Unibail Says 2010 Profit Won’t Increase More Than 2% (Update2)
February 09, 2010, 1:32 PM EST(Adds closing share price in fifth paragraph.)
By Simon Packard
Feb. 9 (Bloomberg) -- Unibail-Rodamco SE, Europe’s largest shopping-center owner, said profit will barely increase this year as fewer new properties and the recession curb growth in rental income.
Earnings excluding changes in the value of properties and interest-rate derivatives, known as recurring profit, will rise no more than 2 percent, Chief Executive Officer Guillaume Poitrinal said in an interview. Unibail-Rodamco yesterday reported a 7.1 percent gain for 2009 to 9.19 euros a share.
“Our outlook is quite favorable in the coming five years, 2010 being a transition year,” Poitrinal, 42, said at the company’s headquarters in Paris. Starting from 2011, “things will most likely become more dynamic.”
Unibail-Rodamco raised 700 million euros ($959 million) from property sales last year and slowed new construction to weather the financial crisis and the recession. The reduction in the company’s portfolio, along with a six-month lag in inflation-index rents, will restrain growth in revenue from tenants this year.
Unibail-Rodamco declined 9.3 euros, or 6 percent, to 144.80 euros in Paris trading today, the biggest loss in more than a year.
After the market closed yesterday, the company reported a 15 percent decrease in net asset value in 2009 to 128.2 euros a share. That fell short of the average estimate of 130.7 euros from seven analysts.
‘A Reversal’
While “this element is disappointing, depreciations started to become marginal in the second half,” said Serge Demirdjian, an analyst at Paris brokerage BGC Aurel. “A reversal of the trend is emerging,” he said, reiterating his “buy” recommendation for the shares.
The increase in recurring profit also disappointed because it was merely in line with the company’s guidance, said Harm Meijer, an analyst at JPMorgan Chase & Co. He reiterated his “overweight” rating, citing the “medium-term outlook.”
Net rental income from Unibail-Rodamco’s shopping centers, which are spread across 12 countries and account for about 75 percent of its real estate, rose 3.9 percent last year excluding acquisitions. The malls are usually the largest in their area and tend to attract the most shoppers, Poitrinal said
“There is still a lot of demand from tenants for the best space,” he said.
Available bank loans and proceeds from the asset sales will “allow us to be able to finance our growth and prospects autonomously, something that’s very comforting,” the CEO said.
Debt Levels
Net debt as a proportion of the value of Unibail-Rodamco’s properties rose to 32 percent at the end of last year from 30 percent a year earlier. The buildings depreciated by 15 percent during that period.
This year “is going to be challenging, with limited growth in earnings and capital values, so any company with superior asset-management skills -- like Unibail-Rodamco -- will stand out,” said Bart Gysens, an analyst at Morgan Stanley in London.
The company’s relatively low debt levels mean it “has the balance sheet to make earnings-accretive acquisitions,” said Gysens, who has an “equal-weight” rating on the shares.
Four days ago, Poitrinal agreed to buy stakes in seven malls in Poland and France for 715 million euros. The purchase, from Simon Property Group and Ivanhoe Cambridge Inc., will also give the company a share in five French development sites.
Acquisition Plans
Poitrinal says he has no plans to make acquisitions in Germany, Italy or the U.K. for the time being, preferring to “consolidate our position in the markets where we are now.”
Unibail-Rodamco is “looking at a number of things at the moment,” he said, declining to identify potential targets. “What’s important is to buy them at their proper price. They have to offer growth potential.”
With about 2.3 billion euros still available in credit lines and cash, the company will proceed with plans to refurbish or extend malls and will step up new developments from the end of this year, Poitrinal said.
The program includes an expansion of the Maquinista mall in Barcelona and the Donauzentrum in central Vienna, along with longer-term projects like the planned Confluence shopping center in central Lyon, France’s second-largest city.
The refurbishments are “the most ambitious that we’ve had since the company was created” and will strengthen Unibail- Rodamco’s position when negotiating leasing terms, he said.
Unibail-Rodamco climbed 20 percent in the past six months, exceeding the 5.2 percent gain for the FTSE EPRA-Nareit Real Estate Index. The company replaced Volkswagen AG in the Dow Jones Euro Stoxx 50 Index last month. The index is a benchmark for shares of the 50 largest companies in the euro region.
--Editors: Andrew Blackman, Anne Pollak.
To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.
To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.
