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Analyst Visit to Les Terrasses du Port,...
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1 Analyst Visit to Les Terrasses du Port, Marseille 23/24 June 2010
Transcript of Analyst Visit to Les Terrasses du Port,...
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Analyst Visit to Les Terrasses du Port, Marseille
23/24 June 2010
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Today’s Programme
Presentations– Introduction and overview– Overview of the French retail property market– Hammerson France– Les Terrasses du Port
Euroméditerranée showroom and site tourLunchCoach to the airport
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Introduction and Overview
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Prime Investment PortfolioTotal portfolio at 31/12/09
€2 billion
7 shopping centres; 1 retail park; 1 mixed use building
Passing rent: €110.3 million
Reversionary potential: 6.4 % Occupancy rate: 98.5 %
Average unexpired lease term: 4.2 years to expiry
Over 850 occupiers
Shopping centres value: €1,714 million
O’Parinor Italie 2 Espace St Quentin Les Trois Fontaines
Bercy 2 Place des Halles Grand Maine Villebon 2 Faubourg St Honoré
1) All figures are as at 31 December 2009
3 out of top 10 retail destinations
Just a few words from me as an introduction before I hand over to Jean Philippe.
First, an overview of our French portfolio.
We currently have nine standing assets, valued in aggregate at some 2 billion euros.
Having taken a strategic decision to exit Paris offices last year, we are currently all retail and the vast majority is in shopping centres in and around the Ile de France area.
We have three of France’s top ten large shopping centres measured by sales density.
That said, we retain the skills and flexibility to move into back into offices in France if we see the right opportunities.
The portfolio, which houses some 850 tenants, is reversionary, and occupancy at 98.5% is very high.
In short, this is a portfolio of high quality and critical mass.
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Top Ten Properties as at 31/12/09
Property name Ownership Valuation(1)
£m
Passing rent(1)(2)
£m
O’Parinor, Aulnay-sous-BoisItalie 2, Paris 13èmeBrent Cross, London NW4Highcross, LeicesterBullring, BirminghamCabot Circus, BristolEspace St. Quentin, St Quentin-en-YvelinesThe Oracle, ReadingLes Trois Fontaines, Cergy PontoiseWestQuay, Southampton
100%100% 41%60%33%50%
100%50%
100%50%
404 356257254234215212208199198
21.619.5 17.215.815.414.312.713.111.913.4
Notes:1) Hammerson’s share of valuation and passing rent shown in respect of joint ventures2) Passing rents are at the end of rent free periods and after deducting head and equity rents
And to put that into context, although many commentators think of us as a primarily UK business, you’ll see from this familiar table that some of our biggest assets are here in France.
Obviously, with the sale of 75% of Espace st Quentin that weighting will change, but I want to stress that we have built good relationships, a quality asset base and a significant market position in France over many years and that is a position which we are keen to build upon.
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The Team
Simon MellissChief Financial Officer
David AtkinsChief Executive
Peter ColeChief Investment Officer
Lawrence HutchingsUK Retail
Jean-Philippe MoutonFrance
Martin JepsonUK Offices
Plc BoardExecutive Directors
Managing Directors
Gérald FerezouAsset Management
Michael KriefIT
Igor AglatRetail Leasing
Thomas HavasMarketing and Communication
Stéphane GirardRetail Management
Christophe ProffitReporting and Control
Laurent SantiagoProject Management
Christophe RigoHuman Resources
French Senior Management
And these are the people responsible for doing that.
We are an integrated business, and ultimate responsibility for the performance of the portfolio rests with the board, but on a day-to-day basis there are six of us with operational control.
In addition to Simon, Peter and me at board level, we have three MDs with individual responsibility for France, UK Retail and UK offices. Since his appointment in April Jean-Philippe has been running the French team, but in reality that was the case since Christophe’s departure in November last year, and as someone who has been with the business since 2003 he knows our assets intimately and has been responsible for some of our major projects, including Les Terrasses du Port.
While the senior managers in France have reporting lines through Jean Philippe, that masks the degree of coordination between the two teams. On leasing, for example, Igor spends a lot of time with Sheila King, head of leasing in the UK. Our finance and reporting team liaise regularly with Christophe Proffit and I’m pleased to say that even in areas like IT and HR there is a high degree of coordination and sharing of best practice.
With that I’ll hand over to Jean Philippe…
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Overview of the French Retail Property Market
I will start with a brief overview of the French property market and its environment.
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French Retail Environment
Resilient consumer spending
Low private indebtedness
Limited shopping centre supply
Favourable legal environment
This is a short summary of the main characteristics of the French retail environment.
Consumption in France has been historically resilient.
French have a limited propensity for personal indebtedness and a strong propensity for savings
On market side, planning rules have limited shopping centre supply.
Last but not least, the legal environment is mainly in favour of landlords.
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Household Consumption
-2%
-1%
0%
1%
2%
3%
4%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: INSEE – Household consumption for manufactured goods
% change
French consumption has proved to be resilient even during the crisis. Only once in early 1990’s, it showed negative growth.
Consumption is stable and less volatile than in the UK where the growth has been close to double digit in some years.
The main reason of this stability is due to the fact that the French are less indebted, they save and more importantly, the purchasing power is improving steadily either thanks to the GDP growth or through governmental incentives.
As an illustration, purchasing power in 2009 grew by 2.7% thanks to the combination of low inflation, tax incentives and subsidies for the poorest families.
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Household Debt
92%
157%165%
91%
149%159%
73% 75%
France Germany UK USA
June 2008 June 2009
Household debt as % of available income France: Consumer debt (€ million)
3.92
34.12
3.82
40.03
2008 2009
Car Other
- 13%
Source: Banque de France
The French have some of the lowest personal indebtedness compared to other Europeans.
This is both cultural, but also linked to the reasonable price of housing.
Consumer debt is also not an issue in France. It represents about €40 billion, with fewer bankruptcies.
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Savings Rates
13.9%14.6%
15.9%15.5%15.2%15.8%
16.9%
15.1%
17.1%15.8%
15.8%15.6%
14.9%15.1%15.0%14.7%15.3%
15.5%15.9%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q32009
Source : INSEE
9.4%
12.0%
9.1%
6.2%5.5%
4.5%
7.0%
4.3%
1.8%
10.5%10.7%
3.6%
9.4%
7.7%5.8% 4.1%
2.4%
3.3%
5.7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q32009
UKFrance
On the other hand, the savings rate is also important with an average of 15% and peaking in periods of uncertainty.
During the times of prosperity, the French have the potential to release part of their savings to spend in retail, as was the case at the end of 2009.
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French Retail Stock
17.5
29.2
18.9
2.80
5
10
15
20
25
30
35
High street Retail warehouses Shopping centres
Source: CWHB/High street: sites with at least 50 places; retail: at least 10 places, shopping centres: at least 10 places
Retail park
million m2
One characteristic of the French retail market is the limited share of retail parks in the retail warehouse sector. Less than 10% of the retail warehouse is in the form of planned and centrally managed retail parks. This figure compares with close to 50% in Germany.
Tight planning rules resulted in an addition of circa 300 000m² of shopping centre space per year over the last five years, or an annual growth of 1.5%.
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French Investment Market
0
10
20
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
(f)
€ billion
3.0
4.0
5.0
6.0
7.0
Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009
French shopping centres Paris CBD offices
French transaction volumes
Prime net initial yields
Source: CBRE, PMA
%
In regards to the property market, transaction levels reached a record level of nearly €30 billion in 2007 right before the financial crisis and it plummeted to €8 billion last year.
The first half of 2010 showed a 30% increase over 2009 albeit 50% below the 2008 level.
Secured assets have been the main point of attraction since 2008
Over the last two years French investors represented more than 60% of the buyers, whereas it was the reverse over the previous years.
In regards to the net initial yield, France was not immune from the upward movement, reporting 150 bps and 200bps increases for shopping centres and offices respectively.
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French Retail Property Investments
23%
9%
14%
8%
10%
9%10%8%
5%
0
5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007 2008 2009
Other Retail
€ billion
68%
16%
9%7%
Shopping centres City centresRetail parks Others
Source: CBRE, DTZ, PMA
Retail property investment – type€1.9 billion
If we look at the past indicators of IPD, retail (and specifically shopping centres), have reported the highest total return over 3, 5 or 10 years.
In 2009, the appetite for shopping centres grew. Retail (and specifically shopping centres), are viewed as the most secure investment.
Investors like the spread of risk amongst numerous tenants, the stability in ERV, the automatic indexation, the low number of retailers falling into administration. In other words, the robustness of the cash flows.
This resulted in the fact that in 2009, retail represented 23% of the investment market compared to an average of 10% in the previous years.
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French Retail Market Characteristics
Development
o Two planning consents required:
- Commercial (CDAC)
- Building Pemit
Retail lease
o Typical duration 10 years (with 3-year break option)
o Annual indexation (CAGR ILC 2004-2009 = 2.5%)
o “Propriété commerciale”:
– Tenants’ statutory right to renew
– Long eviction process, with compensation = tenant departures are rare
High barriers to entry
o Critical size of the French portfolio
o High level of expertise required
o Location, location, location!
o Investment opportunities scarce
One of the reason that investors favour retail is linked to the legal environment.
In France, we have a very restrictive planning environment, particularly for new retail space. To develop a shopping centre, or add space to an existing one, one needs not only a planning consent but a trading consent.
Leases in the retail sector are generally for 10 years with tenants’ break option at years three and six. In practice, retailers rarely exercise their breaks.
Rents in France are subject to automatic annual indexation, historically based on construction cost index. This index was replaced in 2009 by the ILC index with is a blend of IPC, retail revenues and construction costs. This automatic indexation is the best protection against inflation.
Finally, occupiers have security of tenure at the end of a lease with an automatic right to a new lease at market level. This right of renewal in good shopping centres is worth roughly 18 months of turnover. For decades, this was the retirement package of individual retailers. For national retailers, this represents a business goodwill which they lose if they don’t pay the rent. This explains why we have so few defaults on rent payments in our centre. In case of late payment, the retailer loses this important business goodwill.
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Hammerson France
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Strengths
Excellent track record
Experienced team
Directly managed assets
Low vacancy rate
Third largest operator in the shopping centre market
Historically concentrated in Île-de-France
International reputation with major retailers
Overall Hammerson is well positioned in the retail market
The return that we delivered over the last decade is one of the best
Our team is knowledgeable and experienced
All strategic functions are in house, especially functions which are in direct relationship with retailers, ie leasing, lease renewals and marketing
The vacancy rate has been historically low and 1.5% at year end
We benefit from the critical mass of being the third operator in France. This helps our bargaining position vis a vis the retailers
Our portfolio has been historically in Ile de France but more importantly in city centres
The synergies that we have established between the French and UK letting teams, give us an additional lever with our retailers
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Portfolio Performance
Historical Portfolio Value (LHS) and Net Rental Income (RHS)
(€ m)
0
500
1,000
1,500
2,000
2,500
3,000
2005 2006 2007 2008 2009
0
20
40
60
80
100
120
140
Held throughout Acquisitions/disposals NRI
Over the last 5 years, the portfolio evolved as follows:
• in 2005 we acquired Villebon 2 for €155 million
• In 2007 we acquired Angers Grand Maine for €65 million
• In 2009 we recycled capital by disposing two recently completed retail parks and our last office buildings, Les Trois Quartiers and rue de l’Université.
• On a like for like basis, until 2008 the portfolio grew thanks to asset management, lease renewals, lease indexation and the successful delivery of the O’Parinor extension.
• In 2009, the value slightly decreased because of the upward yield movement only partly offset by a slight growth in ERVs
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Retail Portfolio Performance
RetailIncome returnCapital returnTotal return
20005%
13%18%
20016%7%
13%
20026%5%
11%
20036%4%
10%
20046%
11%17%
20056%
20%26%
20065%
15%20%
20074%
17%21%
20084%
-7%-3%
20095%
-11%-6% =12.4%
2000-2009
Overall, this enabled Hammerson France to report average annual total return of 12.4% over the last decade, versus the IPD benchmark of 10.1%.
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Increased Retail Rents in France
98.2m
91.5m
(1.0)m4.5m
13.3m
(10.1)m
80
85
90
95
100
Terminationsand expiries
New lettings and renewals
Indexation Rents passing31 Dec 2009
Rents passing31 Dec 2007
Other
€ million
Note:
Movement in passing rents compared on a like-for-like basis
This graph illustrates how we grew revenues over the last two years from €92 million to €98 million on a like for like basis.
11% of our leases expired but we managed to renew them with an uplift despite the soft consumer environment
Indexation helped us as well.
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Future Plans
Exploit strong position in French retail market
Refurbish/extend existing assets
Progress development pipeline
Recycle capital from portfolio
Selective acquisitions
In light of what I just said, we should continue to exploit this strong position in France, especially vis a vis the retailers.
We are currently reinforcing our relationship with them, through several B to B initiatives and regular corporate events such as the quarterly event called “Club Hammerson” where all retail marketing and development directors interact with our team.
We continue to be involved in the industry, as Board member of the CNCC, the equivalent of the BCSC and pursue our lobbying efforts to influence the legal environment in our industry.
Short term, we will continue with our active asset management initiatives. Specifically, we are in the process of renovating most of our centers to offer a modern environment to our customers. This renovation program will be combined, where possible, with extensions of our centers.
We will also continue to recycle capital when the assets are mature and no longer meet the Company’s hurdle rates. Our capital recycling will be associated with asset management contracts like the one in Espace Saint Quentin, or like in most of our UK centers, in order to maintain our operational presence in the market.
Last but not least, we keep monitoring potential acquisition opportunities, provided that they are in line with the Company’s strategy and presenting attractive returns.
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Faubourg Redevelopment
Start of works Underway
Shell delivery Q3 / Q4 2010
Stores opening Q2 2011
Additional rental income €3 m
Development costs €35 m
5 MSU and 2 shops60 m window facade onto Faubourg Redevelopment of 3,000 m²
Apart from focusing on lease renewals, we have been active in asset redevelopment and asset extensions.
Earlier this year we started the redevelopment of Faubourg, a mixed used building acquired in 2005. The building is 7300m² with a mix of high street retail, offices and residential units.
This is an ideal location in Paris, similar to New Bond Street in London and is located right in front of the British embassy.
The project consists of additional 1000m² of retail space at the expense of offices and by converting thirteen smaller retail units into seven modern and larger units targeted at luxury brands.
Works started in May. The project is pre-let to many luxury brands.
The units will open to the public in the second quarter of 2011.
This project is similar to the successful redevelopment of Vendôme Saint Honore and perfectly illustrates Hammerson’s expertise in dealing with complex structures in constraint environments.
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Extensions
Place des Halles
Planning submission 2011
Space created 5,400 m² GLA
Additional rental income €2 m
Development costs €28 m
Angers
Planning submission 2011
5,900 m² GLA
Additional rental income €2.5 m
Development costs €38 m
Space created
We have identified several extension opportunities in most of our existing centres.
Here in Strasbourg, we will create over 5000 m2 of additional retail space, despite the fact that the centre is located within the city centre perimeter.
Same in Angers where we plan to co-develop with the other co-owner, Carrefour, 6000 m² of additional retail space.
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Extensions
Italie 2 – Grand Ecran
Space created 4,600 m² GLA
Additional rental income €1.5 m
Development costs €19 m
Italie –Avenue d’Italie extension
Space created 5,600 m² GLA
Additional rental income €2.5 m
Development costs €34 m
Bercy 2 – Ground floor restructuring
Space created 1,200m² GLA
Additional rental income €0.6 m
Development costs €7 m
Planning submission 2011
Planning submission 2011 Planning submission 2011
Italie 2 is another example. This centre is 20 years old and located in Paris. We are working with the city to extend the centre on the avenue.
In addition, we have obtained consents for the conversion of the cinema, which closed 3 years ago, into retail space. The consents are being currently challenged.
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Future Pipeline Under Review
Le jeu de Paume, Beauvais•Shopping centre •23 000 m² GLA
Halle en Ville, Mantes•Shopping centre •36 400 m² GLA
La Rotonde, Bethune•Shopping centre•64 000 m² GLA
Le Barlet, Douai•Shopping centre •24 000 m² GLA
Last but not least, in December 2009, when we acquired Les Terrasses du Port, we also received rights to four other projects which are at different stages of maturity.
We are currently auditing these projects, improving them, testing them with the retailers.
In other words we are assessing their financial and operational viability.
We are not committed to progressing any of these projects. At the moment, we view them as mere options.
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Les Terrasses du Port
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Les Terrasses du Port: The Team
Igor AglatRetail Leasing
Valérie ThomasB2B Marketing & Communication
Laurent SantiagoProject Management
Michael FarbosProject Leader
Thomas HavasMarketing & Communication
Lionel Le Gall Leasing
Charles-Henri DelouisProject Management
Olivier Fournier-LaroqueLeasing
Maxime DepreuxAsset Manager
Robin DobsonRetail Development
Vinod ThakrarProject Management
Sheila KingLeasing
UK Support
Les Terrasses du Port is an incredible opportunity for Hammerson, but it also requires all of our focus in light of its lot size.
Since the acquisition, we dedicated a full team of professionals to the improvement of the project.
Michael is the project leader. He has been working for Unibail-Rodamco prior to joining Hammerson.
Igor Aglat is the head of retail leasing. He joined Hammerson as a shopping centre Director and subsequently spent six months in London before taking over the French retail leasing department.
Laurent has been in charge of the our largest developments in France since 1997: 40 rue de Courcelles, 54 Haussmann, Orsay-Université, 14 Haussmann, 9 Place Vendôme, O’Parinor and now Faubourg and Les Terrasses du Port.
Thomas Havas has been in charge of shopping center marketing for the past nine years
We also hired two professionals from the Foruminvest team, Lionel Le Gall and Charles Henri Delouis. While working for Foruminvest Lionel and Charles were in charge of Terrasses du Port in their respective areas of competence. The transfer of information to our team has therefore been much easier.
Last but not least, we benefit from an unconditional support from our UK peers who have an extensive experience in developing large centres. We have been interacting regularly with Robin, Sheila and Vinod.
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The Region
Population of 4.5 million
4 major cities: Nice, Toulon, Marseille and Avignon
Urbanised region (90 % of the population live in cities)
3rd largest economic region in France
Premier world tourist destination with 34 million
visitors per annum
A very attractive region
Marseille is the capital of the PACA region which accounts for a total population of 4.5 million.
The Marseille region was one of the fastest growing regions in France, experiencing an average annual population increase of around 0.8%, compared to 0.5% in Ile de France.
The region is the premier world tourist destination with 34 millions of tourists per annum. Tourism generates 12% of the region’s GDP.
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Marseille
French 2nd city with population of 870,000
Largest port in the Mediterranean
Extensive city regeneration
Exceptional location and weather
Intense tourist activity
European capital of culture in 2013
A European capital
Marseille is France’s second largest city with a population of 870,000.
Marseille has high-quality infrastructure. The city is serviced by France’s fifth airport located in Marignane, the TGV Méditerranée which links Marseille with Paris within three hours and with Lyon within 1.5 hrs. Marseille is also the largest passenger and container port with a total of 41,000 jobs.
Marseille is currently undergoing a major regeneration. The city is focused on becoming the European Capital of Culture in 2013, similar to Lille in 2004.
As a comparison, in Lille, the event generated a 30% growth in tourism with a total attendance of 9 million.
€77 million will be invested on city regeneration, including a new museum located between the Vieux Port and the Les Terrasses du Port project, the Museum of European and Mediterranean civilizations.
€100 million will be invested into hundreds of events during the year
France has also been recently chosen for the organization of the Euro 2016. Marseille is one of the nine cities that will host the event.
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Catchment area
o 870,000 inhabitants in the primary zone
o 1.5 million inhabitants (less than 35 min driving)
o Average income equals the national rate
o 2.1 million passengers through the Port
– 870,000 to/from Corsica and Sardinia
– 585,000 to/from North Africa
– 620,000 to/from cruise-ships
o 25,000 employees and executives in the business neighborhood by 2012, 40,000 – 50,000 by 2020
o €5 billion spent by Marseille inhabitants per annum, €1 billion spent outside the city
The scheme will benefit from a very significant catchment area of 1.5 million residents, with a very populated primary zone of 870,000 residents.
The recent transformation of the regional economy has allowed for rapid economic growth and convergence with the rest of France, placing the average income in line with the national rate.
The 2.1 million passengers through the Port add to the potential of the area:•Cruise-ship passengers, circa 620.000 last year, are expected to reach 1 million by 2011•The Terrasses du Port scheme will directly benefit from the flow to Corsica and Sardinia and North Africa, due to the vicinity of the two stations. •Pedestrian passengers to Corsica and Sardinia will access the ferries through the project during opening hours.•These passengers often have to wait several hours before boarding, and they will be parked just under the scheme, which constitutes another key footfall driver
Les Terrasses du Port will be the only shopping centre in the new business district. 25,000 office employees are expected at the opening, a number that will grow to 40,000 in 2020.
In addition, the Euroméditerranée housing projects, located within 5 minutes walking distance, will add 35,000 inhabitants to the primary catchment area.
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Demographics
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
CAGR 1999 - 2008 CAGR 2008 - 2031
Marseille France
7%11%
2%7%
36%
2%
17%
3%5%
10%
A - Sophisticated singles B - Bourgeois prosperityC - Career and family D - Comfortable retirement E -Routine service workers F - Hard working blue collarsG - Metropolitan strugglers H - Low income eldersI - Post industrial survivors J - Rural inheritance
Source: Eurostat, Experian1) Projection for 2031: Marseille is considered comparable to the Provence-Alpes-Côte d’Azur area
Population Growth(1) – Comparison and projection Mosaic Breakdown of the Marseille population
The population has historically grown at a faster rate than other French cities including Paris.According to the latest Eurostat statistics the population of Marseille and the surrounding region will continue to grow at a faster rate than both Paris and the national average. According to these projections the region will see population increase from an estimated 4.9 million in 2008 to 5.6 million in 2031.
On average the level of GDP per head in the Marseille region is similar to the French national average. However the extension of transport schemes and other regeneration projects are likely to unlock economic potential within the city, further boosting incomes.
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Euroméditerranée: An Operation in the interest of the nation in France’ssecond city
A public organisationFounded by
Supported by the European Union
3 dimensions: Urban planningReal estate developmentEconomic development
A 50 strong team
Marseille’s Euromediterranée project is the most important urban regeneration plan in South of Europe. Indeed, the regeneration perimeter covers 480 hectares in Marseille, located between Port Autonome, old port and TGV railway station.
Initiated by the French State, Provence-Alpes-Côte-d’Azur region, the association of metropolitan areas Marseille Provence Métropole, Bouches-du-Rhone department and the city of Marseille, this major project has been state-approved as a ‘National Interest Operation”.
Euromediterranée project will increase Marseille’s attractiveness and influence between Europe and the Mediterranean. It aims to build a new sustainable “city in the city”.
New infrastructure, public places, residential and commercial properties, shops, cultural facilities are either undergoing construction or are about to start.
At the end of 2007, the French State and the local authorities have decided to extend the operation to the North perimeter.
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Euroméditerranée: 480 hectares between the city centre and the port
Terrasses du Port project is located in Cité de la Méditerranée area, which is one of the seven areas planned in the global Euromediterranée project. Cité de la Méditerranée aims to transform the sea front (three kilometres long from Port St Jean to Arenc). This operation will enhance the opening of Marseille onto the sea and will link the port with the city centre.
Joliette Arenc and its business areaLocated in front of the sea, La Joliette benefits from a strategic location between the city centre and the harbour, high quality transport links (airport, TGV railway station, highways, urban transport). The new business area is already well served by urban transport with an underground station La Joliette and the new tramway line.
Saint-Charles and its railway hubTwo city entries benefit from a regeneration plan: Saint-Charles railway station and Porte d’Aixwith highway A7.
Belle de MaiLocated in the East part of Euromediterranée perimeter, the former tobacco factories have been rebuilt in 2004 to create a cultural and creative facility specialized in media.
Rue de la RépubliqueIn the heart of Euromediterranée project, this large residential and commercial street is one of the largest urban regeneration projects in France.
Réhabilitation des quartiers 2002-2014Located in the east of the Joliette area, this program aims to refurbish a large number of homes (around 1,400) and to create new ones (570). Public facilities such as schools, nurseries, local shops will also be created.
ExtensionState and local councils have decided in 2007 to extend the perimeter which was drawn in 1995. This extension stretches out for another 169 hectares to the North, making it the largest urban regeneration perimeter in Europe.
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Euroméditerranée by 2020
+ 20,000 jobs
+ 10,000 residents
+ € 3.5 billion invested
Euroméditerranée 1st phase (underway) Extension
+ 20,000 jobs
+ 30,000 residents
+ € 3.5 billion invested
Euromediterrannée is currently the biggest urban regeneration program supported by the government. It has been developed over 310 hectares:•600,000 m² of offices (20 to 30,000 employees)•400,000 m² of new housings (4,000 housing units representing 10,000 inhabitants)•200,000 m² of public buildings and retailThe total investment for the phase 1 is €3.5 billion both public and private.
As a consequence of the success of phase 1, the government voted in December 2007 the extension of the Euroméditerranée area over 170 hectares located north of phase 1.
In 2020, Euroméditerranée will encompass:•1,100 000 m² of offices•14,000 new housing units•6000 refurbished homes•400,000 m² of public buildings
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Location
Grand Littoral, Plan de CampagneCentre Bourse
On this slide you can see our project within the Euromediterrannée district
The main projects of Euromediterrannée are located close to the Terrasses du Port scheme and spread along the future boulevard. The A55 highway will be moved underground.
Centre régional de la méditerranée – Future Euromediterranean congress and exhibition hall Muceum – Museum of the civilisations of Europe and MediterranéeLes Docks – New Business Centre with more than 200 firms and 3,500 employeesEuromed Center – a 45,000 m² complex with a convention centre, a cinema, a hotel and officesLe Silo – Old silo to be transformed into a 5,000 m² office building and a show arena with 2000 seats Joliette District – Business district with 300,000 m² of offices Rue de la République – Significant housing and retail refurbishment that will enhance the link between Terrasses du Port and the city centreSAS Suède – 4 buildings: An office tower (37,000 m²) and an office building (10,000 m²), two housing towers (25,000 m² and 17,000 m²) CMA-CGM – Future headquarters of the 3rd worldwide leading container shipping group
In terms of location and accessibility, the scheme benefits from a strategic position both within the city but also on a larger scale. Indeed, the shopping centre will benefit from a front sea location, close proximity to the city centre and easily access by car. There are three connecting motorways: A7 from Aix-Lyon; A55 from Airport-Montpellier and A51 from Nice-Genova.
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Excellent Accessibility
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Previously a flyover, motorway A55 is currently being placed in a tunnel, which will enable it to re-join the harbour side with the city. The Terrasses du Port car park will benefit from an easy link to the A55 and A51 highways, through the Boulevard and underground tunnels.
The scheme will be located near a subway station (Line 2 - Joliette station, only one station away from the TGV station) and close to two stops on the new tramway line. It is also connected to five bus lines of which one is a night line.
The new Boulevard du Littoral will be 45-meter wide and is specifically designed for pedestrians and bicyclists.
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Centre Bourse This shopping centre (29,250 m² GLA and 55 units) is located in the heart of Marseille. It enjoys strong anchor tenants: Galeries Lafayette, Fnac, Habitat and Go Sport. An in-depth refurbishmentover 6,000 m² has been planned for over a decade.
The city centre is composed of 3 main shopping streets:
Rue Saint Férréol is a good looking pedestrian street. It is the most attractive shopping street in Marseille with many national brands such as Galeries Lafayette, Virgin, Zara and H&M.
Rue Paradis and Rue Grignan are more exclusive oriented with for example Hugo Boss, Longchamp, Hermès, Cartier or Kenzo.
Rue de Rome is mass market oriented with for example Monoprix or La Grande Récré
Grand Littoral is a 116,000 m² GLA shopping centre. It comprises a Carrefour hypermarket; 19 Medium-Sized Units such as C&A, H&M, Zara, Intersport and Darty. This centre offers mass-market products and does not constitute a significant threat for Terrasses du Port.
Plan-de-Campagne is a retail warehouse park of over 220,000 m² GLA located at around 17 kmfrom Terrasses du Port. It is easily accessible from Marseille and Aix population via the A51and A7 motorways.
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Les Terrasses du Port, Marseille
• 54,000 m2 centre with 160 shops
• 2,600 car park spaces
• 44% of the retail units secured
• One of the largest shopping centre developments in France
• 70-year ground lease with the Port: No “Propriété commerciale”
• Benefits from government-backed programme to regenerate Marseille
Les Terrasses du Port project is 54,000 m² with 160 stores, which makes it the biggest shopping centre development in France in the next few years. It comprises of four retail levels and four car park levels with 2,600 public spaces.
The project will benefit from the biggest car park in the city centre.
A competition was initiated by the Port of Marseille in 2003. it was won by the Foruminvest group, from which Hammerson bought the project in December last year.
The project is thus located in the Port area, which is public land. Hammerson benefits from a 70-year ground lease.
To date, the project has proved successful among international and local retailers. This is confirmed by the success of the letting process, with 44% of future retail rents secured (exchanged or in solicitors’ hands) nearly four years before completion.
Since Hammerson’s acquisition at the end of December 2009, 30 new notices of interest have been received.
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Les Terrasses du Port
Connection with Boulevard du LittoralPort car park on the ground floorArchitecture evoking the Docks in London building, largely using stone, metal, glass Roof covered with solar panels in a shape that is similar to the Docks roof260 m long terrace with an open view onto the Mediterrannean
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Achievements Since Purchase
Built relationships with local stakeholders
Redesigned project and optimised retail layout
Renegiotiated building contracts at fixed costs
Expected savings achieved through technical re-engineering
Defined an optimisation strategy to achieve BREEAM Very Good
Defined a full merchandising plan and leasing strategy
Local relationshipThe project benefits from a great support from local stakeholders. The Port has supported the project modifications considered by Hammerson in order to optimise the scheme. An amendment to the head lease signed mid June reflects those changes.Project designA specific workshop was led in order to optimize the retail layout, including both Hammerson’s UK and French teams, the project architect and Benoy, architect of the Bullring in Birmingham. The visibility between the levels, the vertical circulations, the catering strategy have been reviewed.Technical re-engineering / Building contractsHammerson teams have reviewed the project’s structural specifications to adapt it to retail standards and successfully re-tendered the project with the initial contractors. BREEAMThe Project did not satisfy any sustainability criteria such as BREEAM. Hammerson appointed a dedicated consultant, in charge of the valuation and certification of the project. The strategy to reach a “Very Good” BREEAM certification has been identified and in the process of being implementedLeasingThe scheme merchandising plan has been benchmarked against similar centres in France and additional market studies have been launched, in order to define the leasing strategy that will be built starting with the historic leases already signed.
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Leasing Strategy - Retail Mix
A comprehensive shopping experience with five main commercial activities:
– Relevant catering offer for workers, residents and tourists
– Good mix of middle to high range fashion and beauty brands
– Balanced household/furnishing offer combining home electronics, furniture and home accessories
– Convenient services including a pharmacy, banks and a post office
– Vibrant cultural/leisure destination for Marseille
Exclusive tenants
The important pre-letting shown by the scheme had already made Hammerson teams confident on its attractiveness for tenants.
During the redesign process led during the first 6 months of 2010, the letting process was put on hold. Nevertheless, in 6 months, 32 international, national and local brands have expressed strong interest for the scheme.
Even if retailers remain prudent in their expansion process, Terrasses du Port seems to be among the prime locations where the demand is maintained.
Since the acquisition of the project, Hammerson’s leasing team has benchmarked the letting status of the project against other regional shopping centres. This benchmark highlighted the lack of activities in the scheme such as Home Furnishing, Culture & Leisure, Snacking, or Services. A merchandising plan integrating these activities has been established.
The centre will include 5 main activities: •Food: different offers for workers, local residents and tourists•Fashion and beauty: establishing middle/high range brands •Home: a balanced commercial offer combining home-electronics, furniture and home accessories•Culture/Leisure: offer a vibrant destination for both tourists and locals•Services: a relevant offer of convenient services
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Lower Level – 70% let
Destination anchors (food supermarket, household equipment)
Basement4 Medium-Sized Units: Monoprix, Darty, Nursery/Toys and Home Furnishing.
These units will be directly linked to the ground floor main access and to the car park access.
Storage areas as well as the delivery area of the scheme are located on this level, in order to limit the impact on traffic.
The recent redesign of the main entrance and the vertical circulations enabled to improve the visibility of the anchors from the ground floor.
The general redesign process of the mall led to a more efficient leasing plan, while limiting the impacts on the leases already exchanged.
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Ground Level – 32% letA street level opened to the boulevard with a convenience offer to meet the expectations of new residents and workers in the district (snacking, florist, bank, pharmacy)
A market hall unique to Marseille with quality food offering
Ground FloorMain pedestrian access to the site.
This level is "opened" to the boulevard with an offer of convenience to meet the expectations of new inhabitants and employees of the district (snacking, florist, bank, pharmacy)
A unique market hall will host local and regional foods, inspired by its equivalent in Lyon or by the Borough market in London. This will give a local and exclusive touch to the project offer compared to its competitors.
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First Floor – 52% letThe main level, with a mid-range positioning. It comprises the fundamentals of the fashion offerwith the anchors and regional exclusives
First FloorThis level is focused on fashion, anchored by Decathlon, H&M, Sephora, Esprit, and 4 brands from the Inditex Group: Zara, Bershka, Pull&Bear and Stradivarius.
Mass market retailers are already well represented on this floor; vacant units will be focused on medium range brands that are exclusive to the region.
This level will be directly linked to the new Port station, and the pedestrians from cruises to Corsica and Sardinia will access the station through the centre during its opening hours.
DESIGN ENHANCEMENTVertical circulations / Main access organisationVertical circulations were not ideally positioned. The link with the underground car park was poor (constrained area with numerous obstacles). The retail areas in the lower level lacked visibility and daylight
An impressive volume was created, gathering all vertical circulations from the -6 car park level to the 2nd floor, creating a real entrance experience and favouring the customer flow to the upper levels.
The modification of the location of the main access increases the visibility of the perimeter.
New places at the cross of the malls favour the link in-between levels and create a more welcoming mall by the creation of rest areas, cafés and restaurant terraces…
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Second Floor – 16% letThe upper level comprises a high range offer in all sectors (fashion, accessories, culture and leisure activities, and home furnishing).
Second FloorWe will be focusing our efforts on high range brands on this level.
Local luxury jewellers Pellegrin & Fils were among the first to mark strong interest and discussions with other high-end brands are in progress.
Apple has chosen the project for its first store in the south of France. A 800 m² Apple store will open with a great sea view in an eye-catching unique ‘glass cube’.
More than 3,000 m² of restaurants will also benefit from the outstanding terrace view over the sea.
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Leasing Strategy - Second FloorA terrace with a fantastic view over the Mediterranean sea and a unique catering zone
Catering
The catering offer will represent 12 % of the total area of the project: - 8 restaurants on the 2nd floor, on the terrace with a sea view- 2 cafés on the 2nd floor, in the glass boxes with a view on the historic Docks building and the entrance atrium- 4 snacking points on the 1st floor- 6 restaurants in the market hall on the ground floor
DESIGN ENHANCEMENT:Terrace experienceThe indoor and outdoor terrace facing the Mediterranean is a key advantage for the scheme.
The zone was redesigned to make the most out of it.
Catering strategyThe terrace isn’t the only catering point throughout the centre. Cafés and fast food units will be spread along the mall and near the main circulations to create a more welcoming scheme.
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Risk Management
Reputable contractors: Vinci, Otis, Spie
Established relationship with Vinci (Vendôme Saint Honoré, 53 quai d’Orsay, O’Parinor)
GMP contract including milestones with penalties
Hammerson’s commitments with the Port transferred to the contractors
Cross fertilisation between English and French development teams
Experience of major development projects in the UK and France
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Commence enabling works August 2010
Main works start on site Q1 2011
Handover of units to the tenants Q4 2013
Opening Spring 2014
Timetable and Cashflow
€39 million 2009
€40 million 2010
€100 million 2011
€100 million 2012
€120 million 2013
€35 million 2014
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Key Figures
Total development cost €434 million1
Construction costs €280 millionNet rents receivable €32 million2
Development yield 7.4 %Expected footfall 14.5 m visitors p.a.Expected sales €360 m p.a.Retail rents (excl. turnover) €540/m²
Note:
1) Includes land and interest
2) Rental income net of rents payable
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Conclusion
Hammerson France well positioned
Excellent track record in France
Strong management team
French retailers remain confident
Strategy to develop the portfolio
Recycle capital and assess other pipeline assets
Les Terrasses du Port an exciting and unique opportunity
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Questions
Disclaimer
This presentation contains certain statements that are neither reported 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 in or implied by these statements.
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 and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national 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 revisions 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.
