Unibail-Rodamco-Westfield confirms €2 bn French portfolio sale

Unibail-Rodamco-Westfield has confirmed the sale of a stake in a multi-billion euro portfolio of its French shopping centres, as tipped last year by PropertyEU.

Europe’s largest mall landlord announced it has agreed to sell five shopping centres at a price in line with December 2018 valuations, to a new ‘strategic’ joint venture with Crédit Agricole Assurances and La Française.

The deal values 100% of the five malls at €2.037 bn, which equates to a net initial yield of 4.8%. The properties are:  Aéroville and So Ouest, both in Paris; Rennes Alma; Toison d’Or in Dijon; and Confluence in Lyon.

URW will retain a 45.8% stake in the joint venture and continue to manage the assets. The transaction will be geared with €1 bn of debt, enabling URW to take out net proceeds of €1.5 bn when the transaction closes, expected during Q2 2020.

The Paris-headquartered REIT said the €1.5 bn will increase ‘as other investors join’ the joint venture.

URW appointed JP Morgan last autumn to advise on a sale which at one time also potentially included property in Lille.

In the past, URW has rarely sold interests in its prime, dominant centres believing there is a premium value in holding 100% of these assets.

However, with a large development programme to finance, and investors now much more picky about investing in retail, the REIT has not been able to sell some of its malls it had earmarked for disposal, at acceptable prices.

The group is also scaling back its development programme, an announcement that was made with the publication this week of its 2019 results to 31 December.

Some €3.2 bn of projects have been cut from the pipeline, reducing the programme’s €11.9 bn cost as at the 2018 year-end to €8.3 bn now.

Last year, URW set up a Paris-based team to examine the pipeline and identify opportunities to introduce more mixed-use into its portfolio. It said its pipeline GLA is now only 43% retail, with offices accounting for 21%, dinning & leisure for 17%, residential for 11% and hotels for 8%.

During 2020, URW expects to deliver €2 bn of projects including the extension of La Part-Dieu, also in Lyon, and Westfield Mall of the Netherlands, both in Europe and Westfield Valley Fair in California.

The results show the contrasting performance between the UK and the rest of Europe. While UK footfall was up 2.8% and sales were strong in November and December, net rental income like-for-like growth fell 4.2% reflecting continued downward pressure on rents. In continental shopping centres, NRI Lfl was up 3.1%.

While adjusted recurring earnings per stapled share (AREPS) beat guidance at €12.37 (compared to €12.10-€12.30 forecast last July), the company said disposals would reduce 2020 AREPS to the range €11.90-€12.10.

Assets URW currently wants to sell include Aupark, a 60,000 m2 mall in Slovakian capital Bratislava.

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