Europe's largest listed real estate company Unibail-Rodamco reported better-than-expected growth of its recurring earnings per share (EPS) for the full-year 2016 at the close of trading on Wednesday.
EPS increased by 10.4% to €11.24, slightly above its guidance of €11.00-€11.20 announced in February 2016. Full-year earnings were boosted by record premiums averaging almost 25% realised on the sale of some €900 mln of office buildings, the delivery of two retail extensions (Forum des Halles and Bonaire) as well as solid growth of its core shopping centre business.
'2016 was another year of financial and operational success for Unibail-Rodamco,' CEO Christophe Cuvillier said in a press release. ‘The successful 2015 deliveries, solid like-for-like rental growth and an all-time low cost of debt drove the strongest year-on-year recurring EPS growth since 2009.'
Rental income was particularly strong in the Nordics and Germany, which both accounted for increases of over 30% on an absolute basis due in part to new centre openings. The Mall of Scandinavia in Stockholm, which opened at end-2015 and was counted on a full-year basis for the first time in 2016, was a 'roaring success', the company's chief financial officer Jaap Tonckens told journalists in a conference call.
The strong overall premium achieved on the office disposals is a 'strong signal for the remainder of the portfolio', he added.
Unfavourable weather had a negative impact on fashion sales across the company's European operations, while in France footfall and sales were impacted by the terrorist threat. Fashion stores were particularly affected, but overall the company saw rents increase by 17%, Tonckens said. The CEE division also turned in a good performance.
The shopping centre division - which accounts for more than 80% of total business - saw net rental income (NRI) advance 8.1% on an absolute basis and 3.4% like-for-like to €1.2 bn. Overall NRI on a like-for-like basis was just 2.4% higher due to declines of 10% and 2.7% respectively in the offices and convention & exhibition divisions. Together these two divisions account for roughly 17% of the total business.
Record low cost of debt
In 2016, Unibail-Rodamco saw its loan-to-value ratio decline further to 33% (35% as at end-2015). The average cost of debt reached an all-time low of 1.6% - down 60 basis points from 2.2% in 2015 as the average maturity was extended to a record seven years (6.5 years as at end-2015).
During the year, the Paris-listed retail giant raised €3.7 bn of medium- to long-term funds in the bond and bank markets and issued the first public bond with a 20-year maturity for a real-estate company, the longest maturity ever achieved in the sector on the euro market. It also issued an 8-year 3-month euro bond with the lowest coupon ever achieved by the group of 0.875%.
In the coming year, Unibail-Rodamco will see the delivery of one new development (Wroclavia in Poland) and four extensions and renovations of existing assets. Its development pipeline currently stands at €8 bn while total assets under management rose 7.3% over the year to €40.4 bn as at 31 December 2016.
For 2017, the group expects recurring EPS of between €11.80 and €12.00 in line with its medium-term forecast of recurring EPS growth at a compound annual rate of between +6% and +8%.
