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Unibail-Rodamco

Unibail-Rodamco

Unibail-Rodamco

In a country fixated by property, I suppose it is neglectful of this column not to have singled out a property giant for analysis before now.

We're rectifying this by tracking Unibail-Rodamco, a true property giant with a portfolio that includes shopping centres in all the swishest European cities like Paris, Berlin, Vienna and Madrid.

It's the biggest shopping centre operator in Europe - the third largest in the world - with a portfolio valued at €44bn and an annual net rental income of €1.5bn.

The company was established seven years ago following the merger between Unibail, a French property company, and the Dutch group Rodamco.

Unibail was created in 1968 as a leasing unit of the French company Worms Group, and later phased out its involvement in leasing and started to build a property portfolio. Rodamco, a bit younger than Unibail, focused on property interests in central Europe in its pre-merger existence.

The enlarged group is a REIT, meaning a real estate investment trust, or more plainly a company which has tax concessions for its investors; it is required to pass on most of its earnings to its shareholders, and have no dominant shareholder. Being a Franco/Dutch company, it is quoted on both the Paris and Amsterdam stock exchanges.

Unibail is involved in all aspects of property, development, investment and management. At year end, it had 90 retail assets, of which 73 were shopping centres in France, Spain, Austria, Holland, Germany and the Nordic countries.

The company's portfolio shows shopping centres accounting for 80pc of total assets; the remainder being offices and convention centres.

The group's up-market malls are attractive to all the top-end retailers, like Massimo Dutti, Armani and Abercrombie & Fitch.

The company is targeting the German market, having entered it only two years ago. It expanded its portfolio, threefold to €4.5bn following acquisitions of Ruhr Park and Centro Shopping Centres.

Unibail now has 26 shopping centres in cities like Berlin, Munich, Cologne and Dusseldorf and plans a €1bn inner city development in Hamburg.

Shopping centres account for the bulk of Unibail's rent roll at €1.2bn. France has more than half of the company's shopping centre assets, generating rental income of €620m, a portfolio valued at €13bn and a pipeline for future development of €2.4bn.

Rental income from office development is up 8pc, at €172m. The French market again is the main driver of growth with an 11pc increase. Beyond France, office rental income fell by 7pc. Conferences and exhibitions, mainly in Paris, generated €100m of income, (one of these exhibitions commemorated the sinking of the Titanic).

During the year, Unibail disposed of €2.4bn of assets and expects to offload an additional €2bn by the end of 2018. However, it also spent €500m on acquisitions, mainly in Germany, and has committed €2bn to the redevelopment of the 'Mall of Europe' in Brussels, its first ever venture in Belgium.

Unibail's share price is currently around €250 a share, just below its all-time high and way above its €90 in 2009. It has a market value of €24bn and a modest price-to-earnings multiple of 15. The really good news for investors is that dividends per share are up 8pc, the company indicating it intends to maintain this dividend this year and beyond as its corporate structure dictates.

As a REIT, its payout rate was 88pc, in line with its stated policy. The company has modest gearing and investors are told that the major credit-rating companies have given it an 'A' rating. Unibail is a strong company with a clear strategy.

I was quite taken with its impressive development pipeline as it proceeds to streamline its portfolio. It has a low cost of borrowing, limited risk and a growth outlook of 6-8pc. It's good to see a firm in the property game demonstrate resilience. If you can afford to invest at €250 a share, this company is worth considering.

Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.

Irish Independent