Hammerson and Intu
Setting the new benchmark for European retail destinations
6 December 2017
intu Trafford Centre, Manchester Setting the new benchmark for European retail destinations
01 The improved business
A leading portfolio 02 03 Enhanced operating and development platform
Significant financial benefits 04 05 Conclusion and Q&A
2 Madrid Xanadú, Spain 01 The improved business
3 Creates a pan-European leading portfolio of high-quality retail and leisure property
Top-three pan-European retail focused REIT with total GAV of £21 billion (1) Increased exposure to higher-growth destination shopping centres A leading portfolio Better aligned to meet the needs of retailers in a multichannel world Combining Ireland and Spain, two of Europe’s fastest growing economies
Superior combined Apply best practice operating skills to unlock the performance potential of the enlarged portfolio operating platform Rigorous income-focused strategy
More differentiated Enhanced resources in events, customer service, online and brand destinations Better equipped to drive footfall and dwell time to deliver productive, attractive space for retailers
Strong development Deploy Hammerson’s expertise in delivering successful developments and extensions across the expertise combined development pipeline
Significant capital Clear rationalisation programme – at least £2 billion of disposals over the short to medium term recycling opportunities Reinvest into higher return opportunities – premium outlets, Spain, Ireland and developments
Earnings accretion expected Compelling Approx. £25 million p.a. cost synergies; further from operational efficiencies and refinancing financial benefits Strengthens Hammerson's consistent earnings and dividend profile
(1) Pro-forma GAV as at 30 Jun 2017, adjusted for Hammerson acquisition of Cergy 3, Paris and disposal of Place des Halles, Strasbourg, and Intu disposal of 50% of Madrid 4 Xanadú and 50% of intu Chapelfield, Norwich
Key transaction terms
All-share offer by Hammerson for Intu of 0.475 new Hammerson shares per Intu share, equivalent to 254p per Intu share (1) The offer Pro-forma ownership Hammerson/Intu 55%/45% Combined group to be listed on LSE and JSE
Board of the enlarged group will comprise: • David Tyler as Chairman • John Whittaker as Deputy Chairman • David Atkins as CEO Leadership and • Timon Drakesmith as CFO governance • John Strachan as Senior Independent Director The Board of the enlarged group will comprise six directors nominated by Hammerson and four directors nominated by Intu Expect to have experienced and diverse Board Relationship agreement in place with Peel Group (15% shareholder in enlarged group)
Conditional on Hammerson and Intu shareholder approval
Shareholder In aggregate, Hammerson has received support from Intu shareholders holding 50.6% (2) support
Includes irrevocable undertakings from (1) Based on Hammerson closing price of 534.5p 5 Estonia, Cheeseden and Crescent (2) Includes irrevocable undertakings from Peel Group and associates and Intu Directors , and a letter of intent from Coronation
Puerto Venecia, Spain 02 A leading portfolio
6 Attractive portfolio balance
Top-3 European retail platform Pro-forma enlarged group, GAV (£bn) (1) £21 billion GAV (1) (2) £820 million NRI £0.6bn £0.6bn £13.1bn £0.9bn
UK shopping centres (3) More high-quality retail and leisure destinations £2.0bn UK retail parks
18 centres over 1 million sq ft France
£2.0bn Premium outlets
Ireland Combining Ireland and Spain, £1.3bn two of Europe’s fastest growing Spain economies Developments & UK other
Close to 20% higher growth categories of Premium outlets, Spain, Ireland and developments (1) Recycle and reinvest into European growth markets
(1) Pro-forma GAV as at 30 Jun 2017, adjusted for Hammerson acquisition of Cergy 3, Paris and disposal of Place des Halles, Strasbourg, and Intu disposal of 50% of Madrid 7 Xanadú and 50% of intu Chapelfield, Norwich (2) Based on annualised NRI for 6 months ending 30 Jun 2017 (3) Darker blue indicating top-10 largest combined group ownerships in UK shopping centres by value
More relevant to ADD READING AND OSLO
retailers expanding Oslo (check which centres are not across Europe included as ‘largest’)
Aberdeen Gothenburg London Brent Cross, Croydon Italie 2, Les Trois Fontaines Paris Glasgow Madrid Xanadu, Las Rozas 14 Newcastle Barcelona La Roca Leeds European countries Dublin Manchester Frankfurt Wertheim Nottingham Dublin Dundrum, Kildaire Birmingham Manchester Trafford, Arndale Cardiff Oxford London Marseille Terrasses du Port Bristol Amsterdam 3 Wroclaw Birmingham Bullring / Grand Central, Merry Hill top-10 shopping centres Southampton Frankfurt Glasgow Braehead, Silverburn create a platform in Spain Brussels Bristol Cribbs Causeway, Cabot Circus Zweibrücken Prague Paris
Munich 43% Zurich of portfolio in top-20 European cities (1)
Spain Asturias Nice Milan
Ireland Porto Zaragoza Marseille Multichannel Barcelona France - experiential shopping centres Lisbon - convenient retail parks Madrid United Mallorca Kingdom - luxury premium outlets Seville 0.0 1.0 2.0 3.0 4.0 5.0 - online affiliate website 2018 2017 Intu largest shopping centres Hammerson largest shopping centres 8 Premium outlets (VR and VIA Outlets) 8 (1) Oxford Economics Add footnotes, what constitutes Note: largest shopping centres defined as those over 500,000sq ft ‘largest’? Bullring, Birmingham 03 Enhanced operating and development platform
9 Enhanced operating and development platform
Superior More Strong combined differentiated development operating destinations expertise platform
Rigorous focus on Harmonised customer Expertise in property best brand mix services and branding development and across centres extensions F&B experts Enhanced events and Enlarged development Sophisticated promotions pipeline commercialisation Complementary digital strategies – affiliate website and bespoke apps
Combination drives benefits for retailers, consumers and shareholders
10 Rigorous focus on best brand mix
Market -leading delivery
Rigorous focus on curating the right retail mix and brand adjacencies
Close retailer relationships
Leasing informed by dedicated consumer insights team
Future opportunities Rituals, Bullring Nespresso, Oracle New portfolio Combined leasing expertise with enhanced leasing regional structure opportunities: intu Braehead and intu Lakeside - curate category clusters and zones
intu Metrocentre - reconfigure large spaces and further improve brand adjacencies
Smiggle, Dundrum Skinnydip, Brent Cross
11 F&B experts
Market-leading delivery
Diversity and innovation in F&B leasing
Experienced F&B leasing team. Recent track record at Westquay, Victoria Gate and Silverburn
Close relationships with established restaurant brands as well as start-ups
Comptoir Libanais, Oracle Bill’s, Westquay Future opportunities
intu Trafford Centre – trial curated street food
intu Merry Hill – review and enhance current New F&B leasing F&B offer with extension opportunities:
Mowgli, Grand Central Franco Manca, Oracle
12 Sophisticated commercialisation
Market -leading delivery
Maximise income from pop-ups, digital screens, sponsored events and enhance customer experience What/where is this Invest in high quality design and fit-out to improve returns
Car park investment programme
Innovative approach to pop-ups
Amazing Chocolate Workshop, Brent Cross Beach bar pop-up, Oracle
Future opportunities
Roll out more sponsorship-led events
Introduce more regionally-themed events
Widen relationship with partners, e.g. AppearHere
Up Market, Bullring Mercedes pop-up, Oracle
13 Enhanced destinations for consumers
Harmonised branding and Enhanced events and Complementary digital customer service across centres promotions strategies
B2C branding Events Affiliate online platform
Customer service Sponsorship & promotions Bespoke apps
Driving footfall & dwell time, benefitting consumers, retailers and communities
14 Deploy development expertise
Strong development track record Intu development pipeline
Les Terrasses du Port, Marseille 62,700 sq m 7% YoC intu Lakeside intu Merry Hill
intu Watford intu Costa del Sol Victoria Gate, Leeds 37,500 sq m 6% YoC Add a lot more development Additional pipeline, UK and Spain £1.2 billion (1) – see p8&9 half year results release
(1) Timeframe 2017-2020 15
Disciplined capital recycling to enhance future growth
Rigorous portfolio assessment of enlarged group
Real estate characteristics Asset location (e.g. size) Occupier profile Financial performance Multichannel relevance Consumer proposition
Identified non-strategic assets At least £2 billion of disposals in short to medium term
Enhance growth prospects through reinvestment
16 Reinvestment opportunities across a wide range of higher return growth channels
Premium outlets Spain Ireland Developments
Sales density growth 11% Sales density growth 11% Market rental growth 5.4% (2) ERV growth 4-5% p.a. (3) Hammerson pipeline £1.5bn (4) (1) confirm p.a. p.a. (1) 2012 2017
Value €0.6bn €1.5bn 2.0 Retail 9 villages 9 villages
VIA €0.5bn 0 outlets Outlets 10 outlets
0.6 ) Puerto Venecia Dundrum Phase 2 Brent Cross London
bn 119,000 sq m (£ GAV at Hammerson share Hammerson at GAV 100,000 sq m 90,000 sq m 2012 30-Jun-17
Bicester Village extension Madrid Xanadú Dublin Central Les 3 Fontaines, Cergy 15% YoC 153,000 sq m 5 acres 33,000 sq m
(1) Value Retail sales density CAGR 2007-2016 17 (2) Retail property rental growth in 2016, according to Capital Economics as of Sep-17 (3) Hammerson’s published forecast ERV growth guidance (4) Total committed development cost for Brent Cross extension, Les 3 Fontaines, Cergy, and Croydon town centre redevelopment intu Eldon Square, Newcastle 04 Significant financial benefits
18 Potential to optimise capital structure and funding
Ongoing financial strategy Debt ratios (1)
Hammerson Intu Combined Hammerson financing policies unchanged Net debt £3.6bn £4.6bn £8.2bn
Maintain solid investment grade credit rating LTV 37% 45% 41%
Proceeds from £2 billion disposals used partially to reduce leverage
Adapt Intu credit/bank facilities to Hammerson’s cheaper and more flexible unsecured financing structure
Proactive approach to refinancing
(1) Pro forma net debt and LTV as at 30 June 2017, adjusted for Hammerson acquisition of Cergy 3, Paris and disposal of Place des Halles, Strasbourg, and Intu disposal of 19 50% of Madrid Xanadú and 50% of intu Chapelfield, Norwich
Optimising the enlarged group’s financing structure
Debt maturity profile at 30 June 2017 (£m) Selected Intu near-term debt maturities:
2000 Facility Drawn Maturity
1800 Convertible bonds £160m 2018
1600 intu Milton Keynes bank loan £140m 2019
1400 CMBS 2019 £20m 2019
1200 Sprucefield bank loan £33m 2020 1000 SGS bank loan £352m 2021 800 RCF £363m 2021 600
intu Trafford Centre loan £250m 2022 400
200 Convertible bonds £375m 2022
0 CMBS 2022 £50m 2022 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027- 2032- 2031 2036 Hammerson Intu Selected Intu near-term debt maturities Total £1,743m
Note: 2018 excludes convertible bonds repurchased since 30 June 2017; 2022 includes additional £250m intu Trafford Centre debt and only 50% of Madrid 20 Xanadú debt; 2024 includes intu Merry Hill refinanced loan
Strong income profile and superior growth prospects
Approximately £25 million run-rate cost synergies per annum; one-off integration cost of approximately £40 million
Opportunity for further cost savings from operational efficiencies and refinancing
Greater confidence in positive LfL NRI growth through enhanced operating platform Bullring, Birmingham Dundrum, Dublin
Earnings accretive in first full financial year
Anticipated dividend growth at least in line with Hammerson’s track-record
intu Trafford Centre, Manchester intu Lakeside, Essex
21 Indicative timetable
Announcement of transaction 6 December 2017
Hammerson/Intu full-year 2017 results announcement 26 February 2018 / 22 February 2018
Hammerson/Intu shareholder votes Q2 2018
Expected completion Q4 2018
22 Puerto Venecia, Spain 05 Conclusion
23 Setting the new benchmark for European retail destinations
TBC
Exciting milestone in Hammerson’s history
Enhanced growth prospects
More high quality retail destinations Victoria, Leeds
Superior retailer proposition
Better consumer experience
Strong earnings profile and dividend growth intu Trafford Centre, Manchester
24 Hammerson and Intu
Setting the new benchmark for European retail destinations
intu Trafford Centre, Manchester Appendices
26 Superior operating platform supports LfL NRI growth
Hammerson track record of operating performance:
Reported UK shopping centre LfL NRI growth (%) Reported UK shopping centre occupancy (%)
6 100
4 95 98 98 4.6 96 96 3.6 3.6 2 3.2 90 2.8 2.4 2.2 2.1 1.8 0 85 -1.9 -2.7 -2 -3.2 80 -4 75 2011 2012 2013 2014 2015 2016 2015 2016
Hammerson Intu Hammerson Intu
Superior operating platform Implement income focussed process
Greater confidence in positive LfL NRI growth
27 Platform of attractive retail and leisure destinations TBC – possibly move back to just Intu
Victoria Centre, Nottingham [ ] sq m [ ]m footfall Located in leading European cities
intu Trafford Centre, Manchester Bullring, Birmingham intu Metrocentre, Gateshead Bicester Village, Oxfordshire 183,300 sq m 126,900 sq m 195,800 sq m 28,500 sq m 31m footfall 35m footfall 21m footfall 6m footfall Well-invested
Braehead,Resilient Glasgow income profile 104,400 sq m 17m footfall Combination of in-town and out- of-town The Mall, Cribbs Causeway 99,900 sq m Arndale, Manchester intu Lakeside, Essex Dundrum, Dublin intu Eldon Square, Newcastle 12m footfall 148,600 sq m 133,300 sq m 123,800 sq m 125,400 sq m 42m footfall 25m footfall 18m footfall 34m footfall [ ]m total footfall
High brand recognition
St David’s, Cardiff Merry Hill 155,200 sq m 129,200 sq m Zaragoza, Spain Brent Cross, London Madrid Xanadú Les Terrasses du Port, Marseille 21m footfall 40m footfall 119,000 sq m 85,200 sq m 153,000 sq m 62,700 sq m 19m footfall 12m footfall 13m footfall 13m footfall
28 Top-three European retail REIT
Publicly listed European REITs by retail GAV (£bn)
35
30 29.5
25
20 20.6
17.4 15
Notes: EUR/GBP exchange rate of 0.89 as of 27-Nov-17 (1) Retail gross asset value only Source: Company reports 10 10.4 10.2
7.9 5 6.6 4.6
0 (1) (2) Unibail Rodamco Hammerson post- Klepierre Hammerson Intu Land Securities British Land Carmila transaction
Notes: Peer retail/shopping centre GAV based on latest reported financials. For Unibail, Klepierre and Carmila, numbers exclude transfer taxes and converted into GBP at exchange rates as of the balance sheet date 29 (1) Pro-forma GAV as of 30 Jun 2017, adjusted for Hammerson acquisition of Cergy 3, Paris and disposal of Place des Halles, Strasbourg (2) Pro-forma GAV as of 30 Jun 2017, adjusted for Intu disposal of 50% of Madrid Xanadú and 50% of intu Chapelfield Norwich Highlights of Q3 2017 trading updates
Hammerson (1) Intu (2) Occupancy 97% Occupancy 96%
Q3 leasing £6.8million (+17% vs. Q3 2016) Q3 leasing £13million (in line with Q3 2016)
• 4% above previous passing • 5% above previous passing
• 11% above ERV • In line with ERV
YTD rent reviews 7% above previous passing YTD rent reviews 10% above previous passing
UK in-store tenant sales flat; France in-store tenants sales Footfall +2% vs. Q3 2016; YTD flat vs. 2016 +5.6% Intu brand net promoter score consistently high at 70 Footfall outperformed benchmarks in both UK and France Disposal of 50% intu Chapelfield, Norwich for £148 million (5% NIY); in line with 31 December 2016 book Opening of Bicester Village extension and acquisition of value, small discount to 30 June 2017 book value Cergy 3, Paris “Anticipate positive like-for-like net rental income in 2017” [5/12/17 Disposal of Place des Halles, Strasbourg, completion of £400m 2017 disposal programme]
(1) RNS released 9 November 2017. Group figures including UK, France and Ireland shopping centres, and retail parks 30 (2) RNS released 2 November 2017 THIS PRESENTATION AND ITS CONTENTS ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION WHERE SUCH DISTRIBUTION IS UNLAWFUL. This presentation has been prepared solely for information and for use in connection with the acquisition by Hammerson plc (“Hammerson") of Intu Properties plc ("Intu"). For the purposes of this notice, "presentation" means this document, any oral presentation and any question and answer session by Hammerson or Intu during the presentations. The release, publication or distribution of this presentation in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about and observe any applicable requirements. This presentation is not directed to or intended for distribution to, or use by, any person or entity in any jurisdiction where such distribution, publication, availability or use would be contrary to local laws or regulations or require any registration or licensing within such jurisdiction. Any failure to comply with applicable requirements may constitute a violation of the laws and/or regulations of any such jurisdiction. To the fullest extent permitted by applicable law, Hammerson and Intu disclaim any responsibility or liability for the violation of such requirements by any person. This presentation does not constitute or form part of, and should not be construed as, investment advice or part of any offer, invitation or recommendation to purchase, sell or subscribe for any securities or the solicitation of any vote for approval in any jurisdiction and neither the issue of the information nor anything contained herein shall form the basis of or be relied upon in connection with, or act as an inducement to enter into, any investment activity, or the making of any investment decision. This presentation does not purport to contain all of the information that may be required to evaluate any investment in Hammerson or Intu or any of their securities. Any investment decision should be made solely on the basis of approved formal offer-related documentation to be released in connection with the acquisition, if made. Nothing in this presentation should be construed as constituting legal, business, tax or financial advice and any person considering an investment in Hammerson or Intu is advised to obtain independent advice as to the legal, tax, accounting, financial, credit and other related advice prior to making an investment. The presentation has not been independently verified and no representation or warranty, express or implied, is made or given by or on behalf of Hammerson or Intu or their directors, officers, subsidiaries, shareholders, affiliates, associates, employees, representatives, advisers or any person acting on their behalf ("Associates"), as to, and no reliance should be placed on, the accuracy, completeness or fairness of the information or opinions contained in this presentation and no responsibility or liability is assumed by any such persons for any such information or opinions or for any errors or omissions. Each of Hammerson and Intu and their respective Associates disclaims, to the fullest extent permitted by applicable law and regulation, all and any responsibility or liability whether arising in tort, contract or otherwise, which they might otherwise have in respect of any of the information in this presentation. No duty of care is owed or will be deemed to be owed to you or any other person in respect of the information in this presentation. The information in this presentation is provided as at the date of the presentation, is of a preliminary nature and is subject to change, without notice. Neither Intu nor Hammerson nor any of their respective Associates assumes any obligation to update or correct the information contained in this presentation (whether as a result of new information, future events or otherwise) or to provide you with any additional information, except as required by applicable law. This presentation and any materials distributed in connection with this presentation may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of Hammerson and Intu. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, “hope”, “aims”, “continue”, “will”, “may”, “should”, “would”, “could”, or other words of similar meaning. These statements are based on assumptions and assessments made by Intu, and/or Hammerson, in light of their experience and their perception of historical trends, current conditions, future developments and other factors they believe appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this document could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and you are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this presentation. Quantified financial benefits statements contained in this presentation relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies and which may in some cases be subject to consultation with employees or their representatives. The synergies and cost savings referred to may not be achieved, or may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. For the purposes of Rule 28 of the City Code on Takeovers and Mergers, the quantified financial benefits statements contained in this presentation are the responsibility of Hammerson and the Hammerson Directors. No statement in this presentation (including any statement of estimated synergies) is intended as a profit forecast or estimate for any period and no statement in this presentation should be interpreted to mean that earnings or earnings per share or dividend per share for Hammerson, Intu or the combined group of Hammerson and Intu, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share or dividend per share for Hammerson, Intu or the combined group of Hammerson and Intu as appropriate. To the extent available, the industry, market and competitive position data contained in this presentation have come from official or third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. While Hammerson and Intu believe that each of these publications, studies and surveys has been prepared by a reputable source, neither Hammerson nor Intu has independently verified the data contained therein. In addition, certain of the industry, market and competitive position data contained in this presentation are sourced from the internal research and estimates of Hammerson and Intu based on the knowledge and experience of Hammerson and Intu management. While each of Hammerson and Intu believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the industry, market or competitive position data contained in this presentation. You should not base any behaviour in relation to financial instruments
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