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 - 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 2
Hammerson Team David Atkins Timon Drakesmith Lawrence Hutchings Andrew Berger-North CEO CFO Managing Director Director Retail Parks UK Retail Morgan Bone Simon Betty Colin Farrow Director of Corporate Investor Relations Manager Assistant Director Communications Retail Parks 3
Hammerson Retail Focus Convenience Comparison Luxury 4
Retail Trends & Responses 26 September 2011 Lawrence Hutchings
Hammerson Retail Portfolio Group 36 retail assets 71% UK, 29% France UK 2,300 shop units 170 million visitors per annum £2.4bn of sales each year* 69 leases signed H1 80 rent reviews signed H1 6 * shopping centres only
Consumer Trends 1. Globalisation 2. Convenience 3. Experience 4. Value 5. Technology 7
Consumer Trends to Property Solutions Hammerson Retailer response Consumer trends response Prime Retail Globalisation Consolidation Venues Retail Parks Convenience Flexibility Click & Collect Exciting brands Experiential Experience Leisure retail Events Value Polarisation Customer strategy Marketing initiatives Technology Multi-channel Improved websites Path Intelligence 8
Hammerson Retailer response Consumer trends response Prime Retail Globalisation Consolidation Venues Retail Parks Convenience Flexibility Click & Collect Exciting brands Experiential Experience Leisure retail Events Value Polarisation Customer strategy Marketing initiatives Technology Multi-channel Improved websites Path Intelligence 9
1. Globalisation 10
1. Retailer Consolidation 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 11
1. Retail Consolidation Clear shift from secondary shop units to primary shop units Strongest demand is for MSU’s (8-10,000 + ft 2 ) Bespoke units < 1,500 ft 2 Retailers now occupy 300,000 units (1973: 473,000) Retailers can generate 50% of profit from their 5 best stores
Hammerson Retailer response Consumer trends response Prime Retail Globalisation Consolidation Venues Retail Parks Convenience Flexibility Click & Collect Exciting brands Experiential Experience Leisure retail Events Value Polarisation Customer strategy Marketing initiatives Improved websites Technology Multi-channel Path Intelligence 13
2. Convenience 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 14
Hammerson Retailer response Consumer trends response Prime Retail Globalisation Consolidation Venues Retail Parks Convenience Flexibility Click & Collect Exciting brands Experiential Experience Leisure retail Events Value Polarisation Customer strategy Marketing initiatives Technology Multi-channel Improved Websites Path Intelligence 15
3. Experience 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 16
Hammerson Retailer response Consumer trends response Prime Retail Globalisation Consolidation Venues Retail Parks Convenience Flexibility Click & Collect Exciting brands Experiential Experience Leisure retail Events Value Polarisation Customer strategy Marketing initiatives Technology Multi-channel Improved websites Path Intelligence 17
4. Value – Polarising Consumer Spend 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 18
4. Customer Strategy 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 19
4. Asset Lifecycle Investment in customer proposition Development Maturity Value Add Recycle Rental Acknowledge asset lifecycle Growth 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 20
4. Development and Extension Sequencing Near Term Longer Term Committed Les Terrasses du Port £305m France Faubourg St.Honoré £2m Principal Place Office £290m London The Goodsyard Principal Place Residential £195m London Wall Place £345m Eastgate Quarters, Leeds £550m UK Retail Sevenstone, Sheffield £290m Brent Cross Cricklewood Extensions Portfolio Extensions/Redevelopments £335m 2011 2015 2016 2012 2013 2014 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
Hammerson Retailer response Consumer trends response Prime Retail Globalisation Consolidation Venues Retail Parks Convenience Flexibility Click & Collect Exciting brands Experiential Experience Leisure retail Events Value Polarisation Customer strategy Marketing initiatives Technology Multi-channel Improved websites Path Intelligence 22
5. Technology Social & Digital Driving Footfall Maximising Customer Sales Media Marketing Targeted to demographic Single platform websites Path Intelligence Self-proliferating Mobile enhancement Vente Privee Cost effective Click & Collect 23
Oracle Twitter screen grab 24
Consumer Trends to Property Solutions Hammerson Retailer response Consumer trends response Prime Retail Globalisation Consolidation Venues Retail Parks Convenience Flexibility Click & Collect Exciting brands Experiential Experience Leisure retail Events Value Polarisation Customer strategy Marketing initiatives Technology Multi-channel Improved websites Path Intelligence 25
Conclusion 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 26
Repositioning the Oracle 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 27
Retail Parks Portfolio 26 September 2011 Andrew Berger-North
Retail Warehouse Consumer Demand 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 29
Retail Warehouse Investment Market ERV Growth Equivalent Yield (%) Transaction Volumes (£bn) 105 (Dec 2010 = 100) 6 5 8 100 4 7 3 6 95 2 5 1 90 4 0 08 09 10 11 12 13 14 15 2005 2007 2009 2011 2013 2015 2005 2006 2007 2008 2009 2010 2011 Retail Warehouses All Retail Retail Warehouses 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 Source: PMA, CBRE, Property Data 30
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