Hammerson (HMSO) Investor Update summary

Transaction overview

• Announced the sale of a non-core, illiquid 42% stake in Value Retail for an enterprise value of £1.5 billion, generating approximately £600 million in cash proceeds, representing a 24x EBITDA multiple and a 3.4% exit cash yield.

• Proceeds will strengthen the balance sheet, reduce LTV to 23% and net debt/EBITDA to 5.1x, and extend debt maturity coverage until 2027.

• Up to £350 million allocated for reinvestment in higher-yielding opportunities, and up to £140 million for a share buyback, about 10% of market capitalization.

• The board intends to increase the ordinary dividend payout ratio to 80%-85% and execute a 1-for-10 share consolidation.

• Transaction is not subject to shareholder approval under new UK Listing Rules and is expected to complete in H2 2024, pending antitrust approvals.

Strategic repositioning and growth

• Portfolio now focused on prime, city centre destinations in the UK, Ireland, and France, with high occupancy (96%) and strong rental growth.

• Over £950 million of disposals completed since FY20, with a 46% reduction in net debt and a 32-43% reduction in LTV.

• Ongoing asset enhancement and repositioning projects have delivered IRRs above 20%, with a pipeline of over 3,000 near-term and 7,000 long-term residential units.

• 93% of destinations are A-rated by Green Street, reflecting high-quality assets.

• Asset management initiatives target significant NRI uplifts and repurposing in key cities.

Capital allocation and financial framework

• Pro forma cash of £1.3 billion covers debt maturities through 2027, with a disciplined approach prioritizing balance sheet strength, organic growth, and shareholder returns.

• Targeting 4%-6% annual gross rental income growth, 6%-8% annual earnings and dividend growth, and a 10% total accounting return in the medium term, starting from 2024.

• Medium-term financial framework includes LTV of 30%-35% and net debt/EBITDA of 6x-8x.

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

• Enhanced financial flexibility supports organic growth, JV consolidations, and selective pre-development projects.