complex in a vibrant, open environment exactly the sort of approach - PDF document

Good morning everyone, and welcome to our 2010 results. I hope that as you arrived you appreciated that we are holding this presentation at a Hammerson development - Bishops Square is a great example of Hammerson in action… When we secured the site in 2000 everybody thought that this area was city fringe. We successfully secured a prelet, and created a grade A office complex in a vibrant, open environment – exactly the sort of approach that we intend to take with London Wall Place and Bishops Place, our two major office development schemes nearby. Then, as you know, we sold our remaining stake in the building late last year, recycling capital into other opportunities. 1

Now to this morning’s presentation itself I’ll give a quick summary before Simon runs through the financials, and I will give an update on how we are responding to current markets and an overview of progress we are making with developments. Now turning to the results… 2

This is a good set of figures… Profit is up 11% NAV is up 18% to £4.95 and there has been further continued growth in the dividend. So turning to the key drivers behind the numbers… 3

We have a clear strategy for the business and you can see that we have made excellent progress with its implementation. A focus on customers’ sales and cost control has lead to growth in our like -for- like income of 3.5%, and our targeted approach to securing tenants has increased occupancy to over 97%. The ongoing review of each of our assets and rigorous portfolio management has lead to us executing nearly £800 million of acquisitions and disposals, equivalent to 15% of the total portfolio, and we have further enhanced our growth prospects by progressing developments. Looking forward, our financial flexibility will allow is to secure acquisition opportunities without having to sell first. And we have created new partnerships in the year, working with both the National Pension Service of Korea and Allianz, forming joint ventures in two our French centres. Now looking specifically at some of our transactions…

In 2010 we realised over £550 million through the disposal of mature assets, and reinvested some £220 million. Portfolio management is a continuous exercise, and therefore you should expect to see further transaction activity from Hammerson. A couple of weeks ago we announced the acquisition of SQY Ouest, a shopping centre adjacent to our Espace Saint Quentin centre near Paris. We secured it at an attractive price from a motivated seller. Our French team can use their local expertise to improve the tenant mix and restructure the centre. Plus, we can provide a common marketing and management approach to both SQY Ouest and Espace Saint Quentin. Furthermore, I’d expect SQYOuest to show very good returns, well above the 9% cash yield on purchase, and I think that it is a good indication of the type of deal that we are looking for. I should also note that at the end of the last week we agreed terms to buy out Teachers at Falkirk retail park, a £70m deal at 6%. Let me say a few words about the background in which we are operating, and why despite a challenging macro environment Hammerson is in a strong position… 5

1. There is strong investor demand for property, driven by the attractive pricing in comparison to other asset classes. However, investors are very much focused on the quality income streams that prime property provides. By contrast secondary properties are suffering structural high vacancy which has an impact on rentals levels and thus values. Of course this in itself may create selective opportunities for Hammerson. 2. Banks are unwilling holders of property, and are keen to reduce their exposure. There is a consequent lack of finance available for property transaction. However, Hammerson’s unsecured financing and industry expertise, puts us in a strong position. 3. Despite the mixed economic backdrop many retailers are doing well, and hence looking for space in strong trading locations. A lack of new retail supply is encouraging them to look at reconfigured space in the best existing centres or moving to high quality retail parks. Against this backdrop, we have the right properties to attract thriving businesses, management expertise to identify and capitalise on changing trends, particularly in retail, and that’s why we have negligible vacancy compared to the market in general. I’ll expand on how we are doing this in practice after Simon’s presentation… 6

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For properties that we have owned throughout the last two years, like for like growth in rental income was 3.5%. Our French portfolio showed a small decline whilst we saw strong growth in our UK Shopping Centres. Although we benefited from the fact that both Bristol and Leicester are maturing, established centres such as Brent Cross and The Oracle also showed good growth in at around 8.5%. There is clearly a differentiation in the UK between strong trading locations and retail sector averages.

Adjusted Profit before tax increased by £14.5 million to £144.5 million. The main reasons for this increase were: £m Lower interest costs including fees 12 Lower overhead costs, net of management fees 4 Rent reviews, reduced vacancy and higher 7 carpark and commercial income Partly offset by Net effect of disposals and acquisitions (6) Prior year developments change and other factors (2) £15m We recognise that disposals may dilute earnings in the short-term, pending reinvestment. The dividend for the year is 15.95 pence, well covered by adjusted earnings per share of 19.9 pence.

Net debt reduced by £330 million in 2010 to £1.8 billion at the end of the year. This reduction reflected the fact that we realised £190 million more from disposals than we spent on acquisition and development; our operating cash flow was strong and exchange translation – movements were favourable. Net asset value per share at the end of 2010 was £4.95… an increase of 17.6% or 74 pence per share.

… is analysed here. The portfolio revaluation generated an increase of 63 pence per share across the portfolio. 11

Strengthening demand during 2010 from investors for prime property has been reflected in lower yields in every sector. As you can see our average yields improved by 80 basis points in the UK and 30 basis points in France 12

In the year the capital return was 9.3% and the total return 15.0%. In the UK, 90% of the uplift in value was attributable to lower yields but encouragingly we also benefited slightly from improved rental values. The capital return of 13.2% from UK shopping centres compared with 10.2 % for IPD and the 12.4% growth in retail parks compared with 9.6% for IPD. You will see that our capital return in France was 1.9%. This was reduced by two things. First, the loss of £19 million on the Parinor and St Quentin disposals. Secondly, our valuers have allowed £20 million for the cost of planned refurbishment expenditure. Turning now to our financing.

In the short term we have very little debt maturing, £38 million in 2012 and £175 in 2013. However, our three principal bank facilities, which are currently largely undrawn, mature in 2012 and 2013. We will start to refinance these in the first half of 2011. In 2011, capital expenditure on development, will be around £145 million with a further £180 million next year, although the latter would increase if we are successful in securing a prelet at either of our City projects.

Both our balance sheet and our cash flow credit measures are healthy. Interest cover in 2010 was 2.6 times and the ratio of net debt to EBITDA was 7.2 Around 80% of the value of French assets is hedged. Importantly we do not rely on the secured debt market, which continues to be difficult, but borrow on an unsecured basis. Accordingly, we start the new year in a strong financial position. 15

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Thanks Simon A moment ago I talked about our strong position, particularly because of the quality of our assets. As you can see here we are nearly 90% retail focused, with some of the very best shopping centres and parks in the UK and France. We also have some excellent offices in London, which we will add to as we take forward developments over the next few years. In both our retail and office portfolio in the UK and France, we have a well diversified range of successful tenants on long leases. 17

As you know I have a strong personal focus on growing income from our portfolio and this starts with letting space. Over the course of the last year we have halved vacancy in our UK portfolio, and kept occupancy at very high levels in the French portfolio. These vacancy figures remain significantly below the industry average, particularly in UK retail where market vacancy remains well over 10% and rising. Our approach is helping us not only improve occupancy levels, but we have been signing leases at robust rental levels. In the second half overall UK leases were signed 1% below ERV, with those in France 2% above. Putting that into context we secured overall new rents of £11.5 million up by £55,000 above last ERV. Where we have completed rent reviews in the UK retail portfolio, the average uplift was 20%, generating £2.3 million of additional annual income. So how are we creating this retailer demand? 18