26 September 2011b2de0febdea80fa78eb4-5cad31df697fe43d78c0459eba68b1d4.r36.c…at Harwell under...

Investor & Analyst Retail Day26 September 2011

Agenda

2

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

Hammerson Team

3

David AtkinsCEO

Timon DrakesmithCFO

Lawrence HutchingsManaging Director

UK Retail

Andrew Berger-NorthDirector Retail Parks

Morgan BoneDirector of Corporate

Communications

Simon BettyInvestor Relations Manager

Colin FarrowAssistant Director

Retail Parks

Hammerson Retail Focus

4

Comparison Luxury Convenience

Retail Trends & Responses26 September 2011

Lawrence Hutchings

Hammerson Retail Portfolio

6

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

Consumer Trends

7

1. Globalisation

2. Convenience

3. Experience

4. Value

5. Technology

Globalisation ConsolidationPrime Retail

Venues

Convenience FlexibilityRetail Parks

Click & Collect

ExperienceExperiential

retail

Exciting brands

Leisure

Events

Value Polarisation Customer strategy

8

Consumer Trends to Property Solutions

Consumer trends Retailer responseHammerson

response

Technology Multi-channel

Marketing initiatives

Improved websites

Path Intelligence


Venues


Click & Collect


retail

Exciting brands

Leisure

Events


9


response



Improved websites

Path Intelligence

1. Globalisation

10

1. Retailer Consolidation

11

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

1. Retail Consolidation

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

13


Venues


Click & Collect


retail

Exciting brands

Leisure

Events



response



Improved websites

Path Intelligence

2. Convenience

14

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

15


Venues


Click & Collect


retail

Exciting brands

Leisure

Events



response



Improved Websites

Path Intelligence

3. Experience

16

Consumers looking for experiences, not just products

100 customer events organised in our centres in 2011 to date

Growth in catering

- Brent Cross: 3% of sales and 6% of rent. Union Square: 16% and 13%

- Letting success of Spiceal Street: 12 offers for 3 units

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

17


Venues


Click & Collect


retail

Exciting brands

Leisure

Events



response



Improved websites

Path Intelligence

4. Value – Polarising Consumer Spend

18

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

- Spiceal Street all deals above ERV

- The Oracle mega deal- prime zone A from £232 to £240

Key customer management

- Introduction of Salesforce- 120 key accounts tracked

- Tracking 400 strategic customer actions

Improving our efficiency and ways of working

- Lease process from 78 days to 47 days

4. Customer Strategy

19

4. Asset Lifecycle

20

Investment in customer proposition

Acknowledge asset lifecycle

– Value add initiatives to capitalise on retail and

leisure trends

• Centrale, Croydon

• Monument Mall, Newcastle

• Silverburn, Glasgow

• WestQuay, Southampton

– Small extensions

• Retail Parks extensions

Focus on PPM and operational standards

Income growth

Time

RentalGrowth

Development Maturity Value Add Recycle

4. Development and Extension Sequencing

2011 2012 20142013 20162015

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

FaubourgSt.Honoré£2m

Note:Hammerson Share of cost to complete depending on JV StructureIndicative timings only – earliest start on site to completionExtensions and redevelopments cover UK and France Retail, and London Office

France

London

UK Retail

Principal Place Residential £195m

ExtensionsPortfolio Extensions/Redevelopments £335m

22


Venues


Click & Collect


retail

Exciting brands

Leisure

Events



response



Improved websites

Path Intelligence

5. Technology

23

Social & Digital Media Marketing

Driving FootfallMaximising Customer Sales

Single platform websites

Mobile enhancement

Click & Collect

Path Intelligence

Vente Privee

Targeted to demographic

Self-proliferating

Cost effective

http://www.google.co.uk/imgres?imgurl=http://icons.iconarchive.com/icons/fasticon/web-2/256/FaceBook-icon.png&imgrefurl=http://www.iconarchive.com/show/web-2-icons-by-fasticon/FaceBook-icon.html&h=256&w=256&sz=23&tbnid=KFICJaE2iv0AvM:&tbnh=111&tbnw=111&prev=/search?q=facebook+icon&tbm=isch&tbo=u&zoom=1&q=facebook+icon&hl=en&usg=__XfT8jDAfMjvCW2yxa-ynTIDjSDY=&sa=X&ei=55ExTu6DMomxhQe68ZTeCg&ved=0CCgQ9QEwAQ

Oracle Twitter screen grab

24

Consumer Trends to Property Solutions

25


Venues


Click & Collect


retail

Exciting brands

Leisure

Events



response



Improved websites

Path Intelligence

Conclusion

26

Portfolio positioned to capitalise on structural retail changes

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

Repositioning the Oracle

27

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

Retail Parks Portfolio

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

Retail Warehouse Consumer Demand

29

0

1

2

3

4

5

6

2005 2006 2007 2008 2009 2010 2011

Retail Warehouse Investment Market

30

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)

Retail Warehouse Supply

31

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

Hammerson Retail Parks Portfolio

32

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%)

Recent Asset Improvement Initiatives

33

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


Gross rental income £1.3 million

Completed June 2009

Redevelopment of first generation retail terrace

Lettings achieved to Next, Boots, Arcadia


Gross rental income £1.5 million

Completed July 2009

Phase II,Central Retail Park,Kirkcaldy

Westwood Retail Park,Thanet, Kent

Cleveland Retail Park,Middlesbrough

Future Asset Improvement Initiatives

Cramlington | Northumberland

Foodstore extension and construction of cinema anchored leisure area


Profit on cost c.30%

Yield on cost > 8.5%

IRR > 40%

Program:

− Exchange anchor lettings Q4 2011

− Secure planning consent Q1 2012

− Commence leisure development Q2 2012

− Practical completion leisure Q4 2012

− Commence retail development Q3 2012

− Practical completion retail Q3 2013

35

Newtownabbey | Belfast

Redevelopment and extension

Total development cost £21.7 million


Yield on cost > 9%

IRR >50%

Major existing tenants Tesco, B&Q, DSG

Program:

− Planning application submitted Q1 2011

− Secure anchor lettings H1 2012

− Commence construction Q3 2012

− Practical completion Q4 2014

36

Selly Oak | Birmingham

Redevelopment of B&Q unit



Yield on cost > 7%

IRR > 30%

Program:

− Open A1 Planning consent granted Q4 2010

− Vacant possession Q4 2012


− Practical completion Q2 2013

37

Merthyr Tydfil | South Wales

Relocation and redevelopment of existing B&Q



Yield on cost > 7.25%

IRR > 30%

Program:

− Secure anchor lettings Q4 2011

− Submit planning application Q4 2011


− Practical completion Phase II (B&Q) Q3 2013

− Practical completion Phase I (M&S) Q2 2014

38

Rugby | East Midlands

o Repositioning asset as Open A1 shopping park

o Total development cost £50 million

o Rent from £15.45 per sq ft to £27.50 per sq ft

o Profit on cost c. 20%

o Yield on cost > 7%

o IRR > 30%

o Program− Submit planning application Q1 2012− Commence redevelopment Q2 2013− Practical completion Q2 2014

39

Conclusion

40

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

The Orchard Centre, Didcot26 September 2011

Simon Betty

Today‟s Presentation

42

Simon Betty - Hammerson

Andrew Berger-North - Hammerson

David Buckle – CEO, South Oxfordshire District Council

Anna Robinson – Strategic Director, South Oxfordshire District Council

The Orchard Centre | Didcot

43

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

Compelling Development Proposition

Large & affluent catchment population

High concentration of hi-tech businesses at Harwell under “Science Vale” brand

Centre of growth for South Oxfordshire

8,000 new jobs proposed at Milton Park and Harwell

8,500 new homes proposed for Didcot by 2026

3,300 homes under construction at Great Western Park

Supportive local planning policy position

Diamond Light Source, Harwell Business Park

Development Demographics

45

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

Development Proposal

46

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

Progress to Date

47

2008 – Exchange Co-operation agreement 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

http://www.southoxon.gov.uk/

http://www.google.co.uk/imgres?imgurl=http://selfempowermentsecrets.com/wp-content/uploads/2010/11/Good-Handshake.jpg&imgrefurl=http://selfempowermentsecrets.com/a-handshake-does-matters/&usg=__7wZI7HGR53s-mTbHpwMygTlA7XQ=&h=300&w=400&sz=30&hl=en&start=21&zoom=1&tbnid=CycFAPXJAJL6fM:&tbnh=93&tbnw=124&ei=z558TtPuOae80QWp2s0K&prev=/search?q=handshake+image&hl=en&sa=G&gbv=2&tbm=isch&itbs=1

Key Financials

48


Annual rent £5 million


IRR > 25%

Yield on cost > 7%

Liquidity maintained through Development Agreement provisions

Program

- Q1 2012 Planning Application

- Q2 2013 Vacant Possession

- Q3 2013 Start on site

- Q1 2015 Completion and opening

St Oswald‟s Retail Park, Gloucester

26 September 2011

Andrew Berger-North

Background

50

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

Development Phasing Plan

51

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

St Oswald‟s Retail ParkPhase 1 | Retail

52

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

Phase 1| Retail

53


Valuation on completion £68 million

Profit £26 million

Profit on cost 62%

Yield on cost 10%

Project IRR 49%

Phase 2 | Residential Sales

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

Phase 3 | FoodstoreDevelopment

55

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

Phase 4 | Residential Site

56

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

Conclusion

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

26 September 2011b2de0febdea80fa78eb4-5cad31df697fe43d78c0459eba68b1d4.r36.c…at Harwell under...

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