Sonae Sierra, a retail specialist active in Europe and Brazil, recorded a net profit of €110 mln in 2017, compared to the €181.2 mln the year before as the growth in the value of investment properties slowed.
Earnings before interest and tax (EBIT) reached €105 mln, a 8.5% increase over the previous year. The direct result rose to €65 mln, an improvement of 14% compared to 2016. This reflected higher EBIT across the portfolio in Europe and in Brazil and the increase in Services’ turnover and margins.
The indirect result stood at €45 mln, €79 mln below the previous year, mainly due to lower value created in investment properties (lower yield compression in Iberia in 2017), lower gains on sales of investments and the fact that 2016 benefited from the opening of ParkLake.
In operational terms, tenant sales grew by 7.8% overall in the European portfolio compared to 2016, with a significant growth in Romania due to the successful opening of ParkLake in Bucharest. In Spain and Portugal total tenant sales increased by 10.8% and 5.6% respectively, reflecting the continuing economic recovery. This trend was chiefly felt within the Portuguese portfolio, where tenant sales increased by 5.6%, on a like-for-like basis, quite above the country Retail Sales Index for 2017 of 4.6%.
In Brazil tenant sales climbed steeply also, rising 6.8% in Brazilian Real.
The global occupancy rate of the portfolio shifted down slightly to 96.0%, a fall of 0.6 p.p. compared to 2016, due to small variations across the global portfolio. In Europe, occupancy remained stable at 97.1%. Occupancy rose in Portugal and Spain, to 99.1% and 94.4% respectively. Brazil saw its unit-shop occupancy decline from 94.8% to 92.5%.
Total rents grew 7.6%, rising 8.4% in Europe and 4.9% in Brazil (in Brazilian Real), above the average inflation rate of the period in both markets.
According to Fernando Guedes de Oliveira, Sonae Sierra's CEO, '2017 was a very good year for Sonae Sierra in both operational and financial terms. Furthermore, we increased our exposure to developments and amplified the scale and geographical reach of our services business.'
Transactions
Sonae Sierra’s capital recycling strategy included several acquisitions and disposals throughout 2017. Iberia Coop Fund, in which Sonae Sierra holds a 10% share, acquired 100% of Albufeira Retail Park. ORES, the SOCIMI with Bankinter in which Sonae Sierra is the operating partner and owner of a 3.75% interest, acquired 16 Investment Properties. Nine of these are located in Spain and seven in Portugal.
In addition, Sonae Sierra (15%) in joint venture with AXA Investment Managers – Real Assets (85%) completed the purchase of the Area Sur Shopping Centre in Jerez, Spain. Sonae Sierra acquired MaiaShopping and GuimarãeShopping, from the Sierra Fund, through a 20/80 partnership with Ocidental.
Sierra Portugal Fund sold AlbufeiraShopping and CCC Portimão, to Square Asset Management. Both properties continue to be managed by Sonae Sierra.
Development
The Company's development pipeline includes Jardín Plaza Cúcuta (Colombia), the urban regeneration scheme in Nuremberg (Germany), Shopping Centre Zenata (Morocco), the McArthurGlen Designer Outlet Málaga (Spain), and in Portugal, the NorteShopping and Centro Colombo expansions.
Construction works already started on the McArthurGlen Designer Outlet Malaga. This 50/50 joint venture between McArthurGlen and Sonae Sierra represents a €115 mln investment, to create 30,000 m2 of new retail space. It will offer consumers a strong mix of over 170 brands.
Sonae Sierra and Central Control also began construction works on Jardín Plaza Cúcuta. The project has a total investment of 52 mln and a gross leasable area of 43,000 m2, making it the largest shopping centre in the city. The opening is planned for the end of 2018.
The execution of the NorteShopping expansion started at end of 2017, to add 15,000 m2 to the existing 54,618 m2 of GLA, representing an investment of €72 mln.
This year a new project was announced in Parma, Italy, with construction works already started. This 50/50 joint venture between Sonae Sierra and Impresa Pizzarotti & c. represents an investment of around €200 mln to develop an urban regeneration project that will create a shopping centre and a retail park with a total 74,000 m2 of GLA and 170 units.
In the professional services area, Sonae Sierra signed a total of 187 new contracts in 2017: 157 for development services, 26 for property management, and 4 for investment management for a total of about €16 mln.
Image: NorteShopping
