Unibail-Rodamco-Westfield reports solid post-merger results

Unibail-Rodamco-Westfield has posted a jump in NAV and earnings during the H1 2018, in its first results since its high-profile merger. Paris-headquartered Unibail-Rodamco completed its takeover of Australian shopping centre giant Westfield in June. Its EPRA NAV rose 2.4% during the six months to €216.10 compared with the previous year. Recurring earnings per share grew by 7.3% to €6.61. URW’s total proportional portfolio value, including Westfield, inched up by 0.6% on a like-for-like basis to €63.7bn. Total net rental income across its portfolio, which also includes offices and convention and exhibition spaces, grew on a like-for-like basis by 4.7% to €861m, compared with H1 2017. Net rental income for all of its shopping centres climbed 4.3% to €738m. Of this, net rental income across both Westfield London and Stratford centres stood at €7m for the six-month period. Comparable net operating income in its UK business for H1 2018 grew by 6.7% compared with the first half of 2017. In the UK Footfall across its two UK assets was up 3.7% in H1 2018, driven by the opening of the extension of Westfield London. URW said the sales productivity of their “speciality” stores in its UK operations amounted to £969 per square foot, up 0.2% on a trailing 12-month basis. The average minimum guaranteed rent uplift was 17%, while occupancy levels across the UK centres was 97.7%. Upcoming projects Chief financial officer Jaap Tonckens said the business is making “good progress” with the Croydon development, which is on track for completion in 2023 after its compulsory purchase order was granted in June. He said: “At this point we continue to work on pre-letting and working with Hammerson on the layout. As far as we’re concerned, we’re moving forward and everything is currently in place to proceed as planned.” He added that permits for Westfield Milan have also since been obtained. In the meantime, Tonckens ruled out other UK investment opportunities in the short term. “There have been a lot of people who have started showing us [opportunities]. One of the elements that distinguishes us is absolute discipline in terms of what we buy. At this point our focus is integrating Westfield and making sure we deliver for our shareholders,” he said. “Once that’s done we’ll obviously look around, but right now our heads are firmly down to make sure we continue to make good progress on integration. [We are not planning to] go out and buy assets that others want to sell at this point. “Our focus remains on our two standing assets [in the UK]. There are works ongoing in Stratford City, where there are further schemes, and an office development on top of Westfield London, so we have our hands full at this point.” Disposals programme Post-merger, the group agreed to sell or dispose of €1.3bn assets in July, mostly based in continental Europe. These included the €489m sale of four regional shopping centres in Spain to Morzal Properties Iberia, and the €785m sale of Paris office asset Capital 8 to Invesco. The business has so far achieved 41% of its €3bn disposal target in continental Europe. It has also offloaded a regional shopping centre in San Diego, Horton Plaza, which it had owned in a joint venture with an institutional investor. The business has said it is “working on further disposals”, and is considering the sale of more assets in France and Germany. US strategy In the US, it plans to convert some regional malls into flagship assets. Tonckens outlined proposals to run a five-year business plan “process” for each individual asset in the region. This entails an “x-ray” review of respective assets to determine which centres have potential, which ones “should get a little TLC”, and which ones should be converted quickly. “We currently have no plans to be selling stakes in our assets – what we like is control,” he added. “We would enter a joint venture if there is a risk-sharing or risk management proposition in there, but at this point, considering our position following the merger, we are making good progress against our disposal targets, which will bring down leverage. “All in all, we are going to wait for the business plan before we determine our next steps with that particular portfolio.” Christophe Cuvillier, group CEO, said: “Growth was driven by a strong like-for-like retail NRI increase of 4.3%, an outstanding performance by our offices division, the deliveries in 2017, as well as the contribution from our US and UK assets during June. “Our focus remains on continuous improvement in our portfolio through disciplined asset management, our rotation strategy, and the build-out of the development pipeline.” To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette