Final Results - Part 1

Hammerson PLC 5 March 2001 PART 1 Hammerson plc - Results for the year ended 31 December 2000 2000 1999 Change Net rental income £141.1m £123.3m +14.4% Profit before taxation (FRS 3 basis) £89.2m £94.5m -5.6% Adjusted profit before taxation(1) £72.0m £73.2m -1.6% Earnings per share (FRS 3 basis) 28.0p 30.7p -8.8% Adjusted earnings per share(1) 22.0p 21.6p +1.9% Net asset value per share(2) 689p 597p +15.4% Fully diluted net asset value per share(2) 667p 583p +14.4% Gearing(2) 67% 50% Return on equity (2) 16.3% 22.3% Recommended final dividend of 9.6 pence (1999: 9.11 pence) making a total for the year of 14.0 pence, an increase of 5.3%. Notes: (1) Excluding exceptional items, which comprise the profit on sale of investment properties. (2) Accounting policy changed so that properties in the course of development are now included at market value rather than cost. Fully diluted net asset value per share would have been 640 pence (1999: 573 pence) under the previous policy. Prior year figures have been restated. Operational Highlights * Investment of over £500 million reflected an active year for acquisitions and progress with the development programme. * Three major acquisitions in France and Germany completed at a total cost of £248 million. * Four development projects completed including West Quay Shopping Centre, Southampton and 54 boulevard Haussmann, a prime retail property in central Paris. * Office development at 280 Bishopsgate, London EC2 let to The Royal Bank of Scotland Group at an annual rent of £15 million. * Five property disposals realised £71 million. Sale of office building at 40 rue de Courcelles, Paris 8eme for £101 million announced today. Ronald Spinney, Chairman, said: 'Hammerson's strong performance in 2000 reflects the benefits of our strategy of development and investment in prime retail and office properties in a number of key European markets. Good returns from the group's continental European properties and its UK offices more than offset the lower returns from UK shopping centres. Looking forward, the majority of the markets in which Hammerson operates are showing good demand. I am confident that we shall continue to exploit the potential within the portfolio and secure new opportunities to achieve excellent returns for shareholders.' For further information: John Richards Tel: 020 7887 1000 Chief Executive Fax: 020 7887 1010 Simon Melliss Group Finance Director Christopher Smith Director of Corporate Affairs Copies of the preliminary results statement, profit & loss account, balance sheet and cash flow statement are attached. CHAIRMAN'S STATEMENT Introduction Hammerson has continued to build on its position as a leading European real estate investment and development company which focuses on two market sectors, shopping centres and offices. The group offers investors an exposure to key European property markets provided by a management team with a successful track record of creating a high quality portfolio and developing properties that meet occupiers' changing requirements. Results and Dividend Profit before tax for the year to 31 December 2000 totalled £89.2 million compared with £94.5 million in 1999. Excluding exceptional items, the reduction in profit was £1.2 million or 1.6%. Pre-tax profit in 2000 was reduced by £2.7 million as a result of the disposal of Holborn Links in 1999 and by additional interest of £1.1 million related to the purchase by Hammerson of its own shares. After taking into account minorities, taxation and the reduced number of shares in issue, adjusted earnings per share increased by 1.9% to 22.0 pence. There was an increase of 84 pence, or 14.4%, in diluted net asset value per share to 667 pence. The principal reason for this was an underlying increase of 4.2% in the value of the group's income producing investments, coupled with development surpluses. Developments are now included at market value rather than cost. This change in accounting policy will enable easier comparison of the group with other property companies and simplifies reporting of performance by including a single figure for diluted net asset value per share. The directors are recommending a final dividend of 9.6 pence, compared with 9.11 pence in 1999. This makes a total dividend for the year of 14.0 pence, an increase of 5.3%. Markets and Outlook Demand for office accommodation in central London remained buoyant in 2000 leading to significant rental growth in the City, West End and Docklands. With a limited development pipeline and continuing good occupational demand, the outlook for further rises in rental values remains positive. This should continue to underpin investment demand. The central Paris office market also performed very strongly in 2000 with take up of modern space at record levels leading to further increases in prime rents. The outlook remains encouraging as there is limited availability of space at a time of strong occupational demand and this should lead to continuing healthy investment interest. Last year I referred to the competitive pressures facing many retailers, particularly in the UK. This has constrained rental growth and resulted in a reduction in investment demand for retail property generally in 2000. However, there has been continued polarisation in occupational demand towards major dominant shopping centres of the type in which Hammerson's centres in the UK are weighted and this trend is anticipated to continue. The French retail sector had a very strong year in 2000. Improving consumer confidence resulted in an increase in retailer demand for space at a time of limited supply and this has been reflected in higher rents and continuing investment demand for prime shopping centres. The outlook remains positive. In Germany, consumer confidence showed some improvement in 2000 and this was reflected in increased demand for space from retailers and modest rises in rents. The outlook continues to improve, particularly against a background of tight supply of prime retail units. There is sustained investment demand for good shopping centres. Conclusion Hammerson's strong performance in 2000 reflects the benefits of our strategy of development and investment in prime retail and office properties in a number of key European markets. Good returns from the group's continental European properties and its UK offices more than offset the lower returns from UK shopping centres. Looking forward, the majority of the markets in which Hammerson operates are showing good demand. I am confident that we shall continue to exploit the potential within the portfolio and secure new opportunities to achieve excellent returns for shareholders. Ronald Spinney Chairman 5 March 2001 OPERATING REVIEW Overview Hammerson is a leading European developer and investor in large real estate projects. Its most important financial benchmark is the return on shareholders' equity as it reflects performance both in capital values and rental income. During 2000, the group's return on equity was 16.3% and over the last three years it has averaged 17.7% per annum. Management balances the allocation of capital between income-producing properties and developments, recycling capital to maximise returns. An example of this is the sale for £101 million, announced today, of 40 rue de Courcelles, an office building in central Paris developed and completed by the group 18 months ago at a total cost of £67 million. The proceeds will add to the group's capacity to invest in new projects where good returns can be achieved. The group's existing development programme consists of six major projects with a value at the end of 2000 of £298 million. These will involve additional investment of £290 million over the next three years. Further projects are in the course of evaluation and planning and can be advanced to maintain an appropriately phased level of development activity. The expansion in the group's development programme over the last five years has held back the growth in earnings per share as development projects do not generally make any contribution to income until completed. For instance, Hammerson's redevelopment of 280 Bishopsgate, London EC2 will involve total costs of £108 million by the time of its completion in November 2001 and during this period it makes no contribution to earnings. In October 2000, an agreement to lease was signed with The Royal Bank of Scotland Group for the entire building at an annual rent of £15 million. When income producing in April 2002, the property will make a strong contribution to earnings, showing a yield on the group's total costs of more than 13%, compared with a financing cost of around 7%. Furthermore, at several of Hammerson's earlier developments, initial rent reviews are now imminent. For example, at 99 Bishopsgate, London EC2, a development completed in 1995, the rental income passing at 31 December 2000 in respect of leases where reviews are due this year was £13 million, compared with an estimated rental value of £18 million. Hammerson's portfolio was enhanced during the year by the acquisition of three investment properties in France and Germany for £248 million and the disposal of properties which were forecast to no longer meet the group's performance targets. Additional investment was made in existing assets to ensure that they continue to meet occupiers' requirements. This included refurbishment programmes at several of the group's shopping centres. Retail * At 31 December 2000 Hammerson had investments in 24 major shopping centres and retail properties with a total value of £1,942 million. These included two development projects, Martineau Place and the New Bull Ring, both in Birmingham, which are due to open in 2001 and 2003 respectively. * Two major investment properties were acquired in 2000. In January, Hammerson completed the purchase of Forum Steglitz, a 29,000 sq.m. shopping centre in a prosperous suburb of Berlin, for £77 million. A major refurbishment programme is being planned. In September, the group completed the acquisition of a 56% interest in Bercy 2, a 35,200 sq.m. shopping centre situated in the south east of Paris adjacent to the Peripherique, for £44 million. Arranged over four floors with 69 retailers and 2,290 car spaces, Hammerson's ownership extends to 19,700 sq.m.. Bercy 2 provides excellent reversionary income potential. * Three retail development projects were completed during 2000. The B5 Designer Outlet Center near Berlin opened in May. In Paris, the redevelopment of 54 boulevard Haussmann was completed at the year end creating 12,900 sq.m. of first class retail accommodation in this premier retail location. The space has been leased to three major retailers, Galeries Lafayette, H&M and Burton and is now fully income producing. * In September, West Quay, a 74,500 sq.m. regional shopping centre in Southampton, was completed at a total cost of approximately £172 million. On opening, 83% of the income from the scheme had been secured and there were 14 vacant units. The centre is trading extremely well, with footfall well in excess of initial expectations. With a number of deals currently in solicitors' hands, only two retail units and a restaurant remain available. * At The Oracle in Reading, a further phase, linking the shopping centre to the town's existing prime retail street, was handed over to tenants in September. The Oracle was recently judged by The British Council of Shopping Centres to be the best new shopping centre to be opened in the UK in 1999. * In the year to 31 December 2000, there was an underlying increase of 1.4% in the value of the group's retail portfolio. Uplifts in the values of the French and German portfolios of 9.0% and 2.3% respectively were partially offset by a fall in value of 1.8% in the value of the group's UK retail assets, the latter reflecting a weakening in investor sentiment towards the sector. * The group's retail portfolio provides a high quality, secure income stream with good growth potential. At 31 December 2000, the vacancy rate was 2.9%, the average unexpired lease term was 12 years and passing rents of £108.9 million were 15% reversionary. Rental income of £17.6 million is in respect of leases that expire, or have tenants' break options in the UK, over the three years 2001-2003, whilst a further £17.0 million is subject to rent reviews during the same period. Management believes that there is good potential to secure higher rents on lease renewals or on rent reviews as a result of the reversionary nature of the retail portfolio. * Annual passing rents at the end of 2000 from the group's ten largest retail tenants, measured by gross rental income, accounted for 17% of the group's total retail rent roll. * Hammerson has initiated expansion or improvement programmes at several shopping centres, including Liberty Centre in Romford, Italie 2 in Paris 13eme, Place des Halles in Strasbourg and Markisches Zentrum in Berlin. Total expenditure on these projects is estimated to be £74 million during this year and next. * At Brent Cross in the UK, a public inquiry into a proposed 27,000sq.m. expansion of the shopping centre resulted in The Secretary for State's refusal to grant planning consent in April 2000. This decision was overturned on appeal in October and the application will now be re-determined by a new inquiry. Hammerson will continue to work closely with The London Borough of Barnet and other interested parties to plan a future for Brent Cross to maintain its position as the pre-eminent shopping area for north west London. Retail Developments Property Ownership Completion Costs Estimated interest date incurred to total 31 December development 2000 cost £m £m Martineau 33.33% Oct 2001 23 30 Place, Birmingham Bull Ring, 33.33% Oct 2003 43 180 Birmingham * In Birmingham, substantial progress has been achieved by The Birmingham Alliance, a partnership between Hammerson, Henderson Investors Ltd and Land Securities, which is carrying out a major retail-led urban renewal programme in the heart of the city. At Martineau Place, The Alliance is creating 16,700 sq.m. of shop units, with completion scheduled for this Autumn. Around 75% of the projected income from the scheme has either been secured or is in solicitors' hands. At the New Bull Ring, the new indoor covered market was opened in October. Demolition of the old centre is nearing completion and initial works on the development of a new 110,000 sq.m. shopping centre are underway. Selfridges and Debenhams will be the principal department stores anchoring the scheme. Over one third of the total projected income has already been secured or is in solicitors' hands over two and a half years before completion. * In October, Hammerson announced that it had agreed terms for a partnership, to be known as The Bristol Alliance, with CGNU, Henderson Investors and Land Securities to redevelop the Broadmead area of Bristol. Although at an early stage, the mixed-use scheme includes provision for approximately 80,000 sq.m. of retail space, including a new landmark department store, ten flagship stores and over 50 new shops. The plans also include a mix of offices, restaurants, leisure facilities and more than 250 new homes. Retail Markets and Outlook * Hammerson offers international retailers the opportunity to secure representation efficiently in a number of major shopping locations in three countries. Managing these centres to create exciting and vibrant retail destinations remains one of Hammerson's core activities. * The company has taken advantage of the recent restructuring and changing property requirements of several high profile retailers to implement asset management initiatives at its shopping centres. For example, centres such as Brent Cross are being reconfigured to create flagship units for an exciting range of fashion retailers. * In France, the retail property market has remained buoyant. Increased occupational demand, both from French and international retailers, is being driven by good growth in retail spending and positive consumer sentiment. The high level of demand at a time of minimal supply has resulted in increased prime retail rents. The investment market remained strong during the year. The outlook remains favourable, with little new space being developed and positive economic forecasts. * In Germany, demand for space both from domestic and international retailers improved, leading to a slight rise in shopping centre rents. Investment demand remained healthy with new investors entering the market. Offices * At 31 December 2000, the group had investments in 27 office properties, mainly in central London and central Paris, valued at £1,396 million and providing some 300,000 sq.m. of accommodation. * In March, Hammerson acquired Les Trois Quartiers, 21 boulevard de la Madeleine, Paris 1er for £127 million. The well located building, which provides 17,900 sq.m. of high quality office accommodation and 11,800 sq.m. of retail space, has increased in value by 11% since acquisition and offers good potential for increased rents. * The group's redevelopment of 16 Old Bailey, London EC4, creating 8,700 sq.m. of modern offices, was completed in June at a total cost of £45 million and the building is now being fitted out by the occupier, Withers. Centennium House, London EC3, where a refurbishment was completed in 1999, was let to Global Crossing in April. * During 2000, Hammerson sold four UK office properties, Mitre House, Compter House and 32 St James's Square in London and Peter House in Manchester, raising a total of £55 million. In Paris, 16 place Vendome was sold in November for £13 million. Contracts were also exchanged for the sale of Gan House, London EC4 for £17 million, with completion in January 2001. * During 2000, there was an underlying increase in the value of the group's UK office portfolio of 18.1 %, reflecting higher rents and favourable yield shifts. In France the increase was 5.2%. * At 31 December 2000, the vacancy rate was 3.9%, compared with 6.5% at the end of 1999 and the weighted average unexpired lease term was ten years. Reflecting changes to the portfolio and rental growth, the portfolio was 27% reversionary at the year end, compared with 1% over-rented at the end of 1999. * Hammerson now owns only one substantially over-rented office building, 21 Moorfields, London EC2, where the average unexpired term of the leases is seven years. Hammerson has planning consent for a new 40,000 sq.m. office building on this site. * Rental income of £10.8 million is in respect of leases that expire, or have tenants' break options, over the three years 2001-2003, whilst a further £27.5 million is subject to rent reviews during the same period. As with the retail portfolio, the office portfolio offers good potential for increased rental income. * Annual passing rents at the end of 2000 from the group's five largest office tenants, ABN Amro, British American Tobacco, Lazards, National Power and Railtrack, totalled around £27 million or 36% of the group's total office rent roll. * Since the year end contracts have been exchanged for the sale of 40 rue de Courcelles, Paris 8eme, for £101 million. This office building was completed in August 1999 at a total cost of £67 million. It is anticipated that no tax will be payable on the disposal. Office Developments Property Ownership Completion Costs Estimated interest date incurred total to 31 development December cost 2000 £m £m 280 Bishopsgate, 100% Oct 2001 59 108 London EC2 148 rue de 100% July 2002 35 64 l'Universite, Paris 7eme 53 quai d'Orsay, 100% Aug 2002 33 58 Paris 7eme 1 London Wall, 50% July 2003 3 49 London EC2 * Construction of 280 Bishopsgate, London EC2, a landmark 13-storey building in a prime location in the City, started in January 2000, following Hammerson's acquisition of the site for £28 million in December 1999. In November, The Royal Bank of Scotland Group signed a lease to occupy the entire building for a term of 25 years at an annual rent of £15 million. The property is scheduled for completion in October this year at an anticipated total cost of £108 million. * In Paris, good progress was made in advancing plans to carry out a major refurbishment of 53 quai d'Orsay to provide 8,700 sq.m. of modern offices behind the existing 1930's facade and a total redevelopment of 148 rue de l'Universite to create an office building of 9,900 sq.m.. Work started in January this year with completion scheduled for summer 2002 at an approximate total cost of £122 million. There has already been encouraging interest in the buildings from potential occupiers. * In December, Hammerson acquired a two thirds interest in Spitalfields Development Group ('SDG') for a total of £18 million. SDG's principal asset is a long leasehold interest in a development site, 10 Bishop's Square, London, E1, which has potential for an office and retail development of 18,600 sq.m.. The freehold interest in the site is owned by The Corporation of London. In addition, SDG has an interest in the adjoining development site at 1 Bishop's Square, the freehold of which is also owned by The Corporation of London. SDG's interests have been combined with those of The Corporation in a conditional joint venture which gives SDG an effective 32% interest in the two proposed developments totalling 63,200 sq.m.. * Hammerson also announced in December that it is to start the redevelopment of 1 London Wall, London EC2 to create a landmark office building of 18,600 sq.m. in a 50:50 joint venture with Kajima, a major Japanese construction, design and development company. The 12-storey building will provide high quality flexible accommodation. Completion is scheduled for Summer 2003 and Hammerson's share of the development costs will be approximately £49 million. * In Paris, good progress was made in respect of the proposed joint venture with AXA, the leading French insurance and financial services group, to redevelop adjoining properties at 9 place Vendome and 368/374 rue Saint Honore, Paris 1er. The plans involve the creation of 26,000 sq.m. of offices and prime retail units totalling 5,300 sq.m.. Heads of terms have been agreed with potential occupiers to take 3,000 sq.m. of the retail space. Office Markets and Outlook * In central London, occupational demand for office space remained strong, with significant rental growth in the City, West End and Docklands. With vacancy levels at their lowest level for a decade, good occupier demand and a limited development pipeline, the outlook for further rental growth is encouraging. Reflecting this, investment demand for offices remained healthy in 2000. * The Paris office occupational market experienced a buoyant year with record take up of space. The good levels of demand, coupled with virtually no new supply and very low vacancy rates, resulted in growth in prime rents of over 30%. There was also strong investment demand for property. The outlook remains positive, with continuing good demand both from occupiers and investors. FINANCIAL REVIEW Return on Shareholders' Equity * The return on shareholders' equity for 2000 was 16.3% compared with 22.3% in 1999. The reduction is mainly due to lower property valuation growth in 2000. Purchase of Own Shares * At the Annual General Meeting in May 2000, shareholders authorised the purchase in the market of the Company's ordinary shares representing up to 14.9% of the issued share capital. Taking advantage of the level of the share price discount to net asset value per share, the Company purchased and cancelled approximately 8.1 million of its ordinary shares during 2000 at an average price of 382 pence per share, at a total cost of £31.3 million. The shares purchased represented 2.8% of the issued share capital at 31 December 1999. This increased diluted net asset value per share by 7 pence whilst reducing adjusted profit after tax by the interest cost of financing the purchases of £1.1 million. There was no effect on earnings per share. * At the forthcoming Annual General Meeting, the Board will seek to renew the existing authority to permit purchases of up to 14.9% of the then issued share capital. The Board will continue to review the exercise of its authority in the context of the Company's share price and the long term interests of shareholders. Operating Results * Net rental income for the year was £141.1 million compared with £123.3 million in 1999. On a like-for-like basis net rental income was virtually unchanged. An analysis is shown below: 2000 1999* Net rental income £m £m Properties owned throughout 91.4 91.5 Properties acquired in 1999 or 2000 27.8 16.1 Properties sold in 1999 or 2000 2.4 14.0 Development properties completed in 1999 or 2000 19.5 2.0 Exchange translation - (0.3) Total 141.1 123.3 * France and Germany included at 2000 exchange rates * In the UK, net rental income increased by £4.1 million to £98.8 million. The increase arose mainly through the acquisitions, in 1999, of the freehold at the Liberty Centre, Romford and the Martineau Galleries, Birmingham and the completion of the developments at The Oracle, Reading and West Quay, Southampton. These increases were partly offset by the sale of Holborn Links in 1999. On a like-for-like basis, net rental income decreased by 2.0% due mainly to lease expiries. Turnover rents accounted for £3.1 million of net rental income in 2000. * In France, net rental income rose by £10.7 million, or by £10.5 million at constant exchange rates, to £31.4 million. The increase was mainly due to the acquisition of Les Trois Quartiers, Paris, 1er and a full year contribution from 40 rue de Courcelles, Paris 8eme, which was completed and let in August 1999. Net rental income increased by 8.4% on a like-for-like basis reflecting leasing activity at the newly refurbished shopping centres, Espace St. Quentin and Les 3 Fontaines. Turnover related net rental income for 2000 was £0.7 million. * In Germany, net rental income increased by £3.0 million, or by £2.9 million at constant exchange rates, to £10.9 million, principally reflecting the acquisition of Forum Steglitz, Berlin in January 2000. Turnover rents accounted for £0.5 million of net rental income in 2000. * The group's administration costs rose by £1.4 million to £15.7 million as a result of increased staffing due to the growth in the group's portfolio and development activities. * Net interest increased by £17.6 million to £53.4 million. The increase mainly reflected increased borrowings due to acquisitions and development expenditure. Interest capitalised on developments increased by £2.0 million to £21.0 million. Of this total, West Quay, Southampton accounted for £8 million and 280 Bishopsgate, London EC2, 16 Old Bailey, London EC4 and 54 boulevard Haussmann, Paris 9eme, accounted for £3 million each. The average cost of borrowing was 6.5% in 2000 compared with 6.7% in 1999 * Interest cover was 1.9 times in 2000 compared with 2.3 times in 1999 with the reduction due to the increase in interest costs. On a pro-forma basis, developments due to complete later in 2001, with pre-let annual gross rental income of £16.5 million, will increase interest cover in 2002. * Profit before tax in 2000 was £89.2 million and included a profit of £17.2 million resulting from property disposals and other exceptional items. Adjusted profit before tax, excluding exceptional items, was £72.0 million compared with £73.2 million in 1999. The sale in autumn 1999 of Holborn Links reduced profit before tax by £2.7 million. However, after taking account of taxation and minority interests, the reduction in the net profit for the year was only £0.6 million. * The tax charge of £8.2 million on profits before exceptional items represents an effective rate of tax of 11.4%, reflecting the benefit of capital allowances and relief for capitalised interest. Advance corporation tax ('ACT') previously written off was utilised by bearing additional tax in the years in which ACT could be used and carrying forward tax reliefs to cover the UK taxable profits of later years. It is anticipated that postponed tax reliefs will also be set against UK taxable profits for a further two to three years, so extending the ACT benefit. * Earnings per share for 2000 were 28.0 pence. After excluding profits from disposals, adjusted earnings per share were 22.0 pence, compared with 21.6 pence in 1999, an increase of 1.9%. Balance Sheet * At 31 December 2000, development properties have been included in the balance sheet at open market value. Previously such properties were included at cost. Comparative figures have been restated accordingly. * The year end book value of the property portfolio was £3,338 million, compared with £2,689 million at 31 December 1999. The increase in the year of £649 comprised valuation surpluses of £202 million, additions, net of disposals, of £439 million, and an increase of £8 million due to foreign exchange translation movements. Had the development surpluses not been included, the year end book value of the property portfolio would have been £3,255 million in 2000 and £2,657 million in 1999. * The surplus on developments at 31 December 2000 of £83 million reflects a valuation that is discounted for the estimated costs to complete, including the interest costs and a profit margin that a potential buyer might apply. The group does not intend to dispose of any of its developments prior to their completion and management believes that, in current market conditions, the future surpluses from these projects are likely to be substantially in excess of £83 million. * Diluted net asset value per share increased in 2000 by 14.4% or 84 pence per share to 667 pence at 31 December 2000. The increase arose from the revaluation surplus, 65 pence per share, share purchases, 7 pence per share and retained profit and other items, 12 pence per share. * At 31 December 2000, the group had net assets of £246 million denominated in Euros, representing 13% of shareholders' funds. It is the group's policy to hedge the initial investment in foreign currency assets, but not subsequent revaluation movements. Exchange translation movements increased shareholders' funds by £2 million in 2000. Cash Flow * Operating cash flow after interest for the year ended 31 December 2000 was £69 million. In addition, there was a net tax inflow of £22 million due to a tax refund received in respect of the 1998 disposal of Hammerson Canada. * During 2000, capital expenditure was £511 million. Of this, £353 million was accounted for by property acquisitions, £137 million by development expenditure and £21 million by improvements to existing properties. * Proceeds of £71 million were raised through the disposal of five properties and an additional receipt in respect of a property sold in 1999. A further £4 million was received in settlement of a legal claim relating to a US property sold in 1995. Cash and Borrowings * At 31 December 2000, the group had borrowings of £1,440 million and cash of £150 million giving net debt of £1,290 million, compared with £859 million at the end of 1999. Undrawn committed facilities totalled £65 million. * In March 2000 Hammerson issued £200 million 20 year unsecured bonds at a coupon of 6.875%. Since the year end, a further £50 million of the bonds have been issued. In July 2000, Hammerson signed a £250 million syndicated revolving credit facility for a five year term. * The Company has in issue £110 million 6.5% convertible bonds. These bonds are convertible, at the option of the holder, into fully paid ordinary shares of 25 pence each at a price of 435.6 pence per share, at any time up to 5 June 2006. The Company has the right to redeem the bonds in whole or in part at any time after 26 June 2001. * At the year end, the weighted average maturity of the group's borrowings was 11 years and 43% was due after more than ten years. Borrowings at fixed rates of interest comprised 76% of the total. Overall, 97% of the group's borrowings were on an unsecured basis. The £37 million of secured borrowings are mortgages on three German properties. * The market value of borrowings and financial instruments at 31 December 2000 was £1,504 million. This included the market value of £8 million of the equity option element of the convertible bond and was some £64 million, before tax relief, in excess of the actual liability. At the end of 1999 the corresponding difference was £78 million. Property Portfolio Information for the year ended 31 December 2000 Net True rental Properties equivalent income at valuation yield £m £m % Notes (1) United Kingdom Retail: London & South of England 34.4 814.2 6.4 Midlands & North of England 15.9 364.5 7.1 50.3 1,178.7 6.7 Office: City 26.0 609.7 7.4 West end 16.1 322.5 7.9 Docklands & other 6.4 151.9 8.6 48.5 1,084.1 7.8 Total United Kingdom 98.8 2,262.8 7.1 Continental Europe Retail: France 20.1 513.5 7.0 Germany 10.9 249.5 6.6 31.0 763.0 6.6 Office: France 11.3 312.0 6.8 Total Continental Europe 42.3 1,075.0 6.9 Group Retail 81.3 1,941.7 6.8 Office 59.8 1,396.1 7.5 Total Group 141.1 3,337.8 7.1 Underlying valuation Total change return % % Notes United Kingdom Retail: London & South of England (2.4) 1.8 Midlands & North of England (0.4) 3.9 (1.8) 2.5 Office: City 23.0 28.0 West end 8.7 14.1 Docklands & other 21.0 25.7 18.1 23.2 Total United Kingdom 6.8 11.5 Continental Europe Retail: France 9.0 13.6 Germany 2.3 6.8 6.7 11.2 Office: France 5.2 9.5 Total Continental Europe 6.3 10.7 Group Retail 1.4 5.7 Office 15.0 19.9 Total Group 6.7 11.2 Estimated Vacancy Rents rental rate passing value Reversionary % £m £m % (2) (3) (4) Notes United Kingdom Retail: London & South of England 2.1 44.3 51.6 11.3 Midlands & North of England 0.4 17.8 21.4 10.2 1.7 62.1 73.0 11.0 Office: City nil 29.4 32.8 11.3 West end 0.8 18.9 25.8 36.5 Docklands & other 10.1 9.2 15.7 64.7 1.5 57.5 74.3 28.1 Total United Kingdom 2.8 119.6 147.3 19.2 Continental Europe Retail: France 2.2 31.4 40.1 24.0 Germany 6.9 15.4 18.4 12.3 4.3 46.8 58.5 20.1 Office: France nil 13.3 16.5 23.6 Total Continental Europe 3.8 60.1 75.0 20.9 Group Retail 2.9 108.9 131.5 14.9 Office 3.9 70.8 90.8 27.3 Total Group 3.2 179.7 222.3 19.8 Notes (1) True equivalent yield is based on rents passing and estimated rental value at 31 December 2000. The calculation excludes properties in the course of development. (2) Rents passing at 31 December 2000 after deducting head and equity rents. (3) Estimated rental value at 31 December 2000 including vacant space and after deducting head and equity rents. (4) The amount by which the estimated rental value exceeds the rents passing at 31 December 2000 excluding vacant space. Security of Income as at 31 December 2000 Average Rents passing Rents passing subject unexpired that expire / to review in break in 2001 2002 2003 2001 2002 2003 lease terms £m £m £m £m £m £m years Notes (1) (1) (1) (2) (2) (2) United Kingdom Retail: London 3.6 1.0 0.8 4.1 2.8 2.7 16 & South of England Midlands 0.7 0.8 0.3 2.7 2.3 2.4 11 & North of England 4.3 1.8 1.1 6.8 5.1 5.1 15 Office: City 0.6 0.3 - 10.1 1.4 - 10 West 0.7 - 4.3 0.2 2.7 10.9 14 End Dockland 0.9 0.8 0.2 0.2 1.1 0.9 8 s & other 2.2 1.1 4.5 10.5 5.2 11.8 11 Total United Kingdom 6.5 2.9 5.6 17.3 10.3 16.9 13 Continental Europe Retail: France 2.9 2.0 1.1 The majority of rents 8 in France and Germany Germany 0.6 1.6 2.2 are subject to annual 5 indexation 3.5 3.6 3.3 7 Office: France 0.7 1.5 0.8 8 Total Continental 4.2 5.1 4.1 7 Europe Group Retail 7.8 5.4 4.4 6.8 5.1 5.1 12 Office 2.9 2.6 5.3 10.5 5.2 11.8 10 Total Group 10.7 8.0 9.7 17.3 10.3 16.9 11 Notes (1) These figures show the amount by which rental income, based on rents passing at 31 December 2000, could fall in the event that occupational leases due to expire are not renewed or replaced by new leases. For the UK it includes tenants' break options. For France and Germany, it is based on the earliest date of lease expiry. (2) These figures show the rental income, after deducting head and equity rents, at 31 December 2000, which is subject to review in each year. MORE TO FOLLOW

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