Wereldhave N.V.: Trading update Q3 2018
Press release Wereldhave Q3 results 2018
- Executing on the strategic agenda by disposal of
Itis in Finland
- Occupancy increases in all countries to 96.2%
overall
- Footfall increases 2.1% above market
average
- Outlook 2018: direct result FY 2018 at € 3.30 - €
3.35 per share
- Dividend level 2018/2019 at € 2.52, despite disposal
of Finland
Our markets
The physical retail market is reinventing itself and its role
towards consumers, by trying to create the right balance between
on- and offline value propositions. In the Netherlands the market
has yet to catch up with the overall strong economic sentiment.
Conditions are still tough for some retailers, as their store
turnover is under pressure. In line with the global trend, the
fashion sector remains struggling and continues to rationalise its
store base. On a positive note, our portfolio saw no major
bankruptcies in the third quarter. Leasing activity remained high
over the course of the summer, with demand from various sectors.
Most of our Dutch centres continue to do well, with leases in line
with market levels; the few weaker centres underperformed.
International retailers are entering the Dutch market, such as
Uniqlo, Dunkin’ Donuts and Baskin Robbins.
In Belgium, Wereldhave’s centres provide an attractive market
place against affordable rents. Customers enjoy visiting our
shopping centres; the footfall patterns are stable. Affordability
of rents for physical stores is becoming an important topic on the
leasing market. We have been able to raise occupancy during the
third quarter, but notice that rental pressure is increasing,
particularly in the fashion segment. There are hardly any new
retailers entering the market. Existing formulas are renewing their
concepts. The first new-style Delhaize in Belgium opened in
Nivelles, one of their best stores in Wallonia. Decathlon have also
opened a 1,600 m² new store in Nivelles. Both openings positively
impacted footfall in the centre. We see a strong performance of our
food & beverage operators, which leads to increasing demand.
This could compensate for rental pressure in other sectors.
In France, the retail leasing market remains challenging.
Particularly in the fashion segment sales are declining.
Wereldhave’s French portfolio is relatively strongly exposed to
fashion. Other segments on average have seen a slight increase in
sales, with housing equipment, sports and food & beverage doing
particularly well. New concepts that were introduced in our
centres, such as Primark, Action, Courier and Sostrene Grene, are
performing strongly. Footfall has been low during the summer. This
can be attributed to the warm weather and the French success in the
World Cup Football. There were two major bankruptcies in the toys
segment this year. We expect that consolidation in this segment
will lead to further rationalisation of floor space. Demand from
discount formulas and large home equipment formats is on the rise.
We also see an increasing demand from less traditional shopping
centre occupiers, such as healthcare and medical, co-working spaces
and services.
Itis is performing strong against the backdrop of a cautiously
optimistic economic climate in Finland. Sales are picking up again,
but the sales in the fashion segment remain somewhat disappointing.
The recent opening of the REDI shopping centre, which is situated
between Itis and the city centre of Helsinki, so far had a limited
impact on footfall, although it is too early to draw conclusions.
Only one tenant has left Itis for REDI. The interest for Itis from
food & beverage operators is still increasing, now that the
Finnkino and the first IMAX in Finland is about to open its doors
on November 30, 2018.
Operations
Gross rental income for the first three quarters of 2018
amounted to € 167.4m, which is 1% below 2017. The decrease is
mainly due to lower rental income in France, primarily the result
of the sales based rents that were concluded in 2017 to secure
anchor tenants. The impact on gross rental income from disposals in
2017 was mitigated by rental income growth in the Netherlands and
Belgium. In the Netherlands, the extension of Maassluis was taken
into operation; in Belgium the shopping centre Les Bastions.
Occupancy of the shopping centre portfolio improved by 0.1%
during the third quarter, to reach 96.2% at September 30, 2018.
This is 0.7% above the year-end 2017 level. Occupancy rose in all
four countries, with a 20 bps increase in the Netherlands and 10
bps in the other countries. Leasing activity was again high with 86
leases signed. On average, overall footfall increased by 0.7% to
111.1m visitors in the first three quarters. This was 2.1% above
the market average.
In Belgium, occupancy of the shopping centre portfolio went up
by 10 bps to 96.8%. Carrefour’s early public announcement of its
intention to close the hypermarkets in Liege and Genk had a
negative impact on footfall. Overall, footfall decreased by 2.3%
compared to the previous year. In spite of this, tenant sales
increased by 1.2%. These numbers do not yet include the Les
Bastions shopping centre in Tournai, where footfall increased by
73% since the opening of the extension in April 2018. This resulted
in an overall increase in footfall of 6.3%.
Wereldhave Belgium and Carrefour have reached agreement about
the hypermarket in Liege. Carrefour will open a new concept
“Carrefour market” of 4,500 m² and has committed an 18-year
commercial lease, above the previous rent level per m². Wereldhave
Belgium will partially use the indemnity to divide the freed up
space of 5,500 m² in medium sized units. This will improve the
lay-out and the attractiveness of the centre. Talks with
prospective tenants have already commenced.
During the third quarter, 12 leases were signed or renewed, with
rents above ERV. In Nivelles, Delhaize opened its first new
concept store in Belgium. Important other new store openings during
the third quarter were Decathlon in Nivelles, Eyes + more in Ring
Shopping Kortrijk, Rituals in Liege and Avance kids in Genk
Shopping 1.
In France, occupancy increased by 10 bps to 93.7% during the
third quarter, with 13 leases signed. The most noteworthy deals
during the third quarter are Superdry in Côté Seine, a dentist
centre in Mériadeck and in Rivetoile, Club Sandwich in Docks Vauban
and the Kase in Docks76. In Rouen, new leases were signed for the
Verrerie project, a.o. with Micromania (video games), Biotech
(fitness nutrition) and Cahem Rouen (virtual reality). After four
consecutive quarters of increasing occupancy, the ongoing
restructuring in the toys segment will negatively impact occupancy
this year.
Footfall in the French shopping centres decreased by 0.8% during
the third quarter. Over the first three quarters, there was a 1.9%
decrease for the French CNCC index; Docks Vauban performed really
well with a 23% increase.
In the Netherlands, occupancy improved by 0.2% to 97.0%. There
were no major bankruptcies during the third quarter. Leasing
activity was again high, with 3.5% of the Dutch rent roll renewed
or extended during the third quarter. New leases were on average
signed 0.9% above ERV. Particularly in Capelle aan den IJssel, good
leasing progress was made. 14 new leases were signed, a.o. with Big
Bazar, Nelson, Vodafone, La Place and NY Pizza. In Kronenburg,
Arnhem, Action took up the former Kijkshop unit, which became
vacant earlier this year.
Footfall in the Dutch centres increased by 0.9%, against a -0.2%
market average. The shopping centres CityPlaza in Nieuwegein,
Koningshoek in Maassluis, Pieter Vreedeplein in Tilburg and
Presikhaaf in Arnhem recorded the highest visitor growth. This
clearly underpins the success of the redevelopment scheme for the
Dutch portfolio. The gap with the three centres at the lower end of
the portfolio is widening.
In Finland, occupancy improved to 96.5% and given the lively
interest from food & beverage operators, the leasing pipeline
offers perspective for further improvement of the occupancy rate.
Footfall in Itis remained more or less stable. Although
preliminary, during the first ten days after the opening of the new
REDI centre footfall only slightly decreased, but tenants are not
reporting any impact on sales. During the third quarter, 11 leases
were agreed, above ERV. Most renewals chose for a long-term renewal
instead of opting for a flexible lease term. Important signings
during the third quarter were Recci, Nordea and Hanko Sushi.
Portfolio
There were no changes in the composition of the portfolio during
the third quarter.
Yesterday, Wereldhave announced that it has reached agreement to
sell the Itis shopping centre in Helsinki to a fund advised by
Morgan Stanley Real Estate Investing (MSREI). The net price for the
shopping centre including the deferred tax liability amounts to €
450m. This reflects a gross price of € 516 million, which is 8.5%
below the book value at 30 June 2018. The transaction is scheduled
for December 2018, subject to completion of the Finnkino
development project.
On 18 October 2018, Wereldhave Belgium reached agreement with
Redevco on the acquisition of two retail parks, one in Bruges and
the other in Turnhout, for a total market value of € 73m. One of
the two retail parks will be contributed in kind by Redevco, who
will take up just below 5% of new shares in Wereldhave Belgium at
NAV. This will dilute Wereldhave’s stake in Wereldhave
Belgium from 69.33% to approx. 66%, whilst maintaining the LTV both
at Group level and in Belgium close to its current
levels.
The transaction is not only EPS accretive but also important for
Wereldhave Belgiums fiscal status. It will bring the relative
weight of the Belle-Ile shopping centre below the 20% mark, in line
with the Royal Decree for Belgian REITs. Until now, Wereldhave
Belgium has a waiver for the restriction that no single asset
should be above 20% of the total portfolio.
Development pipeline
The committed development portfolio consists of four projects,
one in Finland, one in France and two in the Netherlands.
In France, the redevelopment of the Verrerie project in the
Saint Sever shopping centre is progressing well. It will add an
extensive food court in front of the Kinepolis cinema. Pre-leasing
is making good progress, with the preletting currently at 95%.
Completion of the € 26m investment project is scheduled for
2019.
In Finland, the creation of a 9-screen Finnkino with Finland’s
first IMAX theatre in the heart of the Itis shopping centre is
nearing completion. The Grand opening is scheduled for November 30,
2018, together with nine new food & beverage units immediately
adjacent to the Finnkino.
In the Netherlands, the redevelopment of Presikhaaf shopping
centre is also reaching its final stages. The new Coop supermarket
opened on October 9, 2018, ahead of schedule. The entire
refurbishment of the centre is scheduled for completion in early
2019.
In Capelle aan den IJssel, the parking garage for 280 cars and
the new food court were completed during the third quarter. The
next part of phase two is the creation of a passage to improve the
connection between both parts of the centre. This part of the
project is scheduled for completion in the beginning of 2019.
In view of the retail environment, new developments will be
limited in size and subject to upfront anchor tenant
commitment.
Financing
Nominal interest bearing debt was € 1,657m at September 30,
2018, which together with a cash balance of € 16m results in a net
debt of € 1,641m. Undrawn borrowing capacity amounted to € 458m,
including a new additional and yet undrawn € 350m Revolving Credit
Facility that was closed in July 2018. As at September 30, the
Loan-to-value ratio amounted to 42.6% (June 30, 2018: 42.2%). The
average cost of debt and ICR were 1.86% and 6.2x respectively and
the EPRA NAV per share stood at € 49.08 (H1 2018: € 48.94). Once
the disposal of Finland is completed, the LTV is expected to drop
by 6%. The transaction is scheduled for completion in December
2018.
Changes to the FBI regime
The Dutch government announced on October 15, 2018 that it has
decided to withdraw its plans to abolish the Dutch withholding tax.
It was further announced that the Dutch tax transparent REIT regime
for FBI’s will remain unchanged.
Outlook
As a result of the disposal of the Itis shopping centre in
Helsinki and the associated loss of rental income in December,
Wereldhave expects the direct result for 2018 to be between € 3.30
and € 3.35 per share (previously € 3.33 and € 3.38).
The dividend can and will be maintained at the current level of
€ 2.52 for 2018 and 2019.
- 19-10-18 WH Trading update Q3 18
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