Hammerson PLC

LSE:HMSO

Earnings Call Transcript 2021-Q4

[Rita-Rose Gagné]

So,

hello,

everybody.

Good

morning.

Welcome

to

Hammerson's

2021

Full

Year

Results

and

my

first

full

year

with

the

company.

It's

great

to

be

able

to

welcome

some

of

you

in

person

this

morning.

This

time

last

year,

we

were

all

in

lockdown.

While

we

are

now

learning

to

live

with

COVID,

we're

aware,

however,

of

the

terrible

events

taking

place

in

Ukraine

and

we'll

be

following

this

closely.

Let me

run

through

our

agenda.

I

will

start

by

giving

you

an

overview

of

our

2021

priorities

and

achievements.

Himanshu

will

take

you

through

the

financials.

I

will

then

give

you

more

detail

on

our

operational

and

strategic

progress,

finishing

with

our

focus

on

the

future.

Let

me

start

with

what

we

said.

We

always

said

that

2021

was

going

to

be

a

challenging

year

and

a

year

of

change.

This

time

last

year,

I

set

out

our

priorities

and

agenda

for

the

years

to

come.

We

announced

a

review

of

our

strategy,

portfolio

and

operating

model,

while

at

the

same

time,

recognizing

the

need

to

strengthen

our

balance

sheet.

So,

what

did

we

do?

As

you

can

see

here

on

this

slide,

it

was

a

year

of

two-halves.

In

the

first

half

of

the

year,

we

focused

on

addressing

the

immediate

challenges.

Those

were

stabilizing

and

derisking

the

balance

sheet,

which

was

exacerbated

by

the

pandemic.

We

disposed

of

403

noncore

assets

and

refinanced

around

£940

million

of

debt.

This

includes

the

issuance

of

a

sustainably –

of

our

first sustainability-linked

bond.

We

concluded

a

strategic

and

organizational

review

that

clearly

identified

our

unique

position

and

the

important

value

creation

opportunities

within

our

prime

urban

estates

and

land

bank.

To

do

all

this,

it

was

clear,

however,

that

we

needed

radical

change

in

our

portfolio,

in

our

platform,

in

our

focus,

and

in

our

leadership.

The

second

half

of

the

year

was

all

about

execution.

So,

regaining

lost

ground

and

laying

strong

foundations

for

future

value

creation.

So, here's

what

we

did.

We

established

a

clear

path

to

execute

our

strategic

focus

underpinned

by

stronger

financial

discipline.

We

introduced

a

new

asset-centric,

customer-focused

model

across

the

business,

and

by

doing

so,

removed

layers

to

create

a

flatter,

leaner

organization.

We

disposed

of

a

further

£30

million

of

UK

noncore

assets,

simplifying

and

cleaning

up

our

portfolio

and

exchanged

our

share

of

Silverburn

for

£70

million.

Just

last

week,

we

completed

the

sale

of

Victoria

Leeds

for

£120

million.

That

gives

a

total

of

£620

million

since

I

arrived.

We

also

began

repositioning

our

core

assets,

actively

leasing

up

and

injecting

placemaking.

Last

but

not

least,

we

are

accelerating

plans

to

take

forward

our

development

sites.

So,

it's

clear

that

we

have

delivered

against

what

we

said,

but

we

know

there

is

more

to

do

and

significantly

more

opportunity

ahead.

Under

the

new

leadership,

a

lot

has

changed

at

Hammerson.

On

this

slide,

you

will

see

our

approach

to

disciplined

financial

management,

which

underpins

everything

we

do.

This

year

has

been

– we

have

seen

a

relentless

focus

on,

first

of

all,

realigning

our

portfolio.

Secondly,

on

leasing,

we

revised

leasing

policies

and

processes,

creating

better

data

to

drive

improved

performance,

speed

to

market,

and

cash.

Thirdly,

we

focus

on

cash

collections

with

daily

reporting

and

updates.

Four,

on

reducing

our

cost

base

through

our

route

and

branch

review

of

the

organization.

Fifth

point

is

on

our

approach

to

capital

allocation,

thinking

about

it

with

disciplined

underwriting

and

decisional

processes.

The

last

two

points

are

all

about

debt

management

and

maintaining

a

resilient

and

sustainable

capital

structure

throughout

the

cycle.

I'm

pleased

to

say

that

last

month,

we

secured

a

stable

investment

grade

credit

rating

reaffirmed

by

Moody's

as

a

result

of

all

this

work.

This

disciplined

financial

delivery

has

already

had

an

impact

on

our

financial

results,

which

Himanshu

will

now

walk

you

through.

Himanshu?

[Himanshu Haridas Raja]

Thank

you,

Rita-Rose,

and

good

morning

and

thank

you

again

for

joining

us

here

at

Kings

Place

this

morning

and

of

course,

on

the

webcast.

I

also

have been

at

Hammerson

for

nearly

a

year

now.

As

Rita-Rose

said,

it's

been

a

year

of

profound

change

during

which

we've

made

significant

financial

and

operational

progress.

You

can

see

the

highlights

here. NRI

was

£190

million,

up

12%

year-on-year.

Like-for-like

NRI

was

up

22%

year-on-year,

driven

by

stronger

rent

collections,

lower

bad

debt

charges,

and

increased

variable

income

from

turnover

rent,

car

parks

and

commercialization.

Rent

collections

for

2021

are

currently

at

90%

and

2020

collections

are

at

99%.

And-year-to

date,

collections

were

83%

for

2022.

And

consistent

with

what

I

said

at

the

half

year,

we

did

not

grant

any

material

concessions

in

the

second

half.

Adjusted

earnings

were

£81

million,

up

122%

on

2020,

benefiting

from

the

improvement

in

net

rental

income,

a

strong

recovery

at

Value

Retail,

and

the

lower

financing

costs

from

refinancing

and

our

debt

reduction.

Our

managed portfolio

is

valued

at

£3.5

billion,

down

21%.

And

when

you

look

at

that,

around

half

that

was

[indiscernible]

(00:07:00)

disposals,

benefiting

net

debt,

of

course,

and

about

half

from

valuations.

The

valuations

in

the

second

half

were

down

only

3%.

We

have

made substantial

progress

in

reducing

debt

and

strengthening

the balance

sheet. The net

debt

at

the

year-end

was

£1.8

billion,

19%

lower

and

LTV

is

39%

headline

and

47%

on

fully

proportionally

consolidated

basis.

Now,

let's

look

at

the

rest

of

the

numbers

in

a

bit

more

detail.

I

covered

the

headlines

already

so

additionally

[ph]



go

out

(00:07:37) on

the

slide. Premium

outlets

bounced

back

strongly

from

COVID

with

earnings

up

130%

year-on-year

up

£15.9

million

compared

with

£7 million

in

2020.

And

remember in

the

prior

year,

we

had

a

positive

£14 million

earnings

contribution from

VIA

Outlets

we

disposed

of

in

October.

So,

Value

Retail

[indiscernible]



(00:07:59)

and

I'll

return

to

Value

Retail

in

more

detail

later.

The

IFRS loss

is

£429

million,

the

key

driver

being

revaluation

losses,

which

has

slowed

in

H2

as

yields

began

to

stabilize.

NTA

per

share

was

down

22%

from

£0.82

to

£0.64.

Now,

to

the

adjusted

earnings

walk from

£36.5

million

to

£81

million

in

a

bit

more

detail.

As

you'd

expect,

NRI

is

up

£33.1

million

and

that

was

the

largest

element

with

growth

from

our

flagships

of

£25

million

and

a

further

£11

million

from

our

developments

in

other

portfolio.

During

the

year,

we

benefited

from

£17

million

of

one-offs

around

the

premiums

year-on-year.

And

most

of

that

space

either had

been

re-let

or

was

part

of

our

repurposing

plans.

Interest

was

better

by

nearly

£24

million

year-on-year,

benefiting

from

the

disposal

program

from

debt

reduction

and

refinancing

from

our

sustainability-linked

bond

and

our

RCF.

And

as

already

explained,

Value

Retail

had a recovery

of

£23

million.

Whilst

our

gross

admin

costs

posted

a

net

increase

of

£3.9

million,

we've

done

a

lot

on

cost

during

the

year,

which

Rita-Rose

has

already

referenced,

and

the

key

message

here

is

there

remains

more

to

do.

The

effects

of

the

disposals

of

the

retail

parks

portfolio

and

the

French

assets

in

H1

2021

and

VIA

in

late

2020

of £27

million

completes

the

adjusted

earnings

walk of

£81

million.

And

just

before

I

leave

this

slide, after

effect

of the

2021 disposals

and

surrender

premiums,

underlying

earnings

are

around

£52

million,

and

this

£52 million

acts

as

your

reference

point

for

2022.

Now,

let's

turn

to

the

balance

sheet

and

review the

NTA

per

share

walk.

The

key

takeaway

on

this

slide

is

that the

second

half

saw

a

more

modest

decline

of

£0.05,

£0.02

from

the

H2

revaluation

deficit

and

£0.04

from

the

scrip

dividend,

offset

by

£0.01

of

earnings.

The

total

dilution

from

the

scrip

was

therefore

£0.07

per

share

in

the

year.

Now,

turning

to

our

portfolio

valuations.

Going

from

left

to

right,

this

slide

shows

the

portfolio

summary

and

capital

returns.

On

the

left-hand

side,

the

yield

in

the

ERV

impact,

and

the

total

property

return

in

the

middle.

And

on

the

right-hand

side,

the

net

equivalent

and

the

net

initial

yield

ranges.

Again,

the

key

takeaway

is

the

contrast

in

performance

between

the

full

year

and

the

second

half.

Our

managed

portfolio

of

£3.5

billion

saw

a

double-digit

decline

of

11.3%

for

the

full

year,

but

only

2.4%

in

the

second

half,

and

it

was

good

to

see

yields

beginning

to

stabilize

in

the

second

half.

The

downward

pressure

on

ERVs also

began

to

abate

in

the

second

half,

down

only

2.5%.

And

this

was

underpinned

by

stronger

second

half

leasing

performance,

which

Rita-Rose

will

cover

momentarily

in

more

detail.

The

total

property

return

for

the

year

on

our

managed

portfolio

was

therefore

minus

6.7%

and

a

minus

3.9%,

including

Value

Retail.

On

the

net

equivalent

yields,

we

are

seeing

liquidity

returning

to

the

retail

investment

markets.

And

to

that

end,

our

assets

are

well

positioned

to

benefit

from

our

investment

in

reinvigorating

and

repurposing

our

existing

space.

And

the

valuations

on

our

Value

Retail

investment

remain

resilient.

Let

me

now

just

break

down

the

flagship

capital

returns

by

geography.

So,

the

minus

11.6%,

this

slide

shows

the

breakdowns

by

half

year

of

the

capital

returns,

giving

you

a

little

more color

around

the

trajectory

over

the

last

four

years.

As

you

can

see

from

the

pink

and

red

bars,

2020

was

the

worst

performing

year

due

to

the

impact

of

COVID-19.

But

by

the

time

we

get

to

H2

2021,

the

dark

blue

bar

on

the

right-hand

side,

the

rate

of

decline

in

capital

returns

has

markedly

slowed

in

each

of

the

three

territories.

I'm

taking

each

of

those

in

turn.

UK

capital

returns

were

down

16.7%

with

a

slowdown in

the

second

half,

helped

by

the

emergence

of

some

transactional

evidence.

From

the

peak,

UK

flagships

have

declined

by

62%

and

seen

an

ERV

decline

of

31%.

Net

equivalent

yields

in

the

UK

have

expanded

290

basis

points

to

7.7%.

In

France

and

Ireland,

the

rate

of

decline

from

peak

valuations

has

been

less

significant

than

the

UK,

particularly

on

ERV, reflecting

the

more

benign

occupational

markets

and

strong

leasing

performances.

The

net

equivalent

yields

in

France

and

Ireland

are

therefore

at

5%

and

5.3%,

respectively and feel

prudently

valued

when

compared

with some

of

our

European

peers.

Have

we

turned

the

corner?

There's

certainly an

emerging

consensus

that

yields

are

beginning

to

bottom

out

and

our

negative

reversion

is

modest

in

absolute

terms.

I

said

I'll

come back

to

Value

Retail

in

more

detail,

so

first,

to

the

Value

Retail

P&L.

Keying

off

from

the

loss

of

£7.1

million

from

Value

Retail,

GRI

improved

by

£26.4

million

in

2021.

I

remember

this

is

against

the

backdrop

of

all

the

villages

being

closed

and

minimal

rent

collected

in

the

first

quarter

of

the

year.

And

you'll

recall

that

Value

Retail

rents

are

largely

turnover

based,

and

we

saw

the

benefits

of

this

coming

through

in

the

numbers

with

stronger

brand

sales

and

footfall

as

villages

were

able

to

operate

with

fewer

to

no

restrictions.

The

villages

signed

288

leases

in

2021,

collection

rates

were

around

99%

and

occupancy

continues

to

be

around

96%.

Value

Retail

also

successfully

launched

a

wide

range

of

initiatives

aimed

at

their

domestic

audience,

including

virtual

shopping,

on

a

click-and-collect

basis.

And

these

initiatives

have

gone

some

way

to

mitigate

the

absence

of

tax

free

sales

resulting

in improved

spend

per

visit

year-on-year.

And

Value

Retail

also

showed

good

cost

discipline

as

property

operating

costs

increased

by

only

£3.3

million

year-on-year.

We

do

anticipate

a

continued

recovery

in

Value

Retail

in

2022,

particularly

as

they

expect

the

initial

return

of

the

international

traveler

in

the

second

half

of

2022

ahead

of

a

fuller

recovery

in

2023.

Let

me

now

turn

to

the

valuations

of

the

Value

Retail

portfolio

and

their

relationship

to

yield

and

density.

This

chart on

the

left

maps

each

village

by

sales

density

and

exit

yield

with

the

size

of

the

bubbles

reflecting

the

valuation.

The

sales

density

shown

here,

of

course,

is

2021,

which

is

a

reference

point

reflects

a

subdued

trading

due

to

periods

of

closure.

And

Bicester Village

stands

out

by

virtue

of

its

size,

followed

by

La

Vallée.

And

together,

these

account

for

approximately

60%

of

our

£1.9

billion

investment

in

Value

Retail.

There are

also

the

more

mature

villages

and

that

is

reflected

in

the

higher

sales

density.

The

less

mature

villages

such

as

Maasmechelen

and

Fidenza

are

at

the

lower

end

of

the

spectrum

in

terms

of

exit

yield,

sales

density

and

corresponding

valuation,

but

have performed

strongly

as

is

Kildare,

which

was

expanded

during

the

year.

Value

Retail

operates

very

much

at

the

premium

end

of

the

outlets

segment,

with

net initial

yields

of

4%

and

7%

and

an exit

yield

range

of

5%

to

6%

using

the

discount

rate

shown

here.

And

there

have

been

a

couple

of

transaction

reference

points

in

2021

which

support

these

valuations.

We've,

of

course,

seen

the

first

completed

sale

since

2019

of

outlets,

that's

Outlet

Aubonne

in

Switzerland

at a

7%

yield.

And

in

the

UK,

Bridgend

Designer

Outlet

and

UK

Outlet

Mall

are

also

currently

under

offer.

The

latter,

believes

to

be

a

reported

blended

yield

of

6%.

And

more

recently,

Quintain,

a

market

in

their

London

outlet

at Wembley,

with

a

reported

net

initial

yield

of

6%.

And

finally,

before

I

leave

Value

Retail,

they

have

made

good

progress

on

their

refinancings,

with

two

loans

refinanced

and

upsized

since

the

beginning

of

2021.

They

are

in

the

advanced

stages

of

the

refinancing

of

La

Vallée

and

expect

to

refinance

Bicester

in

the

ordinary

course

during

2022.

Now,

let's

turn

to

the

strengthening

of

our

balance

sheet.

I've

already

said

we've

made

significant

progress

in

bringing

down

net

debt

and

reported

net

debt

at

£1.8 billion

was

19%

lower

with

pro

forma

net

debt

starting

at

£1.6

billion

following

the

sale

of

Victoria

Leeds,

and

the

exchange

of

Silverburn.

We

have

strong

liquidity,

£1.7

billion

pro

forma, and

we

have

no

material

refinancing

until

2025,

not

covered

by

existing

cash

and

liquidity.

And

Rita-Rose

has mentioned

testament

to

our

progress. It

was

great

to

see

Moody's

recently

reaffirming

our

IG

credit

rating

and

removing

the

negative

outlook

to

stable.

And

turning

to

the

cost

base,

a

key

focus

in

the

second

half

was

to

reset

the

organization

and,

of

course,

following

due

an

appropriate

consultation,

reduce

the

head

count

by

18%.

We

retendered

and

reduced

our

insurance

premiums

by

64%.

And

we

saw

some

in-year

savings

in

payroll

costs,

but

these

were

offset

by

the

return

to

normalized

levels

of

variable

pay

following

minimal

payouts

in

the

2020

pandemic

here.

As

we

look

forward,

we

continue

to

review

our

organization

to

make

sure

we

have

the

right

skills

and

talent,

and

that

we

also

rightsize

for

the

effects

of

disposals.

And

for

those

of

you

physically

here

today,

we

of

course,

are

looking

to

rightsize

the

office

space and

there'll

be

further

opportunities

to

reduce

costs

as

we

simplify

and

automate.

And

this

will

drive

to

a

leaner

and

more

agile

company

for

the

future.

So,

to

my

final

slide,

let

me

close

by

giving

you

some

guidance

on

modeling

assumptions.

You'll

see

the

different

elements

of

the

very

detailed

guidance on here.

And

we've

provided

you

with

the

starting

GRI

stripped

of

disposals and

surrenders,

including

Silverburn

and

Leeds

and

that

rebased

GRI

is

£193

million.

If

you

take

each

of

the

components

from

disposal

through

to

finance

costs,

you

have

all

the

elements

that

give

you

the

drop

through

to

adjusted

earnings.

The

key

variable,

of

course,

will

be

the

magnitude,

timing,

and

exit

yield

on

disposals.

On

CapEx,

we

expect

2022

CapEx

of

around

£125

million,

balanced

between

the

reinvestment

and

repurposing,

in

placemaking,

and

in

stewardship,

stewardship

being

a

reference

to

the

need

in

some

of

our

assets

to

put

in

CapEx

to

make

up

for

underinvestment

in

previous

years.

Rita-Rose

already

talked

about

our

disciplined

approach

in

financial

management,

and

that

will

certainly

entail

in

our

deployment

of

capital.

And

finally

to

dividends,

we

continue

to

cover

our

outstanding

REIT

and

SIIC

obligations

for

our

scrip

dividend

in

2022

before

intending

to

return

to

cash

dividends

from

2023

onwards.

With

that,

let

me

hand

back

to

Rita-Rose.

[Rita-Rose Gagné]

Thanks, Himanshu.

So,

let

me

start

quickly

with

who

we

are

and

what

drives

us.

So,

we

are

an

owner,

operator,

and

developer

of

sustainable

prime

urban

real

estate.

Our

competitive

advantage

is

our

core

assets,

which

have

a

unique

city

center

footprint

illustrated

by

the

map

you

can

see

on

this

slide.

250

million

people

pass

through

our

assets

every

year. We support

more

than

40,000

jobs,

so

we

play

an

essential

role

in

our

communities.

Today,

that

portfolio

remains

focused

on

traditional

uses.

We

are

now

executing

against

a

clear

strategy

to

reposition

our

prime

urban

estates.

You

can

see

this

on

the

right

of

the

slide.

My

experience

from

other

international

markets

inspire

me

when

I

think

about

the

future

of

our

destinations,

a

more

asset-focused

mindset

and

a

broader

mix

of

uses

adapted

to

reflect

the

demands

of

the

cities,

neighborhoods,

and

the

communities

they

serve.

So,

this

is

a

real

opportunity

for

us

and

it's

already

happening.

At

the

half

year

we

set

out

our

strategy

to

unlock

value,

which

you

can

see

on

the

left

of

this

slide.

It

comprises

of

four

key

elements;

reinvigorating

our

assets,

accelerating

development,

creating

an

agile

platform,

and

delivering

a

sustainable

and

resilient

capital

structure.

On

the

right

of

the

slide,

you

can

see

our

near-term

opportunities,

which

include

maximizing

cash

flow

off

the

existing

asset

footprint

by

repositioning

and

filling

space.

Second,

generating

capital

to

reduce

net

debt

and

reinvest.

Third,

increasing

organizational

speed

and

efficiency,

also

further

reducing

costs.

And

fourth,

creating

value

and

optionality

in

the

land

bank

by

hitting

early

milestones.

In

the

medium

to

long

term,

we

will create value

through

the combination

of

our existing

assets footprint

and

adjoining

sites.

Our

ambition

is

to

deliver

a

total

return

via

a

sustainable

cash

dividend

and

capital

appreciation.

Turning

to

the

first

of

those

key

elements,

reinvigorating

our

assets,

we

have

had

a

strong

year

on

leasing.

Before

I

cover

that,

let

me

show

you

the

recovery

of

footfall

and

spend.

On

the

left-hand

side,

you

can

see

the

significant

uplift

in

footfall

following

the

relaxation

of

COVID

restrictions.

In

our

core

assets,

we

have

seen

footfall

increase

above

2019.

Spend

per

visit

has

also

remained

high

with

sales

recovering

almost

to

2019

levels.

As

sales

have

recovered

and

rental

levels

rebased,

occupancy

costs

are

now

affordable.

This

slide

shows

our

higher

leasing

volumes

and

improved

matrix,

particularly

in

H2.

Let

me

walk

you

through

a

few

data

points.

We

signed

a

total

of

371

leases

in

2021.

So,

it's

around

equivalent

of

20%

of

the

portfolio,

70%

up

on

2020.

This

represented

2.9

million

square

feet

of

space

by

value.

This

was

£25

million

at

our

share,

150%

up

on

2020.

Principal

leases

represented

71%

of

deals

and

94%

of

volume.

Net

effective

rent

for

principal

deals

was

11%

below

ERV

but

with

a

clear

improvement

to

minus

5%

in

the

second

half.

Overall,

headline

rent

was

broadly

in

line

with

previous

passing.

There

is

a

breakdown

by

country

in

the

additional

disclosures.

In

summary,

the

UK

remains

the

most

challenging

and

fast-moving

market.

But

even

there,

one-third

of

deals

were

above

ERV

and

41%

were

above

passing

rent.

France

continues

to

exhibit

stability

and

growth

and

the

Irish

market

is

strong.

But

this

year,

it's

skewed

by

a

small

sample.

As

we

continue

to

execute

our

strategy

to

actively

lease-up

and

increase

vibrancy,

we

are

targeting

now

a

broader

mix

and

saw

69%

of

leases

to

non-fashion

this

year.

For

fashion,

we

remain

focused

on

best-in-class

brands.

We

also

continue

to

use

temporary

leasing,

particularly

to

bridge

periods

between

deals,

keep

options

open,

or

try

out

new

concepts.

These

remain

at

a

steep

discount

across

the

portfolio

but

are

cash

accretive.

We

indeed

saved

around

£6.5

million

of void

costs

on

an

annual

basis

this

year.

As

for

vacancy,

this

has

reduced

from

7%

at

the

half

year

to

4.5%.

Momentum

continues

to

build

with

data

in

2022

showing

that

January

and

February

our

volume

of

leases

is

up

and

rents

are

now

in

line

with

ERV

and

ahead

of

passing

rent,

which

is

a

KPI

we

follow

closely,

which

I

call

internally

the

cash-on-cash.

So,

those

were

the

numbers.

On

the

following

slide,

I

want

to

talk

to

you

a

bit

about

what

it

looks

like

on

the

ground

with

a

samples

of

our

occupiers.

Our

leasing

activity

in

2021

is

roughly

grouped

into

six

leasing

themes,

which

you

can

see

on

the

left-hand

side.

For

asset

management,

we

engage

proactively

and

at

a

portfolio

level.

Next,

in

response

to

the

changing

landscape,

we

are

doing

big

box

repurposing

and

introducing

a

wider

mix

of

F&B,

leisure,

and

non-traditional

uses

to

these

spaces.

Commercialization

and

events

also

play

an

important

role

in

cash

flow,

creating

vibrancy,

and

we

trial

new

concepts.

I

could

talk

to

you

all

day

about

all

the

examples

on

this

slide,

we

had

a

lot.

In

the

interest

of

time,

I

will

stop

on

to

great

examples

that

cover

a

number

of

these

themes,

Goldsmiths

and

Brown

Thomas.

Goldsmiths

wanted

to

upsize

in

the

Bullring.

We

proactively

engaged

at

the

C-suite

level

to

gain

a

better

understanding

of

their

needs.

Today,

Goldsmiths

occupy

a

total

of

14

units

across

the

portfolio,

making

them

a

top

20

occupier

and

partner.

We

also

opened

Brown

Thomas

in

Dundrum

in

Ireland

last

week

in

the

House

of

Fraser

vacant

space.

This

62,000-square-feet

beauty

hall

and

lifestyle

brand

features

the

apartment,

a

lounge

for

luxury

shoppers,

and

a

range

of

other

innovations

such

as

vitamin

injections,

designer

handbag

exchange,

glad

rags

rentals,

etcetera.

Penneys

takes

over

the

remaining

floors,

making

this

an

exciting

and

innovative

retail

experience.

As

we

execute

our

strategy,

we

need

to

realign

obviously

our

portfolio

and

generate

capital.

On

this

slide,

I

will

take

you

through

our

disciplined

disposal

program.

As

we continue

to

follow

the

plan

set

out

at

half

year,

you

can

see

on

the

left-hand

side

of

this

slide

the

sales

in

2021

and

early

2022,

bringing

us

to

£623

million

of

disposals.

On

the

right,

we

have

our

two

buckets

of

disposal

candidates

with

both

in

the

near term

and

in

the

medium term.

Sales

will

depend

on

both

pricing

and

market

conditions.

We

anticipate

at

least

a

total

of

£500

million

by

end

of

2023,

and

that

includes

Victoria

Leeds

and

Silverburn.

Having

said

that,

you

will

see

on

the

next

slide

how

we

think

about

capital

allocation.

Today,

we

are

still

focused

on

reducing

in

total

absolute

indebtedness.

We

have

a

total

return

philosophy.

But

as

a

REIT, we

must

keep

or

meet

our

payout

obligations.

We

also

have

a

clear

intent

to

return

to

a

cash

dividend

once

our

SIIC

obligations

are

met,

and

that

was

covered

by

Himanshu's

guidance.

Next,

mindful

of

our

relatively

high

cost

of

capital,

we

will

look

continuously

at

our

capital

structure,

and

Himanshu

is

all

over

that.

Organic

investment

in

our

existing

core

assets

and

land

bank

means

we

could

consider

consolidating

our

core

assets

[ph]



and

markets (00:31:18).

We

remain

[indiscernible]



(00:31:20) the

opportunity

for

exceptional

[ph]



returns

arise (00:31:23).

Turning

to

creating

the

agile

platform,

which

is

another

key

element

of

our

strategy,

I

mentioned

at

the

start

that

we

have

enhanced

the

leadership

team.

You

can

see

on

the

left-hand

side

of

the

slide

the

new

skills

and

insights

that

supplement

our

existing

talent

within

the

business.

The

shape

of

the

leadership

and

[ph]



colleague

team

(00:31:48)

will

continue

to

evolve

as

we

realign

the

portfolio

requiring

new

skills.

It

has

not

only

been

about

getting

the

right

team

in

place

of

course,

but

making

sure

the

right

governance

structures

are

there

to

empower

and

support

colleagues

and

to

drive

a

high-performance

culture.

When

I

arrived,

decision-making

was

spread

across

more

than

30

committees,

and

today

we

concentrate

on

three.

Hammerson

was

at

an

inflection

point

when

I

arrived,

and

we

needed

to

reset

the

organization

to

be

more

efficient

and

effective.

I've

said

that

at the

half

year.

The

most

material

change

that's

derived

from

our

review

was

the

shift

from

a

geographic

silo

structure

to

an

asset-centric

and

customer-focused

operating

model.

This

new

structure

also

delivers

a

more

empowered

organization,

which

is

closer

to

our

assets

and

occupiers.

In

the

near

term,

we

are also

focusing

on

simplifying

and

automating

key

processes

to

improve

that

speed-to-market,

increase

efficiency,

and

speed

to

cash.

Staying

with

our

four

strategic

elements,

I

will

now

turn

to

accelerating

development.

Most

of

you

are

aware

of

the

opportunity

set

in

the

portfolio,

and

there

is

the

usual

slide

in

the

additional

disclosures

showing

the

potential

mix

of

uses.

I

wanted

to

give

you

a

sense

of

what

stage

we

are

at

with

each

of

these

projects

on

this

slide.

Today,

the

land

promotion

portfolio

can

be

divided

into

three

buckets.

First,

our

four

near-term

projects,

and

that

is

Dublin

Central,

The

Goodsyard,

Martineau

Galleries,

and

Grand

Central.

These

are

either

well

advanced

on

detailed

planning

or

will

be

able

to

be

advanced

rapidly.

Progressing

these

projects

in

the

near term

to

a

point

where

they

are

ready-to-go

development

opportunities

will

create

significant

short-term

value

and

optionality

as

to

how

we

take

them

forward

and/or

look

for

liquidity

or

deliver

partnerships.

Next

are

the

medium-term

projects,

which

are

largely

at

the

feasibility

or master

planning

stages.

Therefore,

more

midterm

prospects

in

terms

of

value

creation

and

liquidity

as

we

define

the

appropriate

project

and

phasing

to maximize

value.

Finally,

we

have

a

longer

term

strategic

project,

which

is

in

Ireland.

Let

me

show

you

a

bit

more

detail

on

the

four

near-term

land

promotion

projects.

These

have

potential

to

be

on site

as

early

as

2023, 2024.

On

the

left

of

this,

you

can

see

the

milestones

we

achieved

in

2021

and

what

you

should

look

out

for

in

2022

and

2023.

There's

a

lot

going

on

here.

But

the

key

message

is

that

this

is

relatively

capital-light

activity,

a

total

of

around

£73

million

over

the

next

two

years.

And

you

can

see

from

the

right-hand

side

that

this

delivers

an

immediate

valuation

uplift

of

approaching

£110 in

that

period.

There

is

of

course

a

very

significant

long-term

opportunity

on

top

of

that

with

potential

GDV

of

more

than

£2.5

billion

at

our

share.

But

the

near-term

work

gives

us

optionality

to

select

the

best

returns

for

the

shareholders.

Let

me

talk

now

a

few

minutes

about

sustainability,

which

is

a

key

focus

of

the

company

and

underpins

everything

we

do.

It's

a

very

important

topic

whether

we

are

thinking

about

embedded

carbon

in

future

developments

or

the

existing

emissions

footprint

to-date.

Hammerson

has

a

long-standing

and

recognized

commitment

to

sustainability.

Since

the

launch

of

our

goals

in

2015,

we

have

reduced

our

carbon

emissions

by

68%.

We've

already

talked

about

the

sector-first

sustainability-linked

bond

we

issued.

So,

let

me

pull

out

two

other

highlights,

expanding

renewable

energy

across

the

portfolio

this

year.

In

France,

we

connected

Terrasses

du

Port to

the

Thassalia

geothermical

(sic) [geothermal] system

for

heating

and

cooling.

We

also

installed

the

new

PV

array

at

Dundrum

in

Ireland.

Looking

ahead,

we

are

in

good

shape

to

meet

our

targets.

We

are

already

2023

compliant

with

EPC ratings

of

E

or

above.

We

estimate

the

total

cost

of

works

to

get

to

B EPC

ratings

at

£35

million

to

£50 million

spread

over

the

portfolio

as

is

across

eight

years

at

our

share.

Before

concluding,

I

wanted

to

show

you

how

we

bring

strategy

to

life,

and

Birmingham

is

a

great

example.

In

Birmingham,

three

assets

are

becoming

a

prime

urban

estate.

This

shows

you

the

near-term

opportunity

we

have

in

real

life.

Today,

you

can

see

Bullring

and

Grand

Central

in

the

middle

and

to

the

left.

A

marquee

project

on

this

journey

is

the

repositioning

of

a

former

department

store

space

to

a

flagship

grocery-led

offer

and

a

competitive

sports-led

leisure

concept.

This

will

be

in

place

by

early

2023.

We

are

in

early

stages

of

engagement

on

the

remaining

floor

for

another

new

leisure

concept.

This

is

about

revitalizing

interest

in

this

end

of

the

Bullring

for

both

existing

and

new

occupiers.

We

are

very

excited

about

the

leasing

pipeline

we

are

actually

seeing.

At

Grand

Central,

we

have

another

great

opportunity

to

repurpose

the

former

JLP

space.

And

at

Ladywood

House,

repurposing

will

see

a

modern

workspace-led

asset.

These

two

important

projects

sit

astride

New

Street

station,

the

main

commuting

hub

for

the

West

Midlands,

which

sees

almost

50

million

people

in

transit

in

an

average

year.

To

the

right

of

the

picture,

a

stone's

throw

away,

you

can

see

Martineau

Galleries.

Today,

this

site

is

a

collection

of

yielding

secondary

and

tertiary

assets.

Next

to

where

the

Curzon

Street

HS2

station

is

being

constructed,

it

has

tremendous

potential

as

a

residential

and

workspace

scheme

in

the

medium

to

long

term.

Linking

this

back

to

our

longer

term

strategy,

when

we

think

about

the

future

of

our

exposure

to

the

city,

we

think

about

Birmingham

estate,

not

about

three

separate

assets.

Taking

this

up

to

the

portfolio

level

now

and

to

give you

a

picture

of

our

aspirations,

by

bringing

together

the

near-term

repositioning

and

longer-term

opportunities,

you

create

a

clear

link

and

pass

the

significant

value

for

the

future.

On

the

left-hand

side,

you

see

the

shape

of

the

managed

portfolio

to-date

by

value.

Delivering

on

those

near-term

opportunities

brings

you

to

the

chart

in

the

middle.

A

stronger

balance

sheet,

reducing

debt,

and

recycling

into

our

existing

assets

and

land,

higher

quality

earnings

and

a

sustainable

dividend

stream,

further

repositioning

of

the

portfolio,

and

some

valuation

uplift

from

hitting

those

early

land

promotion

milestones.

On

the

right-hand

side,

you

can

see

the

indicative

shape

of

the

portfolio

in

five

years

or

so.

And

that's

a

fully

realigned

portfolio,

repositioning

of

those

assets

completed,

further

underpinning

the

earnings

and

the

blend

of

active

phased

development

to

core,

and

further

land

promotion

activity

is

possible.

During

this

journey

from

left

to

right,

we

will

create

absolute

optionality

about

which

opportunities

to

pursue

for

best

returns

for

the

shareholders.

There

remains

obviously

a

significant

earnings

and

capital

growth

opportunity

in

the

future.

To

my

closing

remarks,

under

new

leadership

we

have

addressed

our

immediate

priorities

and

delivered

on

our

early

milestones.

I

do

believe

Hammerson

has

turned

the

corner,

but

we

realized

and

recognized

we

have

more

to

do

and

that

we

continue

to

operate

in

a

challenging

market.

We

have

the

right

[audio gap]



(00:41:27), a

robust

strategy,

[audio gap]

(00:41:29)

and

operating

model.

Our

focus

is

relentlessly

on

reducing

vacancy

and

void

costs,

repurposing

space,

delivering

a

mix

that

occupiers

and

customers

demand,

and

unlocking

value

from

the

development

opportunities

in

the

portfolio.

As

we

continue

to

execute

our

strategy,

we

will

build

a

stronger

business

and

one

that

delivers

value

for

shareholders.

So,

thank

you

for

your

time

today.

I

will

now

open

to

the

floor

and

the

lines

are

also

open

for

questions.

Josh

will

be

taking

the

questions

online.

If

you

are

in

the

room,

please

raise

your

hand

and

there

is

a

microphone

that

will

come

to

you.

Thank

you

very

much.

[Rita-Rose Gagné]

Chris.

[Christopher Fremantle, Analyst, Morgan Stanley & Co. International Plc]

Hi.

[Rita-Rose Gagné]

Hi.

[Christopher Fremantle, Analyst, Morgan Stanley & Co. International Plc]

Good

morning.

This

is

Chris

Fremantle

from

Morgan

Stanley.

I

have

two

questions,

one

on

leasing

trends

in

the

UK

and

the

other

on

rebased

earnings

for

2022.

So,

on

the

UK,

I

think

you

gave

some

disclosure

in

the

back,

which

you

highlighted,

which

is

showing

that

the

leasing

activity

is,

in

the

UK

at

least

on

I

think it's

slide

40,

showing

that

the

leasing

is still

quite

a

long

way

below

ERV.

I

wonder

if

you

can

just

give

us

some

color

on

that,

please,

and

just

suggest

how

that

can

reassure

us

for

stabilizing

ERVs

in

the

UK,

if

that's

happening

or

not.

[Rita-Rose Gagné]

Okay.

[Christopher Fremantle, Analyst, Morgan Stanley & Co. International Plc]

So,

that's

the

first

question.

The

second

on

rebased

earnings,

I

think

you

gave

a

£52

million...

[Rita-Rose Gagné]

Yeah.

[Christopher Fremantle, Analyst, Morgan Stanley & Co. International Plc]

...number

for

rebased

earnings.

I

think

there

are

some

disposals

post

year-end

of

course,

which

you've

announced,

which

are

quite

high-yielding

disposals

and

which

I

think

have,

if

I'm not

wrong,

quite

big

impact

on

2022

earnings

as

well.

So,

I

wonder

if

you

can

just

give

a

little

bit

more

color

on

that.

And

particularly,

when

you

are

disposing

of

those

very

high-yielding

earnings

in

order

to

recycle,

can

you

give

us

some

color

about

the

yields

on

cost

that

you're

using

that

capital

to

recycle

into?

If

you're

disposing

7%

to

9%

net

initial

yields,

are

the

yields

on

cost

that

you're

reinvesting

that

capital

in

comparable

or

better?

Thank

you.

[Rita-Rose Gagné]

Great. Thank

you

very

much,

Christopher.

I

will

start

with

the

leasing

questions

for

the

trends

for

the

UK,

and

then

I

will

ask

Himanshu

to

take

on

the

rebased

earnings

and

I

may

come

back

with

a

few

things.

So,

just

for

the

UK,

you're

right.

I

mean,

there

is

the

UK

in

2021

still suffered

in

terms

of

ERV

and

passing.

What

you

have

to

know

however

is

that

there's

a

big

volume

of

deals.

And

in

H2

there

was

a

clear,

as

we

always

said,

a

clear

rebound.

So,

40%

of

our

deals

in

the

UK

were

over

passing

rent

and

about

35%

were

over

ERV.

And

obviously,

as

we

proceeded

in

the

year,

the

statistics

became

better.

The

other

thing

I

would

say

in

the

UK

is

that

we

did

do

eight

strategic

deals

in

the

year

that

were

below

ERV,

and

we

made

them

for

strategic

reasons

in

terms

of

wanting

to

occupy

some

part

of

the

asset

and

with

some

brands

that

we

absolutely

wanted

to

include

to

the

mix.

So,

that

has

potentially

skewed

the

statistics.

But

we're

clearly

seeing

the

trends,

ERV

declines

have

slowed.

I

would

also

tie

up

2022,

what

are

we

seeing

December,

January,

February.

Now,

we

are,

in

all

geographies,

well

ahead

of

passing

rent.

And

again,

passing

rent

for

me

is

very

important,

and when

I

say

well

ahead,

it's

over

20%,

and

same

thing

for

ERV.

And

that's

in

all

our

regions.

France

is

more

stability

and

more

growth,

but

the

UK

is

really

showing

a

strong

rebound.

And

I

think

that's

related

to

the

demand

coming

back

and

we're

starting

to

see

a

bit

more

tension

in

the

discussions

we

have,

sometimes

even

having

more

than

one

tenant

for

a

unit,

for

example.

And

the

retailers,

the

strong

retailers

really,

really

want

their

physical

space.

And

you're

starting

to

feel

that

they're

ready

to

pay

up

for

the

right

locations.

So,

the

volume

is

continuing

to

trend

very

well

for

January

and

February

2022,

and

we

think

for

the

year

to

come.

Himanshu,

do

you want

to

say

a

few...

[Himanshu Haridas Raja]

Yeah,

sure.

[Rita-Rose Gagné]

...things

on

the GRI?

[Himanshu Haridas Raja]

I

think

on

your

question,

Chris,

on the

rebased

earnings

and

disposals,

let

me

just

take

you

back

up

a

level.

The

disposals

are

about

realigning

the

portfolio,

first

and

foremost.

It's

about

reshaping

of

portfolio

for

the

future

where

we

feel

we

can

diversify

the

income

streams

for

the

future

and

really

have

those

urban

estates

for

the

future.

And that's

what

informs

the

disposal

strategy.

With

the

strengthening

of

the

balance

sheet,

of

course,

we

can

be

patient.

And

one

of your

modeling

challenge

is,

as

I

referenced,

is

what

might

the

timing

of

those

be.

But

I

think

you

had

a

follow-on

question,

which

is

really

about

the

recycling

of

that

capital,

which

is

all

about

capital

allocation.

And

Rita-Rose

shared

our

philosophy

on

that

capital

allocation.

And

it's

really

about

creating

that optionality,

which

Rose

referenced,

the

land

promotion

projects,

for

example.

But

she

also

referenced

the

near-term

ones.

We

use

Birmingham

to

illustrate.

But

we

see

those

opportunities

[ph]



to

rise

(00:47:57) across

the

portfolio.

And

then

we

referenced

in

Rita-Rose's

speech

also

there'll be

opportunities

on

the

balance

sheet

as

well.

So,

we're

mindful

of

cost

of

capital and

making

sure

that

as

we

recycle

that

capital,

we

create

those

options

for

the

future.

[Rita-Rose Gagné]

I

think

that's complete.

Thanks.

Hi.

[Paul May, Analyst, Barclays Investment Bank]

Hi.

Paul

May,

Barclays.

[ph]

Several (00:48:28)

questions

from

me.

The

first one

just

on

the

earnings

point moving

forwards.

I

think

you

started with

[indiscernible]



(00:48:36).

Let's

try

again.

[ph]



So,

here

we

go (00:48:45).

That's

probably

better.

Paul

from

Barclays.

Sorry.

Just

on

the

earnings

moving

forwards,

if

you

start

with

the

[ph]

£52 million (00:48:51),

I

think

you

get

to

quite

a

different

number

versus

the

building

blocks

that

you

gave

on

the

separate

slide

where

very,

very

quickly

you

just, all of a

sudden, you're

getting

to

around about

mid-70s

if

you

adjust

for all

the

various

things

that

you've

mentioned,

assuming

some

recovery

in

value

retail

and

other

things.

Just

wondered

which

is

the

best

start

point.

As

in,

do

you

look

at

the

[ph]

£52

million (00:49:10) or

do

you

look

at

the

slide

where

you

keep

the

building

blocks

and

the

guidance?

Second

one

just

on

the

gross

development

value

of

the

near-term

opportunities

that

you

mentioned

greater

than

£2.6

billion,

are

you

able

to give

any

guidance

as

to

what

the

CapEx

is

to

get

to

that

£2.6

billion

and

the

timeframe

over

which

you

might

be

able to

achieve

that

£2.6

billion?

And

then

finally

on

disposals

and

to

Chris's

point

about

selling

higher

yielding

assets,

obviously

France

is

something

I

think

you've

kind

of

highlighted

as

a

potential

exit,

stability

in

income

there,

yields

are

lower

there.

Is

that

something

that

now

you're

seeing

the

rebound

in

the

UK

you

don't

necessarily

need

France

to

kind

of

stabilize

the

numbers?

Is

that

something

that

you're

looking

to

actively

dispose

of?

Thank

you.

[Rita-Rose Gagné]

So,

thank

you

for

your

questions.

Himanshu,

maybe

take

the

first

one

on

the

earnings,

and

I'll

pitch

in

for

the

two

others.

[Himanshu Haridas Raja]

So,

Paul,

welcome.

The

issue

we

saw

with

the

[ph]



£52

million

(00:50:08) is you

got

to remember

all

the

periods

of

closure.

So,

in

giving

you

the

normalized

£193

million

GRI number

and

to

work

from

that,

our

base

assumption

is

that

we're

beyond

that

COVID

period.

Whether

[ph]



it's

us (00:50:23)

or

value

retail

villages

or

even

when

France

was

open,

they

had

a

period

where

there was

a

sanitary

pass

required

to

be

worn,

not

just

to

enter

a

shopping

center,

but

to

actually

enter

individual

stores,

which

they

then

relaxed.

I

was

in

Ireland

a

few

weeks

ago

and

actually

there

was

restrictions

as

recently

as

three

weeks

ago

with

closures

at sort of

8:00 PM.

So,

the

modeling

guide

is

around

the

normalized

GRI

going

forward

and also

helps

you

by

stripping

out

the

effect

of

Silverburn

and

Leeds.

Rita-Rose,

back

to

you.

[Rita-Rose Gagné]

Thanks,

Himanshu.

So,

on

the

second

question,

make

sure

I

understood,

you're

asking

what

are

the

near-term

CapEx

to

unlock

or

the

overall

program.

I'll

answer

both.

I'll

go

back

to

the

whole...

[Paul May, Analyst, Barclays Investment Bank]

It's

more

on

the

overall

program

to...

[Rita-Rose Gagné]

Yeah.

[Paul May, Analyst, Barclays Investment Bank]

...get

to

the

£2.6

billion.

[Rita-Rose Gagné]

Yeah.

So

yeah.

And

so,

the

overall

program,

the

gross

development

cost

is

about

£2.5

billion,

£2.6

billion

at

our

share.

What

I'd

like

to

say

here,

just

to

make

sure

we

state

this

clearly,

is

that

what

we

are

doing

at

the

moment

on

the

–

we

separated

this

year

in

three

buckets.

Those

land

promotion

projects

was

really

a

focus

at

the

moment

of

creating

maximum

value

short

term,

bringing

those

lands

at

a

point

where

we

will

have

the

opportunity

as

– optionality,

as

I

was

saying,

of

having

created

value

monetizing

or

determining

if

the

development

or

how

we

would

go

about

in

a

development.

At

the

moment,

there

is

a

lot

of

demand

around

those

developments.

So,

we

really

have

to

view

this

in

buckets,

the

short-term

value

and

then

the

decision

points,

what

we

crystallize

then

and

how

we

go

forward.

And

then

you

get

into

this

potential

of

£2.5

billion,

£2.6

billion

CapEx.

On

the

question

of

France,

France

is

a –

I

spent

a

bit

more

time

there

and

was

there

actually

recently.

France

is

a

market

at

the

moment,

which

we

have

four

assets.

We

have

two

assets

in

minority

holdings

and

two, Terrasses

du Port and Cergy,

two

strong

assets

in

which

there's

some

value

creation

to

do

that

we

would

like

to

capture.

At

the

moment,

the

portfolio

is

trending

very

well.

I

gave

stats

for

leasing

on

the

UK.

But

for

France

it's

very,

very

positively

and

the

reversion

is

positive.

ERV,

passing

rent,

there's

a

strong

demand.

We

want to

capture

that.

At

the

moment,

the

diversification

we

have

in

our

portfolio

with

UK,

France,

and

Ireland

has

served

us

very

well.

We

just

want

to

capture

maximum

value

there,

and

we'll

see

in

time.

But

at

the

moment,

for

us,

it's

a

good

contributor

in

our

portfolio

in

the

plan

and

the

time lines

of

what

we

have

to

do.

[Julian Livingston-Booth, Analyst, RBC Capital Markets]

Thank

you.

Good

morning.

[Rita-Rose Gagné]

Hi.

[Julian Livingston-Booth, Analyst, RBC Capital Markets]

It's

Julian

Livingston-Booth

from RBC.

Just

you've

highlighted

the

importance

of

the urban

estates

as

you

look

forward.

Maybe

you

could

talk

a

little

bit

about

the

decision

to

sell

the

shopping

center

in

Leeds

given

you've

got

significant

piece

of

land

nearby.

Did

it

make

it

harder

to

sell

those

shopping

centers

or

maybe

turn

it

around?

Does

it

make

you

less

excited

about

the

land

that

you

still

hold

there?

[Rita-Rose Gagné]

Okay.

If you

have

a

few

questions

in

there,

I'll

just

come

back

on

Leeds

and

Leeds

for

us.

The

strategy

we

have

is

to

repurpose

into

urban

estates

that

have

some

repurposing

potential

and

adjoining

land.

We

didn't

see

that

as

much

in

those

physical

assets.

Leeds

is

also

a

different

profile

of

leasing

that

had

a

bit

less

synergies

with

the

Hammerson

portfolio.

The

asset

have

[audio gap]



(00:54:31)

level

of

vacancy.

So,

it

was

a

question

for

us

of

looking

at

the

risk

return

[indiscernible]



(00:54:37) determining

if

we

wanted

to

have

that

in

the

portfolio

and

ultimately

others

–

it's

a

type

of

asset that

is

better

in

the

hands

of

others

than

in

the

hands

of

Hammerson

with

what

we

have

to

do.

As

for

the

land,

the

land

is

there.

It's

a

great

piece

of

land

and

we'll

see

in

time

what

happens

there.

[Rita-Rose Gagné]

Last

question

from

the

room,

so

we'll

hand

over

to

the

phone

lines

now.

[Operator Instructions]

[Operator]

The

first

question

comes

from the

line

of

Colm

Lauder

from

Goodbody.

Please

go

ahead.

[Colm Lauder, Analyst, Goodbody Stockbrokers ULC]

Good

morning

all,

and

thank

you for

taking

my

question.

I'd

like

to

ask, sort

of

see

your

– and

to

hear

your

views

around

the

market

rental

side.

And

obviously

particularly

when we

look

at

the

lead

that's

been

taken

from

the

UK

market,

obviously,

ERV

declines

have

been

more

advanced

in

those

markets,

and

we

look

at

how

the

capital

value

growth

story

played

out, obviously,

UK

moved

quicker,

Ireland,

and

then

France

followed.

I

just wanted

to

understand

your

view

in

terms

of

guidance

around

the

expectations

on

potential

future

ERV

declines

in

Ireland

and

France,

obviously,

acknowledged

that

[indiscernible]

(00:56:03)

are

probably

more

prime

than

the

broader

UK

side.

But

is

this

a

case

that

those

assets

are

stronger?

So

those

ERVs

are

being

more

resilient?

Or

is

it

a

situation

whereby

perhaps

those

markets

are

lagging

the

UK?

Thank

you.

[Rita-Rose Gagné]

Thank

you

very

much,

Colm.

So

well,

my

view,

overall

view,

and

it

also

comes

from

my

past

experience

of

having

worked

into

– in

the

markets

in

France

and

looked

at

investments

in

Ireland.

I

mean,

these

three

countries

have

very

different

profiles

to

them

in

terms

of

the

lease

profiles,

how

the

lease

are

structured,

the

supply/demand

of

the

retail

sector.

I

mean,

the

UK

is

oversupplied

and

has

had

a

history

of

the

big-box

department

stores,

which

you

didn't

see

in

France.

In

France,

the

big

boxes

are

convenience

and

food.

So,

the

assets

just

have

a

– there

are

less

retail

assets

in

France.

Let's

talk

about

France

more

particularly.

And

they're

just

composed

and

mixed

in

a

different

way.

And

again,

different

lease

structures

so

that

the

ERVs

have

obviously,

and

I

think

that

the

demand

is

strong

because

there

is

a

bit

less

demand.

So, I

know

there

is

this

debate,

will

France

join

UK?

My

opinion

is,

I

don't

really

think

so

because

it's

just

very

different

environments.

And

we've

just

went

through

a

period

where

there's

been

extreme

conditions,

UK

has

went

down

about

35%

to

peak

in

terms

of the

ERVs.

You

didn't

see

that

in

France

or

Ireland.

We're

at

ultimately

also

have

the

worst –

we've

seen

the

worst

in

France

and

Ireland,

in

terms

of

the

pandemic.

So,

I'm

not

saying

we

won't

see

additional

pain,

but

I

don't

think

we

can

correlate

totally

these

countries.

The

other

thing

is

that

I

have

a

bit

of

difficulty

painting

broad

brushes

when

we

talk

about

these

things

because

it's

really

the

more

and

more

specifically

in

our

sector.

It's

going

to

be

about

the

quality

of

the

asset

in

terms

of

the

mix

of

these

assets,

the

adaptability

of

these

assets

to

the

new

world,

basically.

So,

it's

going

to

be

very

specific

to

the

assets.

In

France,

we

have

two

assets

there.

One

in

Paris

and

one

very

close

to

Paris,

very

well

located

in

their

catchment

areas.

And

as

I

said,

flagship

in

Marseille

and

Cergy,

that

is

one

that

is

in

a

– is

a

lone

ranger

in

its

catchment

area.

So

a

great

mixed

use

asset

potential.

So,

I

think

we

really

start

– have

to

start

thinking

about

these

things

pretty

much

specifically

with

the

assets,

their

locations,

their

mix

and

how

they're

operated. This

is

my

view.

[Colm Lauder, Analyst, Goodbody Stockbrokers ULC]

Thank

you.

And

just

one

follow-on

question

just

also

looking

at

leasing

and

rental

trends.

And

it'd

be

good

to

understand

the

types

of

structures

that

we're

seeing

in

terms

of

the

demand

from

your

occupiers,

the

key

trend

of

the

market

had

been

or

is

the evolution

of

alternative

lease

structures,

turnover-linked

leases,

etcetera,

versus

more

traditional

open

market

rent

[ph]



filled (00:59:33)

structures.

If

we

look

at

that

good

volume

of

leasing,

which

you

concluded

over

the

period,

what

sort

of

changes

are

you

seeing

within

lease

terms?

Are

you

seeing

increased

occupier

demand

for

those

turnover-linked

or

perhaps

inflation

or

[ph]



fixed

uplift-linked (00:59:46)

style

leases?

Or

is

the

dominance

still

an

open

market

rent

reviews

given

that

ERVs have

fallen?

Thank

you.

[Rita-Rose Gagné]

Sorry.

The

technology

over

here

skewed

your

question

a

bit

but

I

think

your

question

has

to

do

about

what

we're

seeing

in

terms

of

demand

in

terms

of

types

of

structures

of

leases.

I

can

answer

to

that

question

on

the

side

of

the

demand,

but

I

also

– I'll

answer

the

question

on

the

side

of

what

we

want

to

do

on

our

portfolio

and

how

we

see

the

risk

profile.

So,

currently,

yes,

you

will

see

more

and

more

demand

pushing

for

turnover

[ph]

leasing (01:00:27)

turnover

rent.

And

that

may

be

good

in

some

cases

but

it

may

be

risky

in

other

cases.

And

in

the

case

of

Hammerson,

at

the

moment,

we

are

still

leasing

and,

leaning

towards

the

maximum

guaranteed

rent

with

some

performance

elements

to

it.

So,

the

majority

still

–

[ph]

that's

still

what

we

achieved (01:00:48).

And

I

think,

as

I

said,

it's

a

question

of

strategy

and

I

don't

think

we're

getting

paid

enough

to

be

capped on

turnover

rent

in

many

cases.

So,

that's

really

the

drivers.

[Colm Lauder, Analyst, Goodbody Stockbrokers ULC]

That's

perfect.

Thank

you

very much.

Next

question,

[ph]

Tom

(01:01:17).

[audio gap]

(01:01:18-01:02:03).

Thank

you.

[Rita-Rose Gagné]

Okay.

So,

there's

different

things

in

your

question,

just

very

quickly,

and

I'll

ask

Himanshu

to

pitch

in

on

some

elements.

But

the

view

on

earnings,

yes,

there

is

loss

of

income

with

the

sales,

and

that's

why

we're

proceeding

in

a

very

disciplined

way,

and

that's why

we

put

ourselves

in

a

situation

at

midyear

where

we

were

not

forced

to

sell

rashly

[indiscernible]

(01:02:32).

So,

it's

all

very

much

a

balancing

act

that

we're

achieving.

I

would

say

that

we

still

have

vacancy

on

the

portfolio.

So,

our

earnings,

we

do

want

to

increase

the

top

line

and

we

can

whatever

we

sell,

and

then

working

on

the

cost

structure

and

having

– and

working

on

having

strong

earnings

and

increasing

those

earnings.

So,

there's

different

elements

at

play

and

some

of

them

are

totally

under

our

control.

But

that's

how

I

think

about

that

earning.

And

also,

we

are

total

return

focused,

so

there's

the

earnings,

but

there's

also

this

thinking

about

we

do

want

to

create

capital

appreciation

in

the

portfolio

also,

so

that's

why

we're

managing

our

strategy

in

those

–

within

those

two

blocks

at

this

time.

In

terms

of

the

leverage

Value

Retail,

maybe

Himanshu,

you

want

to

say

a

few

words

on

that

one?

[Himanshu Haridas Raja]

Yeah,

for

sure.

Look,

we're

committed,

as

you

know,

to

an

IG

rating,

and

we

talked

about

both

a

resilient

and

a

sustainable

capital

structure.

For

us,

it's

not

about

a

specific

number

around

LTV,

we're

at

37%

pro

forma

today,

[ph]

it's right

number

35% (01:03:47),

it

depends

where

you

are

in

cycle

or

whether

it's

[ph]



33% (01:03:51).

But

I

think

behind

your

question

is

really

how

do

you

finance

the

longer

term

developments?

And

Rita-Rose

has

articulated that,

I

think,

really

strongly,

which

is

it's

about

land

promotion

projects

and

creating

optionality

and

that

pivot

point

when

we

reach

points

of

liquidity.

As

to

then,

do

we

follow

our

money

and

invest

or

do

we

take

liquidity

off

the

table? And

it's

about

total

returns

and

best

returns

to

shareholders.

Rita-Rose?

[Rita-Rose Gagné]

Well,

I

think,

does

that

answer

fully

to

your

question?

[indiscernible]

(01:04:29-01:04:37)?

[Rita-Rose Gagné]

If

I

understand

the

question

right,

you're

asking

us

if

the

sell

of

Value

Retail

is

still

in

our

options?

[Himanshu Haridas Raja]

Yeah.

[indiscernible]



(01:04:46).

Yes.

[Rita-Rose Gagné]

Okay,

great.

Listen,

on

that,

we –

I

think

we

showed

today

how

strong

the

rebound

has

been

in

Value

Retail.

And

we

expect

that

rebound

to

continue.

These

are

great

assets,

great

platform,

a

lot

of

people, the

sector

that's

very

much

in-demand

at

the

moment.

Investors

are

looking

for

that and

we

have

them.

And

we

want

to

benefit

from

the

value

that

is

getting

out

of

that.

Of

course,

this

is

a

very

strong

platform.

There

are

strong,

sophisticated

partners

in

the

platform.

And

there

is

always

for

that

types

of

assets

and

platforms,

there's

always

going

to

be

optionality

for

doing

whatever

we

want

to

do

in

terms

of

exits

eventually.

But

for

now,

we're

still

benefiting

off

that

rebound

in

the

portfolio.

And

it

just

goes

to

show

how

much

opportunity

Hammerson

has

in

its

portfolio.

The

last

thing

I

would

say

and

Himanshu

did

touch a

point

in

his

presentation

on

the

transactional

evidence.

When

I

say

these

assets

are

very

coveted,

we

just

saw

some

assets

come

to

the

market

at

about

6%

yield.

So,

we're

quite

happy

with

what

we

have

at

the

moment.

But

again,

it's

options

we

have

for

the

future

in

the

portfolio.

Thank

you.

[Joshua Warren]

We

are just

about

out

of

time.

But

there

are

a

couple

of

clarification

questions

from

[ph]



Michael

at (01:06:22)

Jefferies

online,

which

is

worth

covering.

First

is

the

CapEx

guidance

for

FY 2022

including

the

£35

million

cost

of

going

green?

And

then

second,

what

is

the

balance

sheet

liquidity

after

meeting

or

refinancing

and CapEx

obligations

to

December

2022?

[Himanshu Haridas Raja]

Thanks,

Josh

and

[ph]



Michael (01:06:42).

So,

Himanshu,

I

think

you're

well-positioned

to

deal with

this.

[Himanshu Haridas Raja]

So,

the

reference –

Good

morning,

[ph]



Mike (01:06:49).

The

reference

to

the

£35 million

to

£50

million was

that our

share

and

it

is

inclusive

because

that

£35

million to

£50

million

was

spread

over

eight

years

to

get

to

the

equivalent

of

EPC

B.

As

Rita-Rose

referenced, it's

actually –

we're

already

at

the

2023

standards

in

our

portfolio

with

the

vast

majority

stay

already

at

E.

Josh,

would

you

just

repeat

the

second

question

for

me,

please?

[Joshua Warren]

What

is

year-end

liquidity

after

meeting

CapEx

and

financing

obligations

for

December

2022?

[Himanshu Haridas Raja]

Well, look,

liquidity

today

is

£1.7

billion.

There

are

no

major

refinancings

till

2025

that

aren't

covered.

We

have

an

opportunity

to

refinance

with

cash

€235

million

bond

[ph]



part

call (01:07:46)

in

December

of

this

year.

And

that's

the

only

near-term

maturity.

The

next

maturities

are

in

the

USPP

portfolio,

it's

about

£140

million

of

our

£216

million

USPPs.

They

don't

come

available

till

actually

2024,

so

liquidity

just

remains

strong.

And

actually,

you

could

argue

after

where

this

business

has

been

over

the last

two

years.

Actually,

the

balance

sheet,

some

might

say

is

a

little

inefficient,

but

I

just

remind

people

where

this

business

was

two

years

ago

and

the

progress

made.

So,

high

liquidity

remains

through

2022.

[Rita-Rose Gagné]

So

I

think

–

I'm

told

that

there's

no

other

questions

at

the

moment.

Obviously,

you

all

know

Josh,

and

you

can

call

Josh

for

additional

information.

So

again,

thank

you

very

much

for

your

attention.

A

lot

of

information,

but

we

really

appreciate

your

presence

physically

here

in

the

circumstances

and

see

you

soon,

I

hope. Thank you.

[Himanshu Haridas Raja]

Thanks,

[ph]

Rose (01:08:53).