26 september 2011b2de0febdea80fa78eb4-5cad31df697fe43d78c0459eba68b1d4.r36.c…at harwell under...
TRANSCRIPT
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
Globalisation ConsolidationPrime Retail
Venues
Convenience FlexibilityRetail Parks
Click & Collect
ExperienceExperiential
retail
Exciting brands
Leisure
Events
Value Polarisation Customer strategy
9
Consumer trends Retailer responseHammerson
response
Technology Multi-channel
Marketing initiatives
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
Globalisation ConsolidationPrime Retail
Venues
Convenience FlexibilityRetail Parks
Click & Collect
ExperienceExperiential
retail
Exciting brands
Leisure
Events
Value Polarisation Customer strategy
Consumer trends Retailer responseHammerson
response
Technology Multi-channel
Marketing initiatives
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
Globalisation ConsolidationPrime Retail
Venues
Convenience FlexibilityRetail Parks
Click & Collect
ExperienceExperiential
retail
Exciting brands
Leisure
Events
Value Polarisation Customer strategy
Consumer trends Retailer responseHammerson
response
Technology Multi-channel
Marketing initiatives
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
Globalisation ConsolidationPrime Retail
Venues
Convenience FlexibilityRetail Parks
Click & Collect
ExperienceExperiential
retail
Exciting brands
Leisure
Events
Value Polarisation Customer strategy
Consumer trends Retailer responseHammerson
response
Technology Multi-channel
Marketing initiatives
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
Globalisation ConsolidationPrime Retail
Venues
Convenience FlexibilityRetail Parks
Click & Collect
ExperienceExperiential
retail
Exciting brands
Leisure
Events
Value Polarisation Customer strategy
Consumer trends Retailer responseHammerson
response
Technology Multi-channel
Marketing initiatives
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
Oracle Twitter screen grab
24
Consumer Trends to Property Solutions
25
Globalisation ConsolidationPrime Retail
Venues
Convenience FlexibilityRetail Parks
Click & Collect
ExperienceExperiential
retail
Exciting brands
Leisure
Events
Value Polarisation Customer strategy
Consumer trends Retailer responseHammerson
response
Technology Multi-channel
Marketing initiatives
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
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
Future Asset Improvement Initiatives
Cramlington | Northumberland
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:
− 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
Profit on cost c.40%
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
Total development cost £17 million
Profit on cost c.13%
Yield on cost > 7%
IRR > 30%
Program:
− Open A1 Planning consent granted Q4 2010
− Vacant possession Q4 2012
− Commence construction Q4 2012
− Practical completion Q2 2013
37
Merthyr Tydfil | South Wales
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:
− Secure anchor lettings Q4 2011
− Submit planning application Q4 2011
− Commence construction Q4 2012
− 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
Key Financials
48
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
- 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
Total development cost £42 million
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