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A presentation at
02.06.15
Kempen & Co’s 13th European Property Seminar
Hammerson
& Value Retail
Premium
Outlet
Retail
Today’s visit
Kempen & Co’s 13th European Property Seminar
2 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 Agar
COO, Value Retail
Timon Drakesmith
CFO and Managing Director Premium Outlets,
Hammerson
Octavia Overholser
Business Director, Value Retail
2
01
Value Retail:
Europe’s leading
luxury outlet
operator
Duncan Agar
COO, Value Retail
Premium Outlet Retail
3
Why do outlets exist?
Brands have surplus stock and need an efficient means to deal with it that does not compromise
their integrity or image
4
How does Value Retail service this need?
The Value Retail Villages provide a high quality sales environment for goods that are:
• Authentic surplus stock
• At least one year old
• Sold at a 33% - 70% discount
to full price
• Same season
5
Value Retail is Europe’s leading luxury outlet operator
Value Retail was one of the first operators in the European market. Its first centre, Bicester
Village, near Oxford, England, opened in 1995
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
6
Evolution of luxury outlets
Luxury outlet villages follow a pattern of evolution before reaching full maturity and achieving
their highest potential sales densities
Village remerchandised to
bring in luxury brands. Price
points and selection increase.
Village remerchandised to bring in
fashion brands. Brand selection
increases. Units are split and
average unit size decreases.
Village leased up with
International and local
brands.
Village sales
density
Turnover /
Royalty
percentage
Village becomes established
with international tourists and
local opinion formers.
Village becomes established in
local markets.
Attractively designed Village opens
in superior location.
Time
7
Shopping Tourism
Growth in sales at luxury outlets is driven primarily by overseas shoppers
8
What do we mean by ‘Shopping Tourism’ ?
The ‘Travelling Luxury Consumer’ (Angela Ahrendts)
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
International tourism spend trends
Trends in the London tourist market show Chinese visitors are a key source of growth and
spending by Middle Eastern tourists has been resilient
Chinese spend has grown rapidly
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
2009
Average
spend (2014)
China
Middle East
Nigeria
Total spend, YoY
growth (2014)
Qatar
£1,479
+16%
UAE
£1,145
-7%
Saudi Arabia
£886
+8%
China
£739
+6%
Russian Fed
£668
-28%
Middle East
Kuwait
£588
+7%
Nigeria
Nigeria
£586
-8%
USA
£575
-8%
Russian Fed
Other
2014
China
Russian Fed
Other
Source: Global Blue research on London tourist market
10
Performance of Value Retail
Value Retail has delivered consistent double-digit sales/NOI growth over nearly a decade
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
Source: Value Retail
11
02
Hammerson: The
only European listed
REIT with exposure
to Premium Outlets
Timon Drakesmith
CFO and Managing Director Premium
Outlets, Hammerson
Premium Outlet Retail
12
Overview of European outlet market
The European outlet market has differentiating characteristics from other ‘traditional’ retail real
estate markets
Total size
c.150 outlets
Key players
Value Retail; McArthur Glen; Neinver
Valuation yields
(1)
Sales/NOI growth
6 - 8%
(2)
7 - 9%
Lease structure
High portion (50% - 80%) turnover linked
Ownership/management model
Operationally intensive
High tenant rotation
Not many operators with equity ownership
(1)
(2)
Source: CBRE
Source: C&W
13
Overview of European outlet market
The largest three players manage c.45% of the market and UK, Italy, France and Spain have
the highest number of outlets
Market ownership is fragmented below
the top players
UK has a large number of small outlets
Total sales area (m2)
Location of outlets (no. of outlets)
(1)
(2)
40
35
30
25
20
15
10
5
McArthur Glen (20)
Value Retail/VIA (15)
Neinver (15)
Realm (10)
Concepts & Distribution (8)
Other (c.100)
(1)
(2)
0
Source: ecostra; number in brackets indicates number of outlets
Source: ecostra (2013); see appendix for further information on the European country markets
14
Categorisation of European outlet market
The market can be broadly categorised by the customers it serves
Value Retail
Luxury Fashion
Mainstream fashion
€3,000
VIA Outlets
High-street discounters
<€3,000
Increasing sales densities €/sq m
€30,000+
15
Hammerson’s exposure to Premium Outlets
In order to grow our exposure to the outlets market we joined the VIA Partnership last year to
acquire and improve existing European outlets
Value Retail : GAV £885 million
VIA Outlets : GAV £143 million
Invested since 1998
New in 2014
Hammerson exposure(1) : 38%
Hammerson exposure : 47%
Leading operator of luxury Villages across Europe
Partnership between Hammerson, APG, Value
Retail and Meyer Bergman
9 Villages
6 outlet centres
172,000m2
164,000m2
Growth through extensions to existing Villages
(1)
Investment in associate, excluding goodwill
Acquisition/turnaround strategy
16
Over £1bn now invested in Premium Outlets (13% Hammerson portfolio)
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
Hammerson portfolio by GAV
Hammerson LfL NRI growth (2014)
7%
2%
Premium Outlets
UK Shopping Centres
France Retail
UK Retail Parks
Premium Outlets
Source: Hammerson
Rest of retail portfolio
17
VIA Outlets business strategy
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
18
VIA Outlets acquisitions to date
The partnership has acquired six outlets around Europe
1
2
3
4
Batavia Stad
Amsterdam
25,500m2 • 107 units
Asset management:
Upgrade tenant mix
Extension
4
1
Landquart
5
Zurich
21,000m2 • 90 units
Asset management:
Re-engage local
catchment
Increase luxury offer for
international tourists
Alcochete
Lisbon
55,700m2 • 170 units
Asset management:
Introduce higher quality
fashion retailers
6
Gothenburg
16,000m2 • 56 units
Asset management:
Higher quality fashion
retailers
5 Fashion Arena
Prague
25,000m2 •100 units
Asset management:
Upgrade tenant mix
2
3
Kungsbacka
6
Excalibur
Chvalovice
21,000m2 • 80 units
Asset management:
Reconfigure larger units
to introduce more brands
19
VIA Outlets performance
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%
Source: VIA Outlets
20
VIA Outlets partnership
Contribution of the VIA Outlets partners
Experience and
focus area
Hammerson
APG
Value Retail
Meyer Bergman
Pan-European retail
portfolio strategy
Long history of
investing in outlets
World-leading outlet
operator
Depth of acquisition
experience
Investment
management
Insight into panEuropean retail
property
Luxury retail
relationships
Retail property
focused
Remerchandising
and tenant rotation
Acquisition /
disposal execution
Organisational
framework and
governance
Pipeline evaluation
Tourism marketing
21
03
Case study:
Batavia Stad
Octavia Overholser
Business Director, Value Retail
Premium Outlet Retail
22
Batavia Stad
Strategic location
45 mins Schiphol airport
(2014: 55m passengers)
60 mins Amsterdam and
Utrecht by motorway
40 mins direct train from
Amsterdam
Shuttle bus every 20 mins
from train station
Markermeer public jetties
walking distance
Catchment area:
60 mins: 4.8m residents
90 mins: 11.5m residents
23
Batavia Stad
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
24
Batavia Stad
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
25
Batavia Stad
2014 highlights
Brand sales growth +12%
New highway signage
Sales density +13%
Façade changes to
improve circulation
Footfall 2.3m (+4%)
Occupancy 97%
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
(1) Source: Global Blue research
26
Batavia Stad
Leasing highlights in 2014 and 2015
New brands in 2014
Upcoming remerchandising
(38 projects for 2015)
New Brands
Upsize:
Downsize:
27
Batavia Stad
Key initiatives 2015
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 Stad
Façade changes
Before
Before
After
After
29
Batavia Stad
Plan of expansion
II
I
III
IV
V
30
Batavia Stad
Renderings of expansion
31
Conclusion and Q+A
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
04
Appendix
33
Value Retail European Villages
Kildare Village, Dublin
Year opened
GLA
Boutiques
Catchment
2006
10,900m2
65
4m
Bicester Village, London
Year opened
GLA
Boutiques
Catchment
1995
22,700m2
136
30m
Maasmechelen Village, Brussels
Year opened 2001
GLA
19,400m2
Boutiques
109
Catchment
41m
La Vallee Village, Paris
Wertheim Village, Frankfurt
Year opened
GLA
Boutiques
Catchment
Year opened
GLA
Boutiques
Catchment
2000
21,000m2
120
18m
2003
20,900m2
120
21m
La Roca Village, Barcelona
Ingolstadt Village, Munich
Year opened
GLA
Boutiques
Catchment
Year opened
GLA
Boutiques
Catchment
1998
23,130m2
146
6m
2006
20,500m2
119
14m
Las Rozas Village, Madrid
Fidenza Village, Milan
Year opened
GLA
Boutiques
Catchment
Year opened
GLA
Boutiques
Catchment
2000
16,500m2
146
6m
2003
17,400m2
103
21m
34
Hammerson’s investment in Value Retail
Holding companies
22% equity
Hammerson €58m shareholder loan
50%
Bicester Village
La Roca
Village
Las Rozas
Village
La Vallée
Village
Maasmechelen
Village
Fidenza
Village
Wertheim
Village
Ingolstadt
Village
Kildare Village
33
23
19
11
13
20
31
0
3
45
35
31
22
24
32
43
11
14
Key to Hammerson
ownership:
Village ownership
via LPs (%)
Total Village
ownership (%)
35
European outlet market location data
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
Source: ecostra (data for the largest 15 markets in European area)
36