presentation to intu trafford centre noteholders · 2016-11-25 · •revaluation surplus £573...

Presentation to Trafford Centre Noteholders 22 September 2014

Presentation to Trafford Centre Noteholders

• Corporate overview

– David Fischel

• Financial details – Matthew Roberts

• Operational review

– Mike Butterworth

• intu Trafford Centre overview – Mike Butterworth

• Questions

• Appendices

Intu Properties plc

This presentation includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Intu Properties plc to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any information contained in this presentation on the price at which shares or other securities in Intu Properties plc have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance

Corporate overview David Fischel, Chief Executive

Introduction

• Strong revaluation surplus for super-prime shopping centres

• Successful integration of intu Merry Hill, intu Derby and Sprucefield acquisition

• Improved financial flexibility

• Letting progress as retailer demand strengthens for quality space

• Gaining momentum with £1.2 billion development pipeline

• Distinguishing Intu from competitors through brand and digital presence

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A long term business – 20 years of measured expansion

• Revaluation surplus £573 million(1), 7.6% like-for-like

• Increasing NAV per share to 372p

• Total financial return (from pro forma NAV of 335p) 14 per cent in six months

• Investment properties £8.8 billion(1)

– May 2010 demerger £4.6 billion

(1) Including Group share of joint ventures

Strong revaluation surplus for super-prime shopping centres

• Increasing intu ownership to 9 of top 20 UK centres

• Initial indications positive and confirming investment case

• Impact of rebranding and World Class Service training

• Opportunities

– rental levels

– tenant repositioning/upsizing

– active management/development potential

Successful integration of intu Merry Hill, intu Derby and Sprucefield acquisition

• Projects on site in first half

• Soon to commence

– Barton Square, intu Trafford Centre

– intu Watford, Charter Place extension

• Other major extensions

– Design and pre-letting

• Foregoing some income ahead of redevelopment

Gaining momentum with £1.2 billion development pipeline

Distinguishing Intu from competitors through brand and digital presence

• Tell intu customer feedback programme brand driving dwell and frequency

• Wi-Fi

11 intu centres already installed ownership model – infrastructure and data over 1 million registrants to date 60% of intu Wi-Fi registrants “opted in”

• Intu.co.uk website upgrade H2

fully mobile enabled

• National mobile wayfinding app under development location-based messaging

• High quality nationwide commercial partnerships

Financial details Matthew Roberts, Chief Financial Officer

Key highlights

• Valuation up 7.6 per cent (IPD up 3.5 per cent)

• Underlying earnings 6.4p (2013 6.8p) - impact of lease expiries and development offsetting rental uplifts

• Interim dividend of 4.6p

• NAV per share 372p

• Additional leverage raised on intu Trafford Centre, Parque Principado, intu Derby, intu Merry Hill, Sprucefield and St. David’s, Cardiff

• Repaid £146m intu Uxbridge loan in June

• Robust financial position: debt to assets ratio 44.4 per cent, 7.7 years average debt maturity and £510m of cash and committed facilities at 30 June 2014

Underlying earnings including Group share of joint ventures

First half First half 2014 2013

£m £m Net rental income 189.2 181.0 Administration expenses (14.9) (13.9) Net finance cost (underlying) (100.3) (101.2) Dividend from US investment 3.0 3.3 Other (5.0) (1.1) Underlying earnings 72.0 68.1 Interest cover 1.76 1.63 EPRA cost ratio(1) 16.4% 16.3% Earnings per share (pence)(2) 6.4 6.8 Weighted average shares in issue (million) (2) 1,130 1,004 Dividend per share (pence) (2) 4.6 4.6

(1) The EPRA cost ratio presented excludes direct vacancy costs and is calculated in accordance with EPRA guidelines

(2) Adjusted for rights issue bonus factor

Change in like-for-like net rental income

2014 debt funding activities

• £110m intu Trafford bond issue at 4.6% cost

• £40m raised on Parque Principado (Intu share of €95m)

• £146m loan repaid on intu Uxbridge

• £163m 7 year loan and revolving credit facility refinancing Intu’s share of the maturing St. David’s,

Cardiff loan raising an additional £44m of debt and providing a on-going £41m liquidity facility

• Three new debt facilities totalling £424m to provide part-funding for the acquisition

– Weighted average all-in cost of debt 2.5 per cent for first year

– Margins step up after 12 months and thereafter at 6 month intervals

– LTV of transaction was 48.9% – broadly in line with Group LTV

– intu Merry Hill - £191m, initial LTV of 46.9%; maturity in 2016 with a one year extension option;

secured against equity stake

– intu Derby - £203m, initial LTV of 51.9%; maturity in 2016

– Sprucefield - £30m, initial LTV of 43.9%; maturity in 2016

Debt maturity

• Weighted average debt maturity of 7.7 years

• Largely fixed, weighted average cost 4.7 per cent • £510m of cash and committed facilities • 2014-2018 Capex: £164m approved; £130m

proposed (excludes major extensions)

Net debt to assets 44%

Improved financial flexibility

30 June 2014(1) 31 December 2013(1)

Total properties £8,843m £7,624m Net external debt £(3,924)m £(3,698)m Net debt to assets 44.4% 48.5% Cash £200m £235m Undrawn committed corporate facilities £310m £90m Net assets attributable to shareholders £4,546m £3,519m Adjusted net assets per share 372p 346p 335p NAV pro forma basis Weighted average cost of gross debt 4.7% 4.8% Weighted average maturity of gross debt 7.7 years 8.0 years

(1) Group including share of joint ventures

Valuation (1)

• Valuation of £2,098m • intu Trafford Centre topped up net initial yield of

4.0% and nominal equivalent yield of 4.5% • Ratio of outstanding loan note to intu Trafford

Centre valuation: 39%

Rent (1)

• Annual property income of £84.5m; ERV of £101.7m

• Headline rent prime ITZA psf £410

Occupancy (2)

• Current occupancy rate of 96% by rent as at 30 June 2014

intu Trafford Centre – 30 June 2014

Site location

(1) Excludes Barton Square and other land holdings (2) Occupancy defined as passing rent of let and under offer units expressed as a percentage of the passing rent of let and under offer units plus ERV of unlet units, excluding

development and recently completed properties. Units let to tenants currently in administration and still trading are treated as let and those no longer trading are treated as unlet

intu Trafford Centre operating cash flow*

Year ended 30 June 2014

£m

Year ended 30 June 2013

£m

Rents (including turnover rent) 87.6 78.1

Other income 2.1(1) 3.1(2)

Property and other costs (1.8) (4.7)

Operating cash flow 87.9 76.5 Net interest paid (44.0) (43.6)

Net operating cash flow 43.9 32.9

Source: The Trafford Centre Limited Quarterly Reports: Cash flow statement and management commentary.

* Proforma cash flow basis, excluding the exceptional cash flow of REIT entry, corporation tax and interest rate floor termination

(1) Excludes £1.0m of premiums received

(2) Excludes £0.4m of premiums received

Debt Service Cover Ratio (DSCR) Calculated using twelve months historic cash flows

June 2014 Quarterly report 1.47 : 1

Components:

• Rental and other income less costs £87.9 million

• Interest payments and note amortisation £60.0 million (£44.0m interest, £16.0m amortisation)

Debt Service Cover Ratio and Interest Cover Ratio History Temporary decrease due to rent free for major tenant during store expansion

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Interest Cover Ratio Debt Service Cover Ratio

Trafford Centre loan notes analysis

•Initial launch February 2000

•Second issue July 2005

•Third issue March 2014

•Issue size (total) £974.5m

•Outstanding amount – 30 June 2014 £821.6m(1)

•Fixed: Floating(2) ratio 70% : 30%

•Security Trustee Deutsche Bank

•Hedge counterparties Deutsche Bank & RBS

•Liquidity facility Lloyds Banking Group

•Cash Manager Deutsche Bank

(1) For analysis by class see slide 43

(2) Floating rate notes are fully hedged with interest rate swaps and caps

Trafford Centre loan notes amortisation by class

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Amortisation Profile of Trafford Centre Notes

B2 - Floating A3 - Floating D1N - FloatingA2 - Fixed 6.50% B - Fixed 7.03% D3 - Fixed 4.75%B3 - Fixed 4.25% D2 - Fixed 8.28% A4 - Fixed 2.875%A1N - Floating

Operational review Mike Butterworth, COO

Operating metrics

• 98 new long-term leases £15m +4% passing rent

•Occupancy 96% Vacancy UK “big shopping centres” * 11%

•Valuation +7.6% like-for-like (IPD** capital growth + 3.5%)

•Footfall +1% (Experian benchmark flat)

•Retailer sales (est.) +1½%

* PMA estimate – top 70 locations plus regional shopping centres. ** IPD monthly index, retail

Valuation +£573 million, +7.6% like-for-like

Notable valuation movements:

Market value(1) Surplus (deficit)(1)

£m £m %

intu Trafford Centre 2,200 300 16

intu Lakeside 1,248 118 11

intu Metrocentre 922 33 4

Manchester Arndale 425 26 6

intu Milton Keynes 267 16 6

intu Eldon Square 265 11 5

intu Braehead 602 - -

intu Potteries 162 (2) (1)

intu Victoria Centre 299 (13) (4)

Others 2,452 84

8,843 573

(1) Including Group share of joint ventures

Nationwide opportunities

intu Trafford Centre overview Mike Butterworth, COO

• 200+ units (including over 65 catering and leisure units); approximately 1.5m sq. ft. retail and 0.3m sq. ft. catering and leisure space over 2 levels

• Anchor tenants: Selfridges, Debenhams, John Lewis and Marks & Spencer

• Opened to public in September 1998

• Significant redevelopment of main entrance for additional catering in 2007 (The Great Hall)

• Major 0.2m sq. ft. homeware and leisure extension (Barton Square) opened in 2008

• Retailers significantly expanding in 2011, 2012 and 2013 include Marks & Spencer, Debenhams, Next, Superdry, H&M

Site location

Overview of retail mix

• c 310,000 sq ft devoted to catering and leisure – over 50 catering units generating c £75m

annual turnover – themed areas - The Orient, The Great Hall

– adding a sense of theatre • Continuous evolution with brands including

Tampopo, Zizzi, Nando’s, TGI Friday’s, Five Guys and Carluccios

• An unrivalled leisure offer:

– Odeon Multiplex IMAX cinema, Paradise Island Adventure Golf, Laser Quest, Aerial Extreme (treetop adventure course)

– Legoland Discovery Centre and SeaLife aquarium in the adjacent Barton Square

• Events include:

– Celebrity Christmas lights switch on

– high profile fashion shows

– firework displays

Catering and leisure

Driving growth through active asset management

Letting strategy Improving tenant mix Sustainability with

key retailers Achieving ERV on review / renewal

+ + 1 2 3

The right space at the right rent Goal

Outcome Tenant re-investment and commitment to the Centre

Consistent growth in rental income

Recent openings include:

• Five Guys: first site in the North

• Victoria’s Secret: one of first five UK stores

• Next: expansion to 40,000 sq ft via phased

opening March to June 2013

• Hamleys: first store in the North West opened

November 2013

• Forever 21: fourth UK store opened July

• Nespresso: first stand alone UK store

• Wokooshii: new concept restaurant

• Fat Face: new concept store

• Hugo Boss: expansion from 3,000 to 5,500 sq ft

Recent asset management activity

Asset management

Recent openings

Overview of Trafford Centre rent reviews and lease maturities

Lease maturities* Rent reviews*

*As % of 30 June 2014 passing rent

4% 2% 2% 6%

9% 4%

11%

62%

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2014 2015 2016 2017 2018 2019 2020 2021+

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Pre 2014 2014 2015 2016 2017 2018

• Scope for asset management initiatives at intu Trafford Centre including:

– original structure built to accommodate additional floors enabling cost effective expansion, e.g.

– above Debenhams

– along link bridge to Barton Square

– opportunities to introduce MSU flagship stores through conversion of space to additional retail, subject to planning permission

– creation of space to enable unit re-configurations

– scope for retailers to create cost-effective mezzanine floors

Significant asset management opportunities Future-proofed structure

Site location

Barton Square opportunities Second storey retailing and roof

• Scope for asset management initiatives at Barton Square including:

– structure includes an additional floor enabling cost effective expansion

– achieved retail consent for 93,000 sq. ft. on upper level

– courtyard to be enclosed by glass roof to enhance environment

– anticipate an increase in rental tone across Barton Square

9 of UK’s top 20 shopping centres

Over

21m sq ft

of retail, catering and leisure space

Our centres attract

400m customer visits a year

2/3 of the UK’s population live within a 45 minute drive time of one of our centres

96% occupancy

£1.2bn development pipeline

30m unique customers

Q&A

Appendices

Intu - leading owner, developer and manager of prime UK shopping centres

Source: PMA (1) Top shopping centres on basis of PMA Retail Score (June 2014). Intu shopping centres highlighted orange (2) Acquired on 1 May 2014 (3) Adjoined by intu Milton Keynes

Centre Location Centre Location 1 Westfield London London - Shepherds Bush 23 intu Bromley Bromley 2 Bluewater Greenhithe 24 intu Eldon Square Newcastle 3 Westfield Stratford City London - Stratford 25 Victoria Square Belfast 4 Meadowhall Sheffield 26 intu Braehead Glasgow 5 intu Trafford Centre Manchester 27 Victoria Quarter Leeds 6 St David's Cardiff 28 Golden Square Warrington 7 intu Metrocentre Gateshead 29 Silverburn Glasgow 8 intu Lakeside Thurrock 30 White Rose Shopping Centre Leeds 9 Bullring Birmingham 31= The Oracle Reading 10 Arndale Centre Manchester 31= Trinity Leeds Leeds 11 The Mall at Cribbs Causeway Bristol 31= Thistle Centre Stirling 12= Brent Cross London 34 Buchanan Galleries Glasgow 12= Cabot Place, One Canada Square London 35 East Kilbride Shopping Centre Glasgow 14 Liverpool One Liverpool 15 Cabot Circus Bristol 16 intu Merry Hill(2) Brierley Hill 17 Highcross Leicester Leicester 43 intu Victoria Centre Nottingham 18 intu Derby(2) Derby 45 intu Chapelfield Norwich 19 intu Watford Watford 46 intu Potteries Stoke-on-Trent 20 thecentre: mk(3) Milton Keynes 59 intu Milton Keynes Milton Keynes 21 West Quay Southampton 69 intu Uxbridge Uxbridge 22 Festival Place Basingstoke 182 intu Broadmarsh Nottingham

Yield comparisons

• Prime UK shopping centres - attractive asset class for major international investors

• Yield premium to fixed rate assets combined with increasing likelihood of rising rents from economic growth now attracting wider investor interest

Key catchment & demographic statistics

intu Trafford Centre

• Large catchment area

– 8.9 million people live within a 70 minute drive

– 4.8 million within 45 minutes

• Total available retail expenditure of £11.9bn

• Loyal customer base

– 25 times p.a. average visiting frequency

– 16% of visitors visit at least once per week

– 61% visit at least monthly

• Wealthy demographic1

– 66% ABC1; 61% 16 – 44 years

• 79% female shoppers

• Trafford Centre Metrolink under consideration by

the Greater Manchester Combined Authority 1) UK social groups A, B and C1, defined as members of households whose chief earner’s occupation is professional, higher or intermediate management or supervisory Source: ResearchCraft, Experian

70 minute drive time around Trafford Centre

70 Minute Drivetime

intu Trafford Centre top 10 tenants

Rank Tenant Group Secured rent %

1 Arcadia(1)

6% 2 Next 4% 3 Selfridges 3% 4 Boots 3% 5 Marks and Spencer 3% 6 Debenhams 3% 7 H&M 2% 5 United Cinemas 2% 9 J D Sport 2% 10 Forever 21 2% Top 10 tenants total 30%

(1) Includes BHS, Topshop, Topman, Miss Selfridge, Dorothy Perkins and Wallis

intu Trafford Centre analysis of rental income by sales category

Anchor Tenants20%

Books/Cards3%

Jewellers6%

Ladieswear11%

Menswear4%

Mixed: Ladies & Menswear

18%

Phone Retailers inc. Mobiles

4%

Footwear5%

Catering & leisure14%

Other15%

* Other includes banks, childrenswear, confectionery, electrical computer retailers, gifts / soft furnishings / furniture, health and beauty, opticians, outdoor clothing / equipment, music retailers, sportswear, toys, travel agents and office.

intu Trafford Centre Increase in rental tone 2008 to 2012

Key

2008

2012

Trafford Centre loan notes analysis by class

Class Amount Rating Coupon Maturity

£m Fitch Moody’s S&P

A1 (N) 5.3 AAA Aaa AA+ Libor +0.20% July 2015

A2 333.5 AAA Aaa AA+ 6.50% July 2033

A3 188.5 AAA Aaa AA+ Libor +0.29% July 2038

A4 20.0 AAA Aaa AA+ 2.875% April 2019

B 85.2 AA Aa2 AA- 7.03% July 2029

B2 20.0 AA Aa2 AA- Libor +0.33% July 2038

B3 20.0 AA Aa2 AA- 4.25% April 2024

D1(N) 29.1 BBB Baa2 BBB Libor +0.80% April 2035

D2 50.0 BBB Baa2 BBB 8.28% Oct 2022

D3 70.0 BBB Baa2 BBB 4.75% April 2024

presentation to intu trafford centre noteholders · 2016-11-25 · •revaluation surplus £573...

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