(AOF) – Unibail-Rodamco-Westfield announced that Westfield Century City (an outdoor shopping center in Los Angeles, California) has successfully raised $925 million in new financing as part of its continued development program. The new financing is a two-year floating-rate CMBS (A commercial mortgage-backed security = securitization of commercial mortgage loans commonly issued on the capital markets in the United States) with the option of three one-year extensions with a spread of 280.7 basis points on SOFR (Secured Overnight Financing Rate).
SOFR is a benchmark interest rate used to calculate the cost of borrowing for financial transactions.
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Key points
– European leader in commercial real estate born from the mergers of Unibail, Rodamco and Westfield;
– Portfolio of €53 billion in assets and rents of €2.3 billion, 95% generated by the 78 shopping centers then by offices and congresses and exhibitions;
– Economic model of refocusing on Europe based on 3 pillars -concentration, differentiation and innovation;
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Open capital with a minority position of 5.43% held by Xavier Niel, Jacques Richier chairing the 10-member supervisory board and Jean-Marie Tritant the executive board;
– Balance sheet still stretched with a leverage effect reduced to 9.6% at the end of March, but debt, of $20.7 billion, hedged against the rise in interest rates, cash of €13.7 billion securing financial maturities up to early 2026 and LTV ratio lowered to 41.2%.
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– 2024 strategy aiming to once again become a pure European player with operating income back to 2019 levels and a solid balance sheet (LTV below 40%) via:
– new sources of income: exploitation of data and maximization of the value of assets via mixed developments,
– total exit from the United States in 2023;
– Innovation orchestrated by the new director of customer strategy, strengthening of preference, impact (omnical platform) and agility (internet of things and cloud technologies);
– “Better places 2030” environmental strategy based on 3 pillars, the quality of buildings, connectivity and integration into the urban environment:
– halving of the carbon footprint vs 2015 and recovery of waste in connection with local communities,
– energy sobriety plan in Europe by reducing lighting, air conditioning, etc.,
– launch of Green Financing Framework loans with reinforced ESG criteria;
– Benefits of diversification:
– in residential by exploiting the potential of $2.4 billion m2 identified in the portfolio,
– in commercial partnerships via Westfield Rise, with high profitability;
– After completion of more than 75% of the asset disposal program in Europe, towards a total withdrawal from the United States, ie 20% of the portfolio;
– Delivery of €3.1 billion in pipeline projects, including €2.4 billion committed.
Challenges
– Change in revalued net assets or ANR (€155.70), key data for the property sector to be compared to the stock market price, and the vacancy rate of shopping centers (7.2%);
– Expectations for 2023: return of net rents from shopping centers and Conventions & Exhibitions activity to pre-pandemic levels and office activity driven by recently delivered projects;
– After a 7.8% increase in operating profit in the 1 st quarter, the 2023 objective of net earnings per share between €9.30 and €9.50;
– Probable resumption of the payment of dividends in 2024, for the 2023 financial year.
Find out more about the real estate sector
A demand crisis
According to data from the Federation of Property Developers (FPI), the figures for the third quarter of 2022 continue to be alarming. Sales of new collective housing fell by 12.4% over one year, to 19,006 units. Over the first nine months of 2022, the decline reached 10.2%, to 72,670 units.
Reservations are also plummeting due to the collapse of bulk sales to social landlords and institutional investors. As interest rates rise, institutional investors renegotiate or halt operations. First-time buyers are penalized by the rise in rates and the tightening of the Pinel system puts off some private investors.
Due to the sharp rise in construction costs, the REIT estimates that one out of six authorized operations is ultimately not carried out for economic reasons.
Faced with this, prices are still rising: the sale prices of new collective housing increased by 5.9% throughout France in the third quarter of 2022. Ile-de-France is an exception, with a drop of 0, 9%.