Hammerson (HMSO) Investor Update summary

Transaction overview and rationale

• Announced a £1.5 billion enterprise value transaction, generating approximately £600 million in cash proceeds from the sale of a non-core, illiquid, and dilutive 42% stake in Value Retail at a 24x EBITDA multiple and a 3.4% exit cash yield, crystallizing a 10-year IRR of 13%.

• The sale represents a clean, all-cash exit at a 24% discount to GAV, with no shareholder approval required under new UK Listing Rules and completion expected in H2 2024, subject to antitrust approvals.

• Proceeds will be used to strengthen the balance sheet, invest for growth, and enhance shareholder distributions, including a buyback of up to £140 million and an increased dividend payout ratio to 80%-85%.

• Disposal capitalizes on improving market conditions and attractive reinvestment opportunities at higher yields.

• The transaction reduces Hammerson’s portfolio by 42% by value and marks a strategic shift to a retail-anchored, city-focused business.

Financial impact and capital allocation

• Pro forma LTV reduces to 23% and net debt to EBITDA to 5.1x, cementing investment grade rating and balance sheet flexibility.

• Net tangible assets will decrease to about £1.9 billion, or 39p per share, with pro forma EPRA NTA at £1,946 million and 5,002 million shares.

• £350 million earmarked for higher-yielding investments, £140 million for share buybacks, and an increased ordinary dividend payout ratio to 80%-85%.

• Cash capacity rises to £1.3 billion, covering debt maturities through 2027 and enabling targeted reinvestment and shareholder returns.

• Commitment to sustainable capital structure and investment-grade credit rating maintained.

Strategic repositioning and growth outlook

• Portfolio now focused on prime, city center destinations in high-growth urban areas across the UK, Ireland, and France, with high occupancy and strong rental income.

• Ongoing asset enhancement, JV consolidation, and organic investment to drive rental and earnings growth, leveraging a lean, scalable platform.

• Medium-term financial framework targets 4%-6% GRI growth, 6%-8% annual earnings and dividend growth, and a 10% total accounting return, starting from 2024.

• The company will have greater concentration risk post-disposal, with increased exposure to UK, France, and Ireland property markets.

• Share consolidation (1 for 10) and capital reduction will simplify capital structure and increase distributable reserves.