Shopping centre giant Unibail-Rodamco-Westfield has scaled back its development pipeline and effectively disposed of €2.8 billion ($4.5 billion) of assets over the 2019 financial year as it seeks to bolster its position in a tough retail landscape.
The Paris-based group, which completed a historic takeover of the Lowy family’s Westfield retail empire in 2018 and owns the Westfield brand outside of Australia, announced it had entered into a joint venture with a consortium of French investors which will see it offload a 54.2 per cent stake in five French shopping centres.
The divestment would see the quality of its portfolio improve as well as reduce leverage, Unibail said.
The disposals, as well as a reduction in the group’s development pipeline from €11.9 billion to €8.3 billion, will affect the group’s earnings in 2020 and 2021 with a lower FY20 guidance of between €11.9 and €12.1 per share compared to FY19’s adjusted recurring earnings per share of €12.37.
Christophe Cuvillier, the group’s chief executive, said while the retail environment remained challenging and earnings would be affected in the near term, its five-year business plan implied underlying operational growth of between 3 per cent and 5 per cent.
“The group remains soundly positioned for the future. We will continue the execution of our strategy of concentration, differentiation and innovation and a disciplined approach to the allocation of capital and deleveraging,” Mr Cuvillier said.
The arrival of the latest Tesla model had a noticeably positive impact on sales across Unibail’s shopping centres, particularly in the Nordic markets, where sales grew by 14.1 per cent followed by 5.4 per cent sales growth in France.
Across the portfolio, tenant sales increased by 3.7 per cent, with the strongest growth coming from the entertainment, sport and dining segments. Despite a challenging retail market, sales of fashion apparel were up by 2.2 per cent compared to flat sales in 2018.
The UK’s retail market continues to put pressure on Unibail, with 2019 marking the worst year on record for sales, according to the British Retail Consortium and KPMG.
Across its UK assets, the retail landlord recorded a high vacancy rate of 7.7 per cent and like-for-like income growth declined by 4.2 per cent.
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