007
The dominant retail park in Gloucester
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Total development cost £42 million
Valuation on completion £68 million
Profit £26 million
Profit on cost 62%
Yield on cost 10%
Project IRR 49%
15 acres sold to Westbury Homes for £19 million
Affordable housing site transferred to Rooftop Housing
Marketplace development in final phases
160 unit village opened September 2010
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Joint land sale by Hammerson and Gloucester City Council
Tesco Extra 100,000 sq ft store and 40,000 sq ft retail units
Planning application submitted July 2011
Hammerson site acquisition cost £3.7 million
Hammerson sale proceeds £13 million
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4.5 acre site for future disposal to residential developer
Book value £2.5 million
Prevailing market conditions indicate premium to book value
Marketing to commence 2012
Successfully executed complex,
phased development project
Dominant retail park in
Cheltenham and Gloucester retail hierarchy
Excellent partnerships with
council and retailers
Strong financial returns over a
sustained period