Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong operating performance across all activities, with higher year-on-year footfall and tenant sales in retail.
- Record results in the convention and exhibition business, driven by the early impact of the Olympic Games.
- Offices NRI increased due to full leasing progress at Trinity tower in La Défense.
- Significant growth in retail media revenues, on track to meet 2024 targets.
- Stabilization of asset values with net initial yields reflecting rental growth.
Negative Points
- Significant cost overruns and project mismanagement identified in the Westfield Hamburg-Überseequartier project, totaling approximately EUR360 million.
- Increased total investment cost of Westfield Hamburg-Überseequartier by EUR160 million due to a water leak and subsequent delays.
- Adjusted recurring earnings per share decreased by 2.7% year-on-year due to refinancing costs.
- Net debt increased by EUR0.4 billion due to CapEx spending and shareholder distributions.
- US flagship valuations decreased by 4.7% on a like-for-like basis, reflecting a negative yield effect.
Q & A Highlights
Q: Could you provide more details on the increased investment cost for the Westfield Hamburg-Überseequartier project and the expected opening date?
A: The total investment cost increased by approximately EUR160 million due to a water leak and subsequent delays, with an additional EUR360 million identified due to project mismanagement. We are working towards an October 17 opening date for the retail component, and we have reinforced our teams to ensure this timeline is met. (Jean-Marie Tritant, CEO)
Q: How do you view the current asset valuations in relation to potential disposals?
A: The EUR0.3 billion of disposals secured in H1 2024 were at prices in line with the last appraised values. This is consistent with over EUR5 billion of disposals completed in the last 3.5 years. (Fabrice Mouchel, CFO)
Q: Can you provide more details on the acquisition of the remaining stake in Westfield Montgomery?
A: The acquisition was done at a price below the last valuation, and it made sense due to the potential for value creation and the ability to extend financing at attractive conditions. (Fabrice Mouchel, CFO)
Q: How will the cost overruns at Westfield Hamburg impact your leverage ratios and dividend distribution?
A: The cost overruns will have a negative impact on our LTV, but we are implementing mitigating measures to cover half of the overruns. We will decide on the distribution based on the overall disposals and retained profit at the end of the year. (Fabrice Mouchel, CFO)
Q: What is the expected year-on-year decline in the convention business for 2025?
A: Excluding the impact of the Paris Olympics, the like-for-like growth was 25%. We expect a decline in 2025 due to the absence of the Olympics, but the underlying business remains strong. (Fabrice Mouchel, CFO)
Q: How do you plan to manage your leverage ratios given the current market conditions?
A: We have EUR4.6 billion in cash and EUR12.7 billion in credit facilities, giving us the visibility to complete disposals at the right time and conditions. We are confident in our ability to continue deleveraging through disposals. (Fabrice Mouchel, CFO)
Q: What are your plans for the EUR4.6 billion cash on hand?
A: The cash will be used to repay maturing debt and to support the company's financial stability. We have already repaid EUR0.6 billion of bonds maturing in H1 2024. (Fabrice Mouchel, CFO)
Q: Can you provide more details on the potential disposals and the interest from buyers?
A: We have active discussions with a variety of investors, including institutional money and private equity funds. The pace of disposals is slow, but we are confident in our ability to continue deleveraging through these transactions. (Jean-Marie Tritant, CEO)
Q: What is the expected yield on cost for the Westfield Hamburg-Überseequartier project?
A: The yield on cost is around 3.5%, which is lower than initially expected. However, we expect the asset to be successful and generate higher NOI, improving its valuation over time. (Fabrice Mouchel, CFO)
Q: How do you plan to manage the development opportunities in the US relative to Europe?
A: We continue to work on maximizing the value of our assets, including those in the US. For example, the Garden State Plaza project involves limited investment from URW, with most of the CapEx contributed by a JV partner. (Jean-Marie Tritant, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
