Unibail Rodamco lifts EPS by a record 8.4%, raises full-year forecast

Europe’s largest listed real estate company Unibail-Rodamco reported earnings per share (EPS) rose by a record 8.4% in the first half of 2015, propelled by a 5.3% increase in net rental income and the delivery of more than €800 mln of new projects.

The cost of debt fell to a record 2.3% while the average debt maturity was extended to 6.4 years.

‘Unibail-Rodamco’s H1-2015 results are the first following the decisive reshaping of our French retail portfolio, with the massive non-core disposals, and the full consolidation of mfi in Germany in 2014,’ CEO Christophe Cuvillier said in a press release. ‘With confidence in Unibail-Rodamco's ability to continue its strong performance, the outlook for the recurring EPS for 2015 is increased to between €10.25 and €10.45 (from between €10.15 and €10.35 previously),’ he added.

Tenant sales were particularly strong at Unibail-Rodamco's Spanish shopping centres, the company's CFO Jaap Tonckens said in a conference call. Rental income on a like-for-like basis surged 12.3% in Spain followed by CEE (+5.6%), the Nordics (+5.4%), Austria (4%) and France (+2.1%).

Dutch operations lag
The Dutch operations by contrast lagged with a decline of 2.3%. ‘That is one area where we’re seeing the impact of the tough economic environment,’ Tonckens said. Over the period, the group saw Dutch retailer Albert Heijn terminate a lease at one of its shopping centres in the Netherlands and a new lease concluded at a lower rent. Tonckens: ‘We’ve seen a number of bankruptcies at our Dutch shopping centres. The quality is not the same there as for the rest of our portfolio.’

Group-wide, however, tenant sales ‘significantly’ outperformed national indices, he noted, by as much as 490 basis points in Spain and 330 bps in France. The sales figures rate among the highest in the industry, Tonckens added. ‘This is thanks to the enormous amount of effort we have put into building strong destinations for visitors.’

The company aims to upgrade its Dutch shopping centres, in particular its malls in Almere and Amstelveen, but plans have been held up by opposition to the plans and ongoing litigation. The company is also working on the expansion and upgrading of Leidsenhage which is due to be completed in 2017.

Tonckens declined to say whether the underperformance of the Dutch business is linked to the resignation earlier this year of John van Haaren as CEO of the Benelux operations. ‘John van Haaren was a good manager with good initiatives and he recruited a good team for the company,' he said. 'He was a good manager for the state that the organisation found itself in when he came on board.’

Van Haaren joined Unibail-Rodamco in 2011. In March the company appointed Otto Ambagtsheer to replace him as its new managing director for the Benelux region. The Dutch operations account for 5.4% of Unibail-Rodamco's total shopping centre portfolio which in turn make up 79% of the total.

New developments
Over the first half of the year, the Paris-based group delivered four new developments, including the
Minto shopping centre in Mönchengladbach, and the fully let So Ouest Plaza office tower in the Paris region. The group also added €962 mln of new projects to the pipeline, including the Triangle tower project in Paris following its approval by the Paris City Council on June 30, 2015. Triangle will be the first high-rise tower built in Paris in 40 years.

As a result, the value of the total development pipeline rose to a record level of €8.2 bn at end-June compared to €8 bn at end-2014. Assets under management grew by 3% to €37.5 bn.

The French office market remains 'challenging', the company reported. Income for this segment fell 0.8% but the decline was amply compensated by the 28.7% growth for the conventions and exhibitions segment. Offices account for 12% of the total portfolio with convention centres and services making up the remaining 9%.

In November, Unibail-Rodamco is due to open its Mall of Scandinavia in Stockholm.