Wereldhave N.V.: press release H1 results 2018

PRESS RELEASE RESULTS FIRST HALF 2018

JULY 24, 2018

Operations

·        Occupancy increases in all countries

·        Occupancy rate of shopping centres increased to 96.1% (YE 2017: 95.5%)

·        Operations in France stabilised under challenging market conditions

·        Overall like-for-like rental growth at -1.3% (index 1.3%).

·        Increase in footfall of 0.6% from 73.5m to 73.9m shopping centre visitors

·        Footfall increase 2.2% above market average

Over the first quarter, occupancy remained flat. In the second quarter leasing gained momentum, with a strong increase in occupancy across the board, bringing the overall number from 95.5% at year-end 2017 to 96.1% at the end of June 2018.

THE NETHERLANDS

In the Netherlands, occupancy stood at 96.8% at the end of the second quarter (YE 2017: 96.5%). Leasing activity remained high, with 146 leases signed during the first half of the year. Important new leases that were signed during the second quarter are with S. Oliver and Comma at Nieuwegein, Action at Kronenburg in Arnhem, Levi's and Pandora for Tilburg and package deals with Casa, terStal and The Stone. Rent levels are generally at or above ERV. Like-for-like rental growth amounted to 1.0% which is 0.3% below the indexation.

In spite of ongoing development works in Capelle aan den IJssel and Presikhaaf in Arnhem, footfall in Wereldhave's centres outperformed the market average. Compared to 2017, footfall decreased by 1.5%, whereas the national footfall index saw a 1.9% decline. People may come less often, but stay longer. The average dwelltime in our Dutch centres during the first half of 2018 increased by 9.6%.

BELGIUM

In Belgium, occupancy of the shopping centres increased strongly during the first half of the year, from 94.9% at year-end 2017 to 96.7% at June 30, 2018. The occupancy of the Belgian offices remained stable and stood at 90.6% at June 30, 2018. 

During the second quarter, transactions for large units were signed with anchor tenants as Decathlon, NewYorker, Action and Medi-Market. Particularly in Kortrijk, good leasing progress was made. In one year's time, occupancy in Kortrijk rose from 88% to 95%. Footfall in Kortrijk went up by 4.1% in 2017 and 5.3% in 2018. In Genk occupancy also improved, as leases were signed with JDSports, Action and Only. In Nivelles, Decathlon became an important new anchor to the centre, bringing occupancy back to the 100% level.  

The announcement by Carrefour to close its hypermarkets in Liège and Genk and the subsequent strikes impacted footfall, particularly in Liège. Carrefour has meanwhile reached agreement with the trade unions, and has requested a partial release of the lease agreements in Liège and Genk. They seek to reduce floorspace and change their profile from hypermarket to supermarket. Negotiations with Carrefour are ongoing and Wereldhave is exploring alternatives for the space that will become available. In Liège, the new lay-out will be reviewed in combination with the expansion plans that have been put on hold. Due to the large success of the new Bastions shopping centre in Tournai that opened on April 12, 2018, footfall of the Belgian shopping centre portfolio still went up by 6.5%.

Like-for-like rental growth of the Belgian shopping centre portfolio was -3.4%, with indexation at 1.5%. The like-for-like rental income decreased by the introduction of free parking in Shopping1, temporary vacancy in Nivelles (now leased to Decathlon) and the departure of a tenant at Stadsplein, Genk.

FRANCE

In France, operational performance is becoming more robust, as occupancy increased for the third quarter in a row. During the second quarter, the increase amounted to 0.2%, bringing the occupancy level to 93.6% at June 30, 2018 (YE 2017: 93.2%). Footfall in the French shopping centres increased by 3.4% while the CNCC footfall index declined by 1.2%. This is mainly driven by the success of Primark opening in Docks Vauban and to new anchor tenants, in particular Action, in Côté Seine. Sales dropped by 3.6%, which is below the market average decrease of -1.6%.

Important leases that were signed during the first half of 2018 are with Marionnaud and Bershka for Docks Vauban, Guess in Rivetoile, Etam in Docks76 and a package deal with Muy Mucho (home interiors). Letting of the Verrerie project in Rouen is at 86% (KFC, Vapiano, Miss Cookies, BChef, Micromania). We are steadily increasing the multi-purpose use of our centres. In Rivetoile, a lease was signed with a dentist centre and in Côté Seine with La Poste.

The like-for-like rental growth in France came out at -3.9%, with indexation at 1.8%. Leases that were signed during the third quarter of 2017 to secure anchor tenants impacted net rental income. NRI for the first half of 2018 amounted to € 20.4m, which is 6.1% below the H1 2017 level. We anticipate an annual decrease of up to 5% of NRI in France for the full year 2018.

FINLAND

In Finland, occupancy at June 30, 2018 stood at 96.4%, against 96.0% at the end of the first quarter. Leasing activity was high during the second quarter, with 21 leases signed, nearly all well above ERV. After the strong like-for-like rental growth of 7.6% in H1 2017, like-for-like rental growth for the first half of 2018 was -0.6%, with the indexation at 0.4%. Jysk was signed as a new anchor and all Food and Beverage units next to new cinema are now pre-let, amongst others with Vapiano, Taco Bell and Lucky Bastard.   

To improve the customer journey, a kid's play area was installed in front of the shopping centre at the Talinn square and new wayfinding was implemented throughout the centre. In spite of the development works for the cinema and the food and beverage units, footfall decreased by only 0.5% over the past twelve months.

Investment portfolio

During the first quarter of 2018, Wereldhave sold 89 residential units above the Koperwiek shopping centre in Capelle aan den IJssel in the Netherlands. The transaction was completed for € 12.8m, equal to the book-value. There were no disposals during the second quarter. On July 4, 2018, Wereldhave Belgium sold an office building at the Olieslagerslaan in Vilvoorde for € 2.4m, equal to book-value.

Development pipeline

At June 30, 2018, Wereldhave's committed development portfolio consists of four projects, two in the Netherlands, one in France and one in Finland. The total value of the committed development pipeline is now at € 109m, which will be funded with the anticipated disposals in line with our management agenda (disposals up to € 200m for 2017-2019). 

In the Netherlands, the redevelopment of the Koningshoek shopping centre in Maassluis was completed in the first quarter of 2018. The centre is nearly fully let and footfall increased by 14%. Retailers report that the regional function of the centre is growing strongly and that average sales tickets are rising. Wereldhave is proud to announce that the centre was nominated for the annual Dutch shopping centre council (NRW) redevelopment prize, amongst 4 other contenders.

The committed development pipeline in the Netherlands now consists of two projects. In Capelle aan den IJssel, the development of a parking garage, a new passageway and a food court to the centre is making good progress. The first shops opened their doors in May 2018 and the project is to be completed early 2019.

The second committed project is the redevelopment of the Presikhaaf shopping centre in Arnhem. The project is now more than halfway. The fresh-food square was completed on May 25, 2018 and is fully let. The square is located at the front of the centre next to the new Albert Heijn and the third supermarket of the centre, Aldi. Leasing in Presikhaaf is making good progress with a healthy tenant appetite. Recent signings to the centre are The Stone (fashion) and Van Haren (shoes). The project is scheduled for completion in 2019.

In Tilburg, the new Frederikstraat is nearly fully let. Footfall at the Pieter Vreedeplein and the Emmapassage records double digit growth since the first phase of the project was competed. Plans are being drafted with the municipality for the second phase of the inner-city redevelopment scheme, to connect the new Frederikstraat to the Emmapassage and the Primark. This part of the project is not yet committed and is to be partly funded with local asset rotations.

In Belgium the 15,000 m² expansion of the Tournai shopping centre was completed on April 12, 2018. Wereldhave Belgium takes pride in the nomination of Les Bastions for the shopping award 2018 by BLSC, the Belgian Luxembourg Council of Retail and Shopping Centres. Les Bastions is very successful, with average footfall recording a 50% increase. The centre is fully let with large and renowned retailers, such as Zara, Bershka, JBC, Bel&Bo, Etam Lingerie and Armand Thiéry and an attractive food & beverage offer. There are currently no major committed development projects in Belgium.

In France, the new Primark in Docks Vauban, which opened its doors on February 21, 2018, pushed footfall of the centre up by 30% during the first half of the year. The committed development portfolio in France now consists of the Verrerie project in Saint Sever. This € 26m investment aims to add a food hall to the shopping centre, directly in front of the Kinepolis cinema, with Vapiano and  KFC. Preleasing of the project is at 86% and the total project will be completed in 2019. We are currently actively working on securing a new large anchor for Saint Sever. 

In Finland, the Finnkino project is well on track and within budget. Opening is scheduled at November 30, 2018. All restaurants near the cinema have been let, with anchors such as Vapiano, Lucky Bastard and Taco Bell and a salad bar, a noodle bar and a coffee bar. These will open between August and November 2018.

Wereldhave aims to keep the development pipeline scaled down to below the 3% level of the total portfolio. Uncommitted projects in the pipeline are the refurbishment of Mériadeck in Bordeaux, the second phase of the city centre redevelopment in Tilburg, the expansion of Sterrenburg in Dordrecht and an extension and changes in lay-out in Belle-Ile, Liège.­

Results H1 2018

 

·        Total result € 29.0m (H1 2017: € 74.2m)

·        Direct result € 74.5m (H1 2017: 75.2m)

·        Indirect result € -45.5m (H1 2017: € -0.9m)

·        Property revaluation: € -44.9m (H1 2017: € -2.9m)

·        Direct result per share € 1.70 (H1 2017: € 1.72)

·        NAV per share (EPRA): € 48.94 (FY 2017: € 50.00)

·        Loan-to-Value: 42.2% (FY 2017: 40.7%)

·        Like-for-like shopping centres -1.3% (index 1.3%)

 

Total result

The total result for the first half of 2018 amounts to € 29.0m (H1 2017: € 74.2m). The decrease is largely due to a lower indirect result compared to the first half of 2017. The direct result decreased by 1% to € 74.5m, mainly from disposals that were completed in 2017. The indirect result for the first semester was € -45.5m, against € -0.9m in H1 2017. The total result per share amounted to € 0.54 (H1 2017: € 1.69).

Direct result

The direct result for the first half of the year amounted to € 74.5m against € 75.2m in 2017. The direct result per share amounted to € 1.70 (H1 2017: € 1.72).

Overall, net rental income decreased by € 1.9m, or 2%. In Belgium, net rental income improved by € 0.2m. The additional rental income from the extension of Tournai is partially offset by the disposal of the Madou office building in Brussels and lower rental income in Stadsplein Genk. In France, net rental income decreased by € 1.3m, mainly from sales based rents with anchor tenants that were agreed mid 2017 and the Verrerie project in Saint Sever, Rouen. In the Netherlands, net rental income decreased by € 0.8m. The impact from two disposals in 2017 in Zoetermeer and Zwolle was mitigated by € 1.0m improved net rents, mainly in Koningshoek, Maassluis, which was taken into operation. Net rental income in Finland remained nearly stable.

H1 results 2017 were negatively impacted by € 0.8m restructuring costs. Interest charges increased by € 0.4m to € 15.6m in H1 2018, mainly the result of the increase in debt.

Indirect result

There was a negative revaluation in the Netherlands of € -25.9m and in Finland of € -16.3m (net of deferred tax). The devaluation in the Netherlands mainly relates to yield expansions and lower ERV expectations on less strategic assets, as well as non-yielding capital expenditures. In Finland, the devaluation relates to capital expenditures, mainly in relation to the cinema. The negative impact was partially offset by a positive property revaluation in Belgium of € 10.2m on the shopping centres, mainly from Les Bastions, less a negative revaluation of the Belgian offices of € 6.9m. In France, the value of the portfolio decreased by € 4.1m. Yields in France remained flat.

The indirect result was further slightly impacted by the valuation of derivatives, the deferred tax liability and other items. The total indirect result amounted to € -45.5m. The EPRA net initial yield as at June 30, 2018 remained flat at 5.1%.

Equity

On June 30, 2018, shareholders' equity including minority interest amounted to € 2,075.0 m (December 31, 2017: € 2,117.0m).
The net asset value per share (EPRA) including current profit stood at € 48.94 at June 30, 2018 (December 31, 2017:  € 50.00).  At both dates, the number of ordinary shares in issue amounted to 40,270,921.

Financing

On July 19, 2018, Wereldhave agreed an additional € 350m Revolving Credit Facility with a syndicate of banks, for a maximum term of two years. Consequently, with an extension of the company's existing € 300m Revolving Credit Facility by one year until 2023 and a refinancing of maturing facility in Belgium of € 30m for five years, the liquidity profile of the company improved significantly.

At the end of June, the weighted average maturity of the debt portfolio amounted to 4.5 years and the average cost of debt and ICR were 1.90% and 6.3x respectively.

Nominal interest-bearing debt was € 1,628m at June 30, 2018, which, together with a cash balance of € 13m, gives a net debt of € 1,615m. As at June 30, 2018 the undrawn committed borrowing capacity amounted to € 150m and the Loan-to-Value ratio amounted to 42.2% (December 31, 2017: 40.7%). As at June 30, 2018, 80% of Wereldhave's debt portfolio was at fixed interest rates.

Outlook 2018

·        Outlook precised: direct result 2018 between € 3.33 and € 3.38 per share (was: € 3.30 - 3.40)

·        Quarterly interim dividend of € 0.63, or € 2.52 on an annual basis

Outlook precised

The operational performance is gradually improving in all countries. We now set our outlook for 2018 for the direct result to between € 3.33 and € 3.38 per share (previously: € 3.30 - 3.40). Dividend for 2018 will be at a level of € 2.52, payable in four equal (interim) dividend payments of € 0.63 per quarter.

 

Changes to the FBI regime

The October 2017 Government coalition agreement stated an intention that FBI's (Dutch REITs), including Wereldhave, will no longer be allowed to invest directly in Dutch real estate from 2020 onwards, due to the planned abolishment of the dividend withholding tax (DWT). We expect more clarity on this subject by mid-September, as part of the Government tax budget for 2019.

Non-listed real estate FBI's are able to restructure themselves and can so potentially maintain tax transparency. Wereldhave, as a publicly listed company, has to be NV and can not restructure. We believe these changes to the FBI regime would create an uneven playing field and are probably an unforeseen - but very damaging - side effect of the DWT plans. We find these plans hard to explain, at a time when 35+ countries worldwide have existing REIT legislation, including most of the G20 countries, and many more countries are actively considering to introduce a REIT model.

We continue to believe this issue can still be resolved. Our efforts are aimed at resolving this issue in collaboration with our peers, in particular for Dutch private investors which are likely to be most impacted by this change. The Dutch assets compose approx. 40% of our total assets. If we find ourselves unable to resolve the issue, we believe items such as fiscal depreciations could well be a mitigating factor in the actual impact for Wereldhave.

Schiphol, 24 July 2018

Wereldhave N.V. Board of Management
D.J. Anbeek, CEO
A.W. de Vreede, CFO

Results Wereldhave H1 2018

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Source: Wereldhave N.V. via Globenewswire