Only a year ago Retail Rocks 2013 Stairway to Heaven or Road to - PowerPoint PPT Presentation

Only a year ago… Retail Rocks – 2013 – “Stairway to Heaven or Road to Hell?” Great scepticism about secondary assets and especially retail Panellists and speakers concluded: • Markets always over-correct. • Timing is absolutely right • “We certainly see buy - side opportunities… in conjunction with greater market stability / rebased rents and yields.” James Watson, BCL June 24 th – Ellandi & Tristan acquired Folkestone 9% NIY

A lot can happen in a year at Ellandi… New Team Members

A lot can happen in a year at Ellandi… New Partners

A lot can happen in a year at Ellandi… Powerful Partnerships

A lot can happen in a year at Ellandi… New Schemes

Ell llandi Portf tfolio Current Portfolio Community SC’s 11 GAV £285m NOI £25.3m IRR 22% RoE 1.9 x Av. Cash on Cash 14.5% Av LTV 57%

A lot can happen in a year at Ellandi… New Schemes New Ideas

A lot can happen in a year at Ellandi… Same Old Fashioned Values

What do does th the fu futu ture hold? • Polarisation of retail – winners are the top destinations and local convenience shopping • UK consumer confidence at its highest in seven years. 75% of the growth over the last 11 years expected in the next 4 years • Significant population growth and income growth forecast for the UK. Translates to increased retail spending • Ageing population are affluent, shop closer to home and are better connected to local community • Fastest growing retailers are positioned towards the local and discount sectors • Click and collect likely to evolve as dominant internet fulfilment route – relies on local store presence Stores Affected by Administration 7,000 6,536 5,793 6,000 5,000 3,951 4,000 2,600 3,000 2,469 2,500 2,000 944 1,000 204 0 2007 2008 2009 2010 2011 2012 2013 2014 (to March)

COMMUNITY SHOPPING CENTRES ARE HOME TO THE SUCCESSFUL RETAILERS

Why Now? 4.50% - 4.25% (2.54) 4.00% (3.45) (5.00) (5.27) (5.50) (6.27) 3.50% 3.50% 3.50% 3.00% (10.00) 2.50% 2.50% 2.40% (15.00) 2.00% 2.00% 1.89% (19.09) Yield Gap 1.50% (20.09) (20.00) 1.25% 1.25% (22.45) Long Run 1.00% 0.90% 0.75% Average (25.00) 0.60% 0.50% Consumer Confidence (28.54) (28.72) (28.72) 0.00% (30.00) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Return to a Traditional Investment Hypothesis • UK retail sector has reached the bottom. Stabilisation is evident in both investment and occupational markets • Sector poised to benefit from improving UK economy and consumer sentiment • Yet, not all assets have the same prospects - Ellandi view Community rather than Comparison • Community Shopping Centres play to the strengths of the discount & convenience sectors, the growth segment of UK retail • With good portfolio construction and expert asset management Investors stand to benefit from rental growth, asset management gains and cyclical yield tightening

Mark Robinson – Investment Director

The In Inte ternet t The future of shopping?

“Can the Internet Save the High Street” Panellists

What is is a Community Shopping Centre For us it is: • Preferably the only shopping centre in the town • Is the prime retail pitch • Contains 30% of the retail footprint • Dominates the 10/15 minute drive time catchment • Must have a centre management team • The potential to re-invigorate wider town with complementary uses

Sta tat t of f th the Day – The Futures Bett tter Valu lue

Shopping Centres At the heart of their communities

Market Plac lace Kett ttering Meet and drink

Council Off ffices St t Austell Council offices, one stop shop and library

Regus Express Town centres, a place to do business

Micro Manufatcuring The future of retail 3D Printing?

Communities are re Made Up p of f People Our people are the key

“Shopping Centres at the Heart of Communities” Panellists

ELLANDI’S 3 RD ANNUAL RETAIL CONFERENCE THE INTERNET: A SIDE SHOW OF A SIDE SHOW? 19 th June 2014

ONLINE EATS BRICKS & MORTAR SHOPPING… [Marc] ‘Andreessen predicts the death of traditional retail . Yes: absolute death ’, [by 2020] Pando Daily January 30, 2013 2

BEFORE DUMPING YOUR GROCERY SHARES… We are spectacularly bad at predicting technology impact  1872 Aaron Montgomery Ward, the first mass market mail order operator, predicts the end of store shopping  1900 John Elfrith Watkins predicts that shopping in the future will be delivered by pneumatic tube 1966 Time Magazine predicts that ‘remote shopping will flop’   1977 Bob Circosta presents first TV shopping programme; end of store retailing predicted  1998 Webvan predicted ‘ to dominate grocery retailing’  1999 Thomas Friedman predicts the demise of Amazon 2007 Steve Balmer, Microsoft: ‘iPhone has no chance’   2013 Marc ‘Andreessen predicts the death of traditional retail . Yes: absolute death’ by 2020 ( Pando Daily January 30, 2013 ) 3

ALSO USELESS AT PREDICTING ONLINE SALES… A very strong proclivity to grossly exaggerate… City analysts, retail consultants, property 10.37 consultants, academics, data publishers, trade bodies, internet promoters… 4

LOW-HANGING FRUIT – THE EASY INTERNET WINS Where the internet is the fulfilment channel 1. Electronically transferable services (finance, travel agency, etc.) 2. Electronically transferable goods (music, video, software, etc.)

LOW-HANGING FRUIT – THE EASY INTERNET WINS Where home Where the internet delivery and click & collect is the fulfilment channel is the fulfilment channel 1. Electronically transferable services 1. Non-store sales (finance, travel agency, etc.) (mail order, TV shopping, store orders etc.) 2. Electronically transferable goods 2. Branded commodities (electricals mostly) – price comparison led (music, video, software, etc.) 3. Groceries

WHERE INTERNET SALES HAVE COME FROM Transfer of transaction point…sometimes fulfilment point as well 15.29 Grocery Non-Food 47.39 Traditional Non-Store 37.32 Channels Source: ONS (2013)

RATE OF INTERNET SALES GROWTH DECLINING Tangible goods markets are a more difficult nut to crack Initial easy-win Tangible goods growth phase Electronically transferable Heavy logistics cost investment and mail order transfer growth phase Margin diluting Downturn Logistical Cost Barrier Low Hanging Fruit 33.5 32.5 30.9 28.5 25.4 25.4 18.0 16.4 16.0 15.0 14.5 13.1 10.8 9.2 8.2 7.3 4.1 4.0 3.3 2.9 2.9 2.7 2.5 2.4 2.4 2.5 1.6 1.5 1.3 1.3 1.2 0.8 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Online Growth Total Retail Growth Source: Conlumino

THE QUESTION  What is the internet doing to space demand?  What proportion of online sales will be diverted from stores?

MULTI-CHANNEL FULFILMENT 2009-2014 CHANGE % of consumers ever used (online respondents) Click and collect (store) Click and collect (delivery point) Deliver to work Deliver to neighbours Deliver to home -5 0 5 10 15 20 25 Per Cent Source: Cunlumino

ONLINE SALES 2013 Current split Retail Sales 2013 1.80% 10.37% 87.83% Source: ONS Direct store sales Online Traditional Non-Store

STORE DEPENDENCY Because of home delivery logistical costs… Retail Sales 2020 Store Non-store Mail order, TV shopping, store ordering dependent pure-play online (ASOS, OCADO etc), 5.10% 6.35% non-store click and collect etc 5.25% Store sales; mobiles in-store; 83.30% click and collect; in-store orders Source: ONS, Conlumino Direct store sales Click & Collect Showrooming Non-Store

TOP 50 GLOBAL CHAINS: INVESTMENT INTENTIONS Rate of growth determined by rate of investment… Source: CBRE

THE QUESTION  What is the internet doing to space demand?  What proportion of online sales will be diverted from stores?  So why is click and collect winning out over home delivery?

THE FLY IN THE OINTMENT Difficult to claw back home delivery costs from consumers Home delivery Normal shop Multiple trips and Single trip multiple ‘pick -costs ’ Customer pays Currently for trip and pick heavily subsidised costs by store retailers