Hammerson plc

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00:01 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 will be following this closely.

00:31 Let me run to our agenda. I will start by giving you an overview of 2021 priorities and achievements.

Himanshu will take you through the financials. I will then give you more deal on our operational and strategic progress, finishing with our focus on the future.

00:51 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 year 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. 01:19 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 de-risking the balance sheet, which was exacerbated by the pandemic. We disposed of 403 non-core assets and refinanced around 940 million of debt.

This includes the issuance of our first sustainability linked fund. 01:58 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 banks.

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. 02:23 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 our organization.

02:58 We disposed of a further 30 million of UK non-core 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. 03:38 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. 03:55 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. 04:25 Thirdly, we focused on cash collections with daily reporting and updates.

Fourth, on reducing our cost base through our root 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. 04:59 I'm pleased to say that last month, we secured a stable investment grade credit rating re-affirmed 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?

05:25 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 a 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.

05:47 NRI was £119 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.

06:07 Rent collections for 2021 are currently at 90% and 2020 collections are at 99%. And year-to-date, collections are 83% for 2022 and consistent with what I said at the half year, we did not grant any material concessions in the second half.

06:30 Adjusted earnings were £81 million, up 122% on 2020 benefiting from the improvement in net rental income, a strong recovery in Value Retail, and the lower financing costs from refinancing on our debt reduction. Our managed portfolio is valued at £3.5 billion, down 21%.

And when you look at that allowing half of that was a function of disposals, benefitting net debt of course and about [Technical Difficulty] valuations. The valuations in the second half were down [over 2%] [ph].

07:07 We have made substantial progress [Technical Difficulty]. Net debt at year-end was [£1.8 billion] [ph], [Technical Difficulty] and 47% on a [Technical Difficulty] consolidated basis.

07:27 Now, let’s look at the rest of the numbers in a bit more detail. I've covered the headlines already, so [Technical Difficulty] on this slide.

07:36 Premium outlets bounced back steadily from COVID with earnings up 130% year-over-year at 15.9 million compared with [7 million] [ph] in 2020. [Technical Difficulty] our outlets we disposed up in October.

So, value retail[Technical Difficulty] with [£23 million] [ph]. And I’ll return to value return in more detail later.

The IFRS loss was 429 million. The key driver being revaluation losses, which has slowed in H2 as years began to stabilize.

NTA per share was down 22% from £0.82 to £0.64. 08:23 Now to the adjusted earnings walk from £36.5 million to £81 million in a bit more detail.

As you'd expect, NRI was up 33.1 and that was a largest element with growth from our flagships of 25 million and a further 11 million from our developments and other portfolio. 08:45 During the year, we benefited from 17 million of one-off surrender premiums year-on-year, and most of that space have either been relet or is part of our re-purposing 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 retailer recovery of £23 million.

09:16 [Last all the way] [ph] is admin cost, posted a net increase of 3.9 million. We've done a lot on costs during the year, which Rita-Rose has already referenced and the key message here is there remains more to do.

09:30 The effect of the disposals of the retail path portfolio and the French assets in H1 2021 and there in late 2020 of 27 million completes the adjusted earnings walk of £81 million. And just before I leave this slide, after the effect of the 2021 disposal in surrender premiums, underlying earnings are around £52 million and this 52 acts as your reference point for 2022.

09:58 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 a zero penny of earnings.

The total dilution from the scrip was therefore £0.07 per share in the year. 10:25 Now, turning to our portfolio evaluations.

Going from left to right, this slide shows this portfolio summary and capital returns on the left hand side, the yield in 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. 10:46 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.

11:09 The downward pressure on ETV’s 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. 11:26 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. 11:58 Let me now just write down the flagship capital returns by geography, so the 11 minus 11.6.

This slide shows the break downs buy 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 bark blue bar on the right hand side, the rate of decline in capital returns has markedly slowed in each of the three [indiscernible], and taking each of those in turn. 12:37 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%.

13:02 In France and Ireland, the rate of decline from peak valuations has been less significant than the UK, particularly on ERV, reflecting 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.

13:29 How we turn the corner? The certainly emerging consensus, the yields are beginning to bottom out, and our negative reversion is modest in absolute terms.

I said, I’ll come back to value-retailing in more detail, so first, to the value retail P&L. 13:48 Keying off from the loss of £7.1 million in value retail, TRI improved by £26.4 million in 2021.

I remember this is against a 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, a largely turnover based, and we saw the benefits of this coming through in the numbers, with stronger brand sales and thoughtful as villages were able to operate with fewer to no restrictions.

14:23 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 of 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.

14:54 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.

15:22 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.

15:40 The sales density shown here of course, is 2021, which as a reference point reflects a subdued trading due to periods of closure. And Bicester village stands out by virtue its size followed by La Vallee, 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. 16:10 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 has Kildare, which was expanded during the year.

16:28 Value retail operates very much at the premium end of the outlet segment with net initial yields of 4% to 7% and an exit yield range of 5% to 6% using the discount rates shown here. And there have been a couple of transactional reference points in 2021, which support these valuations.

16:49 We're of course in the first completed sale since 2019 of outlets that's Outlet Aubonne in Switzerland at to 7% yield; and in the UK, Bridgend Designer Outlet and UK Outlet Mall are also currently under offer. The latter believed to be a reported blended yield of 6%, and more recently Quentin marks in their London Outlet at Wimberly was a reported net initial yield of 6%.

17:19 And finally, before I leave Value Retail, they have made the progress on their re-financings, 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.

17:43 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 proforma net debt standing at 1.6 billion following the sale of Victoria, Leeds and the exchange of Silverburn.

We have strong liquidity, 1.7 billion proforma, and we have no material refinancing until 2025, not covered by existing cash and liquidity. 18:16 And Rita-Rose has mentioned testament to our progress was great to see Mood’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] [ph] appropriate consultation, reduced a headcount by 18%, where we re-attended and reduced our insurance premiums by 64%.

18:48 And we saw some India savings in payroll costs, but these were offset by the return to normalize levels of variable pay following minimal payouts in the 2020 pandemic year. As we look forward, we continue to review our organization to make sure we have the right skills and talent and that we also right size for the effects of disposals.

19:13 And for those of you physically here today, we of course are looking to right size the office space and there'll be further opportunities through these costs as we simplify and automate. And this will drive to a leaner and more agile company for the future.

19:31 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 provided you at the starting GRI, strips of disposals and surrenders, including Silverburn and Leeds, and that re-based GRI is £193 million. If you take each of the components from disposals 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. 20:12 On CapEx, we expect 2022 CapEx of around 125 million, balance between the reinvestments and repurposing, in-place making and in stewardship, stewardship being a reference to the need in some of our assets to putting CapEx to make up for under investment in previous years.

20:34 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 reach and seek obligations for our script dividends in 2022 before intending to return to cash dividends from 2023 onwards.

20:59 With that, let me hand back to Rita-Rose.

21:06 Thanks, Himanshu. So, let me start with quickly with who 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.

21:31 250 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.

21:59 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. 22:25 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. We're invigorating 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 of the existing asset footprint by repositioning and filling space. 23:05 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.

23:30 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.

23:49 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 and footfall following the relaxation of COVID restrictions. 24:13 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 rebase occupancy costs are now affordable.

This slide shows our higher leasing volumes and improved matrix, particularly in H2. 24:44 Let me walk you through a few data points.

We find a total of 371 leases in 2021. So, that's around an 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% four of volume. 25:24 Net effective rent or 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.

25:47 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.

26:11 As we continue to execute our strategy to actively lease up an 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.

26:31 We also continue to use temporary leasing, particularly to bridge periods between deals, keep options open or trial 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. 26:55 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. 27:25 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 samples of our occupiers. Our leasing activity in 2021 is roughly grouped into 6 leasing themes, which you can see on the left hand side.

For asset management, we engage proactively and at a portfolio level. 27:54 Next, in response to the changing landscape, we are doing big box repurposing and introducing a wider mix of FMB, 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. 28:16 I could talk to you all day about all the examples on this slide, we have a lot, in the interest of time, I will stop on two great examples that cover a number of these themes, Goldsmiths and Brown Thomas.

28:32 Goldsmiths wanted to upsize in 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. 28:52 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 weather innovations such as vitamin injections, designer handbag exchange, [grad rides] [ph], rental, etcetera. Penneys takes over the remaining floors, making this an exciting and innovative retail experience.

29:29 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. 30:01 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.

30:24 Having said that, you will see on the next slide, how we think about capital allocation Today, we are still focused on reducing total absolute indebtedness. We have a total return philosophy, but as a REIT, we must keep or meet our payout obligations.

We also have the clear intent to return to a cash dividend once our seek obligations are met and that was covered by Himanshu’s guidance. 30:56 Next, mindful of our relatively high cost of capital, we will look continuously at our capital structure, and Himanshu is all over that.

Organic investments in our existing core assets and land bank means we could consider consolidating our or assets and markets. We remain [indiscernible] the opportunity for exceptional returns arise.

31:22 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. 31:43 The shape of the leadership and [quality team] [ph] will continue to evolve as we realigned 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.

32:12 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 half year.

The most material change that derived from our review was a shift from a geographic siloed 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.

32:45 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.

33:05 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.

33:25 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. 33:49 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.

34:10 Next, are the medium-term project, which are largely at the feasibility or master planning stages. Therefore, more mid-term 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 Swords in Ireland. 34:37 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. 35:08 A total of around 73 million over the next two years, and you can see from the right hand side, that this delivers a needed evaluation 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. 35:40 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 today. Hammerson has a long-standing and recognized commitment to sustainability.

36:04 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. 36:27 In France, we connected Terrasses du Port to the Thassalia 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] [ph]. 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 8 years at our share.

37:06 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.

37:35 A marquee project on this journey is the repositioning of a former department stores space to a flagship grocery led offer and a competitive sports led leisure concept. This will be in place by early 2023.

37:54 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.

38:14 At Grand Central, we have another great opportunity to repurpose the former GLP space. And at Ladywood House, repurposing will see a modern workspace led asset.

These two important projects sit a stride new street station, the main commuting hub for the West Midlands, which sees almost fifty million people in transit in an average year. 38:44 To the right of the picture, a stone 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 workspace scheme in the medium to long-term.

39:09 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.

39:41 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 net 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.

40:17 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 promotional activity is possible.

40:41 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.

41:01 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 a corner, but we realize and recognized we have more to do and that we continue to operate in a challenging market.

41:22 We have the right [Technical Difficulty] robust strategy and operating model. Our focus is relentlessly on reducing vacancy and void costs, repurposing space, delivering a mix that occupiers and customers demand and then locking value from the development opportunities in the portfolio.

41:45 As we continue to execute our strategy, we will build a stronger business and one that delivers value for shareholders. 41:54 So thank to 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's a microphone that will come to you. Thank you very much.

42:25 Chris, hi.

42:27 Good morning. It is Chris [indiscernible] of 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 ERV’s in the UK? If that's happening or not?

43:17 So that's the first question. The second question on rebased earnings, I think you gave a 52 million 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, 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 at 7% to 9% net initial yields, are the yields on costs that you're reinvesting that capital in, you know comparable or better?

Thank you.

44:17 Great. Thank you very much Chris.

So, I will start with the leasing questions for the transfer to 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. I 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, you know as we always said, a clear rebounds of 40% of our deals in the UK were over passing rent, and about 35% were over ERV. And obviously, we as we proceeded in the year the statistics became better.

45:08 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 [where are] [ph] we seeing December, January, February. 45:46 Now, we are in all geographies well ahead of passing rents.

And again, passing rent from me is very important and when I say well ahead, it's over 20% and same thing for ERV, and that's in all regions. France is more stability and more growth, but the UK is really showing a strong rebound, and think I think that's related to the demand coming back and we're starting to see a bit of more tension in the discussions we have sometimes even having more than one tenant for unit for example.

46:26 So, 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.

46:45 Himanshu, do you want to say a few things under GRI?

46:50 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 the 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 modelling challenges as I referenced is what might the timing of those [be there] [ph]. 47:28 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 shed our philosophy on that capital allocation.

And it's really about creating the optionality Rita-Rose rose referenced, you know the land promotion projects, for example, but she also referenced the near-term ones. 47:50 We used Birmingham to illustrate, but we see those opportunity to rise across the portfolio.

And then we referenced, and 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.

48:11 I think that's complete. Thanks.

48:21 Paul May at Barclays. The question is [Technical Difficulty] Here we go.

That’s pretty better, Paul from Barclays. Sorry, just on the earnings moving forward, if you start with the 52, I think you get to quite a different number, versus the building blocks that you give on the separate slide where very, very quickly just [indiscernible] getting to around about mid-70s.

If you adjust for the various things that you've mentioned assuming some recovery and value return and other things. Just wondered which is the best star point as in, do you look at the 52 or do you look at the slide where you keep the building blocks and the guidance?

49:12 Second one, just on the gross development value of the near-term opportunities, I think you mentioned greater than 2.6 billion. Are you able to give any guidance as to what the CapEx is to get that 2.6 and the timeframe over which you might be able to achieve that 2.6.

And then finally on disposals and to Chris’ point about selling high 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 France to, kind of stabilize the numbers, is that something that you're looking to actively dispose of? Thank you.

49:51 Paul, thank you for your questions. Himanshu, maybe take the one on the earnings and I'll pitch in for the two others.

50:01 So, Paul, welcome. The issues we saw with the 52 is, you got to remember all the periods of closure.

So, in giving you the normalized 193 GRI number and to work from that, our base assumption is that we're beyond that Covid period, whether it's household value retail, villages or even when France is open, they had a period where there was a [sanitary pass] [ph] required to do – not just to enter true a shopping center, but to actually enter individual stores, which they then relaxed. 50:35 I was in Ireland a few weeks ago, and actually those restrictions as recently as three weeks ago with [indiscernible] 8:00 P.M.

So, the modeling guide is around the normalized GRI going forward and also helps you by stripping out the effect of Silverburn and Lees. Rita-Rose, back to you.

50:56 Thanks, Himanshu. So on the second question, make sure I understood you're asking what are the near term CapEx to unlock it or the overall program.

I'll answer both. I’ll go back to the…

51:12 It’s more on the overall program to get to the 2.6 billion.

51:15 Yeah. So, the overall program and that gross development causes 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, you know we separated this year that in three buckets, those land promotion projects, what’s really a focus at the moment of creating maximum value short-term, bringing those lands at a point where we will have the optionality as I was saying of having created value monetizing or determining if the development or how we would go about in a development. 52:04 At the moment, there's a lot of demand around those developments.

So, we really have to view this in buckets. The short-term value and then the decision point what we crystallize then and how we go forward and then you get into this potential of 2.5, 2.6 CapEx.

52:24 On the question of France, you know France is a, I have spent a bit more time there and was there actually recently. France is a market at the moment with – 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. 52:50 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. 53:14 We just wanted 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 timelines of what we have to do.

53:33 Thank you. Good morning.

It's [indiscernible] from RBC. 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 centers in Leeds given you've got a significant piece of land nearby; does it make it harder to sell those shopping centers or maybe turn it around, does it may you less excited about the land that you still holder there?

53:57 Okay. We 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 [Technical Difficulty] very high level of vacancy. 54:31 So, it was a question for us of looking at the risk return for determining if we wanted to have that in the portfolio and ultimately others that – it's a type of assets that is bearing the hands of others and 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. 55:02 That was the last question from the room.

So, we’ll hand over to the phone lines now.

55:23 Good morning all and thank you for taking my question. I'd like to ask obviously your, and to hear your views around the market rental side.

And I'll say, particularly when we look at the lead that's been taken from the UK markets, obviously ERV declines have been more advanced in those markets, and we look at how the capital value growth story paid out, obviously the UK move quicker, and then France followed. I was wondering, if you understand your view in terms of guidance around expectations on potential future [indiscernible] ERV declines in Ireland and France, obviously acknowledge that [indiscernible] are probably more prime than the broader UK side, but is this the case that those assets are stronger?

So, those ERV’s are being more resilient or is it a situation whereby perhaps those markets are lagging the UK? Thank you.

56:14 Thank you very much [indiscernible]. So, well, my view, overall view and it also comes from my past experience of having worked 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. 56:43 I mean, the UK is oversupplied and has had the history of the Big box department stores, which she didn't see in France.

In France the Big boxes are convenience and food. So, the assets just have – 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, the ERV’s have obviously, and I think that the demand is strong because there is a bit less demand. 57:21 So, I know there is this debate, will France join UK, you know my opinion is, I don't really think so because it's just very different environment, 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.

57:49 We’re at, ultimately also at 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 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. 58:27 So it's going to be very specific to the assets.

In France, we have two assets that are 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 have to start thinking about these things, pretty much specifically with the assets.

There are locations, there are mix, and how they are operated. This is my view.

59:07 Thank you. And then just one follow-on question.

This is 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 new demand from your occupiers of their key trend of the market had been or these evolution of alternatively lease structures turnover over linked leases, etcetera versus more traditional open market rent viewed 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 occupied demand for those turnover linked or perhaps inflation or fixed uplift link style leases or is the dominance still an open market rent views given that ERV’s have fallen? Thank you.

59:52 Sorry. The technology over here, [indiscernible] your question a bit, but I think your question has to do about what we’re seeing in terms of the 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. 60:15 So, currently, yes, you will see more and more demand pushing for turnover – leading turnover rents, and that is really good in some places, but it may be risky in other case.

In the case of Hammerson at the moment, we are still leasing and leaning towards the maximum guaranteed event, with some performance element to it. The majority still.

That is still what we achieved. And I think, as I said, it's a question of strategy.

I don't think we're getting paid enough to be [indiscernible] rents in many case. So, that's really the [drivers] [ph].

61:07 Thank you very much. [Technical Difficulty]

62:01 Okay. So there's a 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, but that's why we're proceeding in a very disciplined way and that's why we put ourselves in a situation at mid-year where we were not forced to sell and [Technical Difficulty], so it's all very much a balancing act that we're achieving.

62:34 I would say that we still have [vacancy on] [ph] the portfolios 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 – 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. 63:04 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. 63:22 In terms of the leverage value retail, maybe Himanshu you want to say a few words on that one?

63:27 Yeah. For sure.

Look, we’re committed as you know to an IG rating, and we talk about both a resilient and a sustainable capital structure. For us, it's not about specific number around LTV, we're at 37% proforma today.

Is right number 35, it depends where you're on cycle or whether it's 33, but I think behind your question is really how do you finance the longer-term developments. And Rita-Rose has articulated that.

63:57 I think really strongly, which is, it's about land promotional projects and creating optionality and that pivot point when we reach points of liquidity as to then, do follow our money and invest or do we take liquidity off the table? And it's about total returns and best returns to shareholders.

64:21 No, I think – does that answer fully to your question?

64:26 Well, can I just add one on that. I guess [indiscernible] of your options.

64:35 If I understand question right, you're asking us if the sale of Value Retail is still in our options?

64:42 Yeah.

64:43 Okay. Well.

Listen on that, 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, it is a 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.

65:11 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 excess eventually, but for now, we're still benefiting of that rebound in the portfolio.

And it just goes to show how much opportunity Hammerson has in its portfolio. 65:40 The last thing I would say, and Himanshu did touch 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.

66:08 Thank you.

66:14 We are just about out of time, but there are a couple of clarification questions from Mike [indiscernible] 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.

66:36 Thanks Josh and Michael, so Himanshu I think you’re well-positioned to provide details.

66:42 So, the reference – good morning Mike. The reference to the 35 to 50 was at our share and it is inclusive because that 35 to 50 was spread over 8 years to get to the equivalent of EPC B.

As Rita-Rose referenced actually, we're already at the 2023 standards in our portfolio with the vast majority, which they are already at [indiscernible]. 67:11 Josh, would you just repeat the second question for me, please?

67:20 What is year-end liquidity after meeting CapEx and financing obligations for December 2022?

67:26 Well, look, liquidity today is 1.7 billion. There are no major refinancing still 2025 are uncovered.

We have an opportunity to refinance with cash, [€235 bond] [indiscernible] December of this year, and that's the only near-term maturity. The next maturities are in the U.S.

PP portfolios, about 140 million of our 216 US PPs, but don't come available till actually 2024. So, liquidity just remains strong.

68:03 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 efficient, but I just remind people where this business was two years ago and the progress made.

So, high liquidity remains through 2022.

68:25 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.

68:49 Thanks.