Europe's largest listed real estate company Unibail-Rodamco is not interested in teaming up with institutional investors or sovereign wealth funds on new shopping centre developments, the company's CFO Jaap Tonckens told PropertyEU in a conference call earlier this week following the publication of the company's 2016 earnings.
'Institutional investors are not used to taking development risks,' he noted. They also have a very different organisational structure and a great need for certainty, he added. 'There are very few companies like us that are entrepreneurial and have short decision-making lines to take advantage of opportunities in the market in this sector.'
In October last year, Dutch pension asset manager APG acquired a 75% stake in the St James shopping centre in Edinburgh from TH Real Estate ahead of a major redevelopment of the complex. APG already has an extensive portfolio of major European shopping centres including Westfield Stratford City in London and CAP3000 in Nice. 'Edinburgh St James fits in seamlessly with our strategy to increase our focus on "develop to core" projects,' Robert-Jan Foortse, head of European Property Investments at APG , said at the time.
Tonckens conceded that there may be some institutional parties that would be interested in participating on shopping centre developments or extensions, but pointed out that the Paris-listed company had no need for co-financing. ‘We have very low leverage and plenty of access to capital markets.'
In 2016, Unibail-Rodamco saw its loan-to-value ratio decline further to 33% (35% as at end-2015). The average cost of debt reached an all-time low of 1.6% - down 60 basis points from 2.2% in 2015 as the average maturity was extended to a record seven years (6.5 years as at end-2015).
During the year, the Paris-listed retail giant raised €3.7 bn of medium to long-term funds in the bond and bank markets and issued the first public bond with a 20-year maturity for a real-estate company, the longest maturity ever achieved in the sector on the euro market. It also issued an 8-year 3-month euro bond with the lowest coupon ever achieved by the group of 0.875%.
Another argument against co-financing on extension projects is that it is quite complex to align interests, Tonckens said. ‘Some existing tenants may move to the new section and may then see more revenue. The question then arises what revenue are the two partners entitled to? It’s not a question of simply splitting the additional revenue. The interests of the two parties are not aligned.’
