Wednesday 21 March 2018

Hammerson chief eyes long-term investment horizon as he steers steady course

Sailor Simon Betty, who swapped the Caribbean for Ireland, says the property giant is here for the long haul, writes Dearbhail McDonald

Simon Betty Picture: David Conachy
Simon Betty Picture: David Conachy
Dearbhail McDonald

Dearbhail McDonald

Simon Betty was lounging around the idyllic English Harbour in Antigua Bay when he woke up and realised he needed "a proper job". For years, the Plymouth-born, Bristol-reared land economy graduate had circumnavigated the globe, working on boats in the Caribbean and the Mediterranean and becoming a professional sailor.

But waking up on a paradise beach every day had taken its own transient toll, dimming the wanderlust that had marked Betty's salad days in Bristol university studying the economics of bricks and mortar. "I just woke up one day and thought 'I just don't want to do this anymore'," says Betty, Director of Retail in Ireland for Hammerson, the British property investment giant which co-owns Dundrum Town Centre, the jewel in Ireland's retail and real estate crown.

Betty, who oversees a mammoth retail property portfolio valued at almost €2bn, has yet to deploy his sailing skills in Dublin, his new home county. He has gone so far as to don a T-shirt and shorts and stroll along Dun Laoghaire pier, but has yet to take the plunge. "It's nice to look at, but it looks too cold," says the avid cyclist and runner.

"I prefer sloshing around in the Med."

When Hammerson secured ownership of Dundrum Town Centre last year, some wondered if the FTSE 100 company had put too much of its overseas property eggs - 40pc of the group's portfolio is denominated in euro - into the Irish retail basket.

This was at a time when Irish retailers were contemplating the headwinds of a looming Brexit, a slowdown in retail growth and what subsequently turned out to be a disappointing Christmas. When the Dundrum deal was first agreed with German insurer Allianz (joint 50pc owner of Dundrum) in 2015, it was hailed as the largest-ever retail property transaction in Ireland.

It was also Hammerson plc's largest single leap of faith, having taken the earlier decision in 2012 to offload more than £500m worth of office stock in order to fund further acquisitions of shopping centres.

Hammerson acquired 50pc stakes in Dundrum, the Ilac and the Pavilions in Swords after paying Nama €1.85bn for €2.6bn worth of loans. Hammerson and Allianz acquired the "Project Jewel" loans from Nama, all of which had been associated with developer Joe O'Reilly and his firm Chartered Land.

Hammerson's massive foray into the Irish market is one that has paid off handsomely for the group, which last November raised €462m of debt through a private placement in the US, in part to repay short-term debt associated with its Irish acquisitions.

Last month Hammerson reported rental income in Ireland of £14m (€16.4m), with £1.5m of this generated by its Dublin Central development site.

Across its Irish property assets, which had a 99.5pc occupancy rate last year, the company secured annual rent uplifts of 8pc. Some 76pc of leases at Dundrum are subject to upward-only clauses and prospective tenants may have to share their sales data if they want to pitch up across Hammerson's portfolio.

There was a revolt, of sorts, when Hammerson doubled its car parking rates at Dundrum. But after the fuss died down, Hammerson quietly revealed that income from car parks and sale of advertising generated a tidy £2.3m since it secured ownership.

"Dundrum is the star of the show in terms of our Irish operations, but the other assets and development sites are an equally important part of our underwrite as Dundrum is," says Betty who followed his father John into the property business. "Clearly Dublin Central is part of that."

When Betty says Dublin Central, what he means is the sprawling six-acre site north of the Liffey that extends from the former Carlton cinema on O'Connell Street to Moore Street.

Hammerson had no idea when it undertook its transaction with Nama that it would find itself engaged in a dispute on the final battlefield of the 1916 Rising.

Last year, in a surprise judgment, a High Court judge ruled that nearly all of the buildings on the east side of Moore Street - as well as the laneways leading into it - collectively constitute a national monument.

The Government is appealing the ruling, a position quietly supported by Hammerson which says the litigation has not delayed its plans to develop its assets north of the Liffey. "Ultimately, we don't see the overall redevelopment of Dublin Central being solved by the courts," says Betty, who would like to revisit the planning permission secured by Chartered Land that sparked protest from relatives of those who died in the Rising.

"That will be solved by dialogue, reasonableness and compromise. Hopefully, we can bring some skills and approaches to this particular project that may not have been evident under the previous ownership.

"We're relaxed about the timing. We always realised there was going to be a long and detailed consultation process," adds Betty, who says that the Ilac centre is one of the busiest retail centres in its portfolio, with 18 million people passing through its doors each year.

Betty is bullish on Brexit and almost delirious about Ireland and its prospects - and not just related to property.

He has become one of the go-to guys for overseas investors looking for alternative cities to relocate to in the wake of Brexit and has been inundated with requests from retailers in the UK and across Europe.

"Dublin will get its fair share [of Brexit relocations], it's an incredibly vibrant and diverse place to live," he says, adding that he has faith in the British government and the European governments to figure out Brexit and avoid the worst prospect of a hard one. "Dublin is small, it's easy to access the natural environment and it's by the sea. I think the quality of life here is incredibly high."

The onslaught of Brexit queries has forced Betty to consider his own journey to Ireland, one that has included his French-speaking wife Abby recently giving birth to a daughter in Dublin.

"Ella will probably have an Irish accent, which is a bit weird," says the first-time dad who is staggered that the couple are registering their daughter for schools when she is less than three months old.

Its not just places in Ireland's schools that occupy the minds of those new to these shores.

Housing has also emerged as a major challenge for potential investors and employees. The shortage of housing supply has prompted Hammerson to reconsider a massive retail expansion at Dundrum in favour of an apartment scheme, albeit with a significant retail component.

It's a strategy that has been replicated elsewhere in the group's portfolio. "We wouldn't participate in residential development, but we can certainly act as a facilitator," says Betty, who has confirmed Hammerson is in talks with a number of development firms about a joint venture.

"We'll go about it in a methodical and sequential manner at the appropriate time in consultation with our partners, Allianz."

Distrust with the property industry is one thing that marks Ireland apart from its peers, according to Betty who says Hammerson may seek to join forces with other investors to represent the sector's interests here.

"We have observed a distrust in the property industry in Ireland that doesn't exist in other economies in Europe in which we invest," he says. "It seems that the nature of the crash here - the nature and severity of the crash - has left a very bitter taste. The real estate industry can be a force for good and we think that we perhaps have a role in repairing the damage that previous generations of property owners in Ireland caused during the financial crisis."

Part of the reason why the public distrusts the property industry is down to tax vehicles such as S110s and various funds that have allowed them to pay little or no tax on their investments.

Hammerson acquired its loan portfolio from Nama through a Section 110 and holds all its real estate in an Irish Collective Asset-management Vehicle (Icav) which is fully exempt from tax on income and profits.

The Government clamped down on Icavs late last year - they are now subject to a withholding tax of 20pc on certain property distributions from Irish funds to non-resident investors.

Privately, some funds have complained that the new rules amount to double taxation and a penalty on investors who took risks on Ireland when others wouldn't. For its part, Hammerson opposed the lack of a grandfathering rule and the potentially significant impacts the new rules may have on the value of historic transactions.

"Ireland's success is grounded in its ability to be competitive to international capital," says Betty.

"There's not a lot of domestic equity capital in Ireland ... therefore, the lifeblood of this economy is the international capital that comes in."

Whatever the headwinds, Hammerson is here to stay and Betty is full speed ahead managing Hammerson's investment in its assets including a multi-million-euro digital overhaul at Dundrum that will see the introduction of loyalty apps, a pop-up store by model Pippa O'Connor and number plate recognition in its car parks. "Retail is moving from the acquisition of product to the acquisition of experience.," says Betty.

"We view this opportunity in Ireland through a very long investment horizon, you might as well call it perpetuity."

'Being able to problem-solve is important'

What do you do in your spare time?

Cycling in the Wicklow Mountains, running in Phoenix Park and spending time with my family.

What book are you reading?

The Battle - Paul O'Connell's biography.

What's your music taste like?

I'm a big fan of Massive Attack.

Where was the last great meal you had?

I recently had an excellent meal at Dax Restaurant. I especially enjoy the restaurants of Howth.

What's the best advice you've received, and who gave it to you?

My father, who has been a big influence, says being able to problem-solve is much more important than knowing the right answer.

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