A presentation at Hammerson & Value Retail Premium Outlet Retail 02.06.15 Kempen & Co’s 13th European Property Seminar
A presentation at
Hammerson& Value Retail
Premium Outlet Retail
02.06.15 Kempen & Co’s 13th European Property Seminar
Today’s visit
2
Kempen & Co’s 13th European Property Seminar2 June 2015
Agenda
Presenting today
11.15 Presentation and Q+A
12.00 Tour of Batavia Stad
12.45 Buffet lunch
13.15 Depart
Duncan AgarCOO, Value Retail
Timon DrakesmithCFO and Managing Director Premium Outlets, Hammerson
Octavia OverholserBusiness Director, Value Retail
Value Retail: Europe’s leading luxury outlet operatorDuncan Agar
COO, Value Retail
Premium Outlet Retail 3
01
Why do outlets exist?
4
Brands have surplus stock and need an efficient means to deal with it that does not compromise their integrity or image
5
• Authentic surplus stock
• At least one year old
• Same season
• Sold at a 33% - 70% discount
to full price
How does Value Retail service this need?The Value Retail Villages provide a high quality sales environment for goods that are:
Value Retail is Europe’s leading luxury outlet operator
6
Portfolio
9 Villages
€3.75 bn value
Locations
Proximity to Europe’s wealthiest cities
Close to major tourist attractions
Total Catchment
163m residents within 120 minutes drive
100m tourists p.a. to cities served by Villages
The Collection
172,000m2 of gross lettable area
Over 1,000 boutiques
Source: Value Retail
Value Retail was one of the first operators in the European market. Its first centre, Bicester Village, near Oxford, England, opened in 1995
Evolution of luxury outlets
7
Luxury outlet villages follow a pattern of evolution before reaching full maturity and achieving their highest potential sales densities
Village leased up with International and local brands.
Attractively designed Village opens in superior location.
Village becomes established in local markets.
Village remerchandised to bring in fashion brands. Brand selection increases. Units are split and average unit size decreases.
Village becomes established with international tourists and local opinion formers.
Village remerchandised to bring in luxury brands. Price points and selection increase.
Village sales density
Turnover / Royalty percentage
Time
Shopping Tourism
8
Growth in sales at luxury outlets is driven primarily by overseas shoppers
What do we mean by ‘Shopping Tourism’ ?
Customers at Value Retail’s European Villages include a large number of tourists
• Europeans on holiday
• Non-EU long-haul tourists from China, the Gulf, Russia, Latin America, India
• Three out of four Chinese tourists to the UK visit Bicester Village
• Chinese tourists at Bicester Village spend an average of £1,000 - £1,500 each (roughly 10
times the average for all visitors)
Ingredients for success in attracting tourists
• Location – close to major cities and complementary tourist attractions
• The right line-up of brands
• Marketing – websites, airlines, MICE, social media, tour organisers
• Services – foreign language signage, hands-free shopping, multilingual shop assistants, prayer rooms, VIP rooms, VAT cash refund booths
9
The ‘Travelling Luxury Consumer’ (Angela Ahrendts)
International tourism spend trends
10Source: Global Blue research on London tourist market
Chinese spend has grown rapidly
Trends in the London tourist market show Chinese visitors are a key source of growth and spending by Middle Eastern tourists has been resilient
International split of duty free sales, London
Global spending patterns in London vary - Middle Eastern spend resilient despite oil price, Russia recently impacted by currency
Average spend (2014)
Total spend, YoYgrowth (2014)
Qatar £1,479 +16%
UAE £1,145 -7%
Saudi Arabia £886 +8%
China £739 +6%
Russian Fed £668 -28%
Kuwait £588 +7%
Nigeria £586 -8%
USA £575 -8%
2009
2014
China
Middle East
Nigeria
Russian Fed
Other
China
Middle East
Nigeria
Russian Fed
Other
Highest sales densities (Bicester) £3,000/sq ft
Value Retail total brand sales growth +11% (2014)
Value Retail brand sales CAGR since 2006 +17%
2014 gross rental income +12%
2014 EBITDA +13%
2014 net assets +25%
Extensions to Villages will
drive further growth
11Source: Value Retail
Performance of Value RetailValue Retail has delivered consistent double-digit sales/NOI growth over nearly a decade
Hammerson: The only European listed REIT with exposure to Premium Outlets
Timon Drakesmith
CFO and Managing Director Premium Outlets, Hammerson
Premium Outlet Retail 12
02
Overview of European outlet market
13
The European outlet market has differentiating characteristics from other ‘traditional’ retail real estate markets
(1) Source: CBRE(2) Source: C&W
Total size c.150 outlets
Key players Value Retail; McArthur Glen; Neinver
Valuation yields (1) 6 - 8%
Sales/NOI growth (2) 7 - 9%
Lease structure High portion (50% - 80%) turnover linked
Ownership/management model Operationally intensiveHigh tenant rotationNot many operators with equity ownership
Overview of European outlet market
14(1) Source: ecostra; number in brackets indicates number of outlets(2) Source: ecostra (2013); see appendix for further information on the European country markets
0
5
10
15
20
25
30
35
40
UK has a large number of small outlets
The largest three players manage c.45% of the market and UK, Italy, France and Spain have the highest number of outlets
Total sales area (m2) (1)
McArthur Glen (20) Value Retail/VIA (15)
Neinver (15) Realm (10)
Concepts & Distribution (8) Other (c.100)
Market ownership is fragmented below the top players
Location of outlets (no. of outlets) (2)
Categorisation of European outlet market
15
The market can be broadly categorised by the customers it serves
Luxury Fashion
Mainstream fashion
High-street discounters <€3,000
€3,000
€30,000+ Increasing
sales d
ensities €/sq
m
VIA Outlets
Value Retail
Hammerson’s exposure to Premium Outlets
Invested since 1998
Hammerson exposure(1) : 38%
Leading operator of luxury Villages across Europe
9 Villages
172,000m2
16(1) Investment in associate, excluding goodwill
Value Retail : GAV £885 million
New in 2014
Hammerson exposure : 47%
Partnership between Hammerson, APG, Value Retail and Meyer Bergman
6 outlet centres
164,000m2
VIA Outlets : GAV £143 million
In order to grow our exposure to the outlets market we joined the VIA Partnership last year to acquire and improve existing European outlets
Growth through extensions to existing Villages Acquisition/turnaround strategy
Over £1bn now invested in Premium Outlets (13% Hammerson portfolio)
17
Hammerson portfolio by GAV Hammerson LfL NRI growth (2014)
Rental growth from Premium Outlets is over 3x the rest of Hammerson’s portfolio, significantly accelerating our rental income versus the rest of the European retail market
Source: Hammerson
Premium Outlets UK Shopping Centres
France Retail UK Retail Parks
7%
2%
Premium Outlets Rest of retail portfolio
VIA Outlets business strategy
18
Acquisition/roll-up of existing European outlets centre with growth potential
Acquisition focus Asset management opportunities
Strong tourist appeal/destinations Upgrade tenant mix
Major city catchments Rightsizing of units; more flagship spaces
Consumer appreciation of outlet shopping Extend centres where appropriate
Expand portfolio to around 15 centres Drive tourist traffic via global marketing and strategic travel partnerships
Target €1bn GAV (HMSO incremental c.£200m) Enhance 5* hospitality services and amenities
Retailer engagement before acquisition Re-engage with local catchment
Meyer Bergman evaluating pipeline Utilise VR digital platform
Batavia StadAmsterdam25,500m2 • 107 unitsAsset management:Upgrade tenant mix Extension
LandquartZurich21,000m2 • 90 unitsAsset management:Re-engage local catchmentIncrease luxury offer forinternational tourists
AlcocheteLisbon 55,700m2 • 170 unitsAsset management: Introduce higher qualityfashion retailers
VIA Outlets acquisitions to date
19
The partnership has acquired six outlets around Europe
1
4
3
5
2
6
3
4
2
1 KungsbackaGothenburg16,000m2 • 56 unitsAsset management:Higher quality fashion retailers
Fashion ArenaPrague25,000m2 •100 unitsAsset management:Upgrade tenant mix
ExcaliburChvalovice21,000m2 • 80 unitsAsset management:Reconfigure larger units to introduce more brands
5
6
VIA Outlets performance
20Source: VIA Outlets
KPIs as at March 2015
Year to date as at March 2015
Brand sales(YoY %)
Sales densities (YoY %)
Occupancy (%)
Alcochete 14% 16% 81%
Batavia Stad 7% 14% 92%
Excalibur 17% 20% 93%
Fashion Arena 10% 9% 96%
Kungsbacka 20% 21% 97%
Landquart 8% 5% 79%
TOTAL 11% 12% avg. 90%
VIA Outlets partnership
Hammerson APG Value Retail Meyer Bergman
Experience and focus area Pan-European retail
portfolio strategy
Investment management
Organisationalframework and governance
Long history of investing in outlets
Insight into pan-European retail property
Pipeline evaluation
World-leading outlet operator
Luxury retail relationships
Remerchandising and tenant rotation
Tourism marketing
Depth of acquisition experience
Retail property focused
Acquisition / disposal execution
21
Contribution of the VIA Outlets partners
Case study: Batavia Stad
Octavia Overholser
Business Director, Value Retail
Premium Outlet Retail 22
03
Batavia Stad
23
45 mins Schiphol airport (2014: 55m passengers)
60 mins Amsterdam and Utrecht by motorway
40 mins direct train from Amsterdam
Shuttle bus every 20 minsfrom train station
Markermeer public jetties walking distance
Strategic location
Catchment area:60 mins: 4.8m residents90 mins: 11.5m residents
Batavia Stad
24
Plan of Batavia Stad village
Total GLA 25,500m2
107 units
Key dates:• Opened 2001
• 2007 extend 5,500m2
• 2009 extend 5,500m2
• 2014 VIA acquisition
Extension scheduled to open Q3 2016• 5,500m2
• 45 new units
Batavia Stad
25
Over 200 of the latest brands
Adidas • Asics • Calvin Klein• Cavallaro • Converse • Denham • Desigual •
Gaastra • Gant • G-Star footwear • Guess • Helly Hansen • Hugo Boss • Lacoste
• Le Creuset • Levi’s • Lindt • Marc O’Polo • McGregor • Michael Kors •
Napapijri • Nike • O’Neil • Pepe Jeans • PME Legend • Protest • Puma • Polo
Ralph Lauren • Suit Supply • Superdry • The Society Shop • Tommy Hilfiger • Van
Bommel • Van Gils • Van Lier • Villeroy & Boch • Vingino
Batavia Stad
26(1) Source: Global Blue research
2014 highlights
Brand sales growth +12%
Sales density +13%
Footfall 2.3m (+4%)
Occupancy 97%
New highway signage
Façade changes to improve circulation
Three major hires• Tourism manager• Retail manager• Retail development
manager
Tax free sales growth +30%
Top three markets(1): China (+22%); Russia (+11%); Israel (+10%)
VIP programme launched
China Union Pay Card: 85% store acceptance
Batavia Stad
27
New brands in 2014
New Brands
Upcoming remerchandising (38 projects for 2015)
Leasing highlights in 2014 and 2015
Upsize:
Downsize:
Major façade changes and start phase 4 and 5 extensions
Landscaping and welcome roundabout signage
New logo, new website, interactive screens in mall
Shopping Express bus trial during July and August
New Information Centre
Electronic gift card and new marketing partnerships
28
Batavia StadKey initiatives 2015
29
Before
After
Before
After
Batavia StadFaçade changes
Batavia Stad
30
Plan of expansion
IIII
IVIVIVIV
VVVV
IIIIIIII
IIIIIIIIIIII
Batavia Stad
31
Renderings of expansion
Outlet market offers exceptional rental growth, 3x average Hammerson retail
Operating Premium Outlets successfully requires experience, skill and
relationships
Hammerson, Value Retail and the other VIA partners are combining skills and working closely together to build market share
Hammerson is the only European-listed REIT to give investors exposure to this opportunity
Our focus on being a pan-European retail specialist is enhanced by our
Premium Outlets portfolio
32
Conclusion and Q+A
Appendix
33
04
Value Retail European Villages
34
Bicester Village, LondonYear opened 1995GLA 22,700m2
Boutiques 136Catchment 30m
Kildare Village, DublinYear opened 2006GLA 10,900m2
Boutiques 65Catchment 4m
La Vallee Village, ParisYear opened 2000GLA 21,000m2
Boutiques 120Catchment 18m
La Roca Village, Barcelona Year opened 1998GLA 23,130m2
Boutiques 146Catchment 6m
Las Rozas Village, Madrid Year opened 2000GLA 16,500m2
Boutiques 146Catchment 6m
Maasmechelen Village, Brussels Year opened 2001GLA 19,400m2
Boutiques 109Catchment 41m
Wertheim Village, FrankfurtYear opened 2003GLA 20,900m2
Boutiques 120Catchment 21m
Ingolstadt Village, MunichYear opened 2006GLA 20,500m2
Boutiques 119Catchment 14m
Fidenza Village, MilanYear opened 2003GLA 17,400m2
Boutiques 103Catchment 21m
Hammerson’s investment in Value Retail
Holding companies 22% equity
Bicester Village
33
45
La Roca Village
23
35
Las RozasVillage
19
31
La Vallée Village
11
22
MaasmechelenVillage
13
24
FidenzaVillage
20
32
Wertheim Village
31
43
Ingolstadt Village
0
11
Kildare Village
3
14
50%
35
Village ownership via LPs (%)
Total Village ownership (%)
Hammerson €58m shareholder loan
Key to Hammerson ownership:
European outlet market location data
36Source: ecostra (data for the largest 15 markets in European area)
No of sites Retail sales area m2
Retail sales per 1,000 inhabitants (m2)
2013 2003
UK 35 36 515,000 8.4
Italy 23 4 492,000 8.2
France 17 12 256,000 4.1
Spain 16 9 207,000 4.4
Germany 9 3 127,000 1.5
Poland 9 1 134,000 3.5
Switzerland 6 4 88,000 11.4
Russia 3 - 70,000 0.7
Greece 3 - 46,000 4.0
Ireland 3 - 23,000 5.4
Netherlands 3 2 69,000 4.2
Portugal 3 1 82,000 7.8
Austria 3 1 75,000 8.9
Sweden 3 3 37,000 4.0
Czech Republic 2 - 39,000 3.7