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Unibail-Rodamco blames security threat, weather for stifled growth

Unibail-Rodamco SE, Europe's largest listed commercial property company by market capitalization, pointed to a combination of security concerns in France and unseasonable weather in Europe for preventing it from achieving higher growth in 2016.

The Franco-Dutch real estate investment trust, which owns shopping centers in 12 European countries and owns offices around Paris, posted largely positive results for 2016, with recurring earnings per share up 10.4% from 2015 as adjusted for 2015 disposals, and net rental income up 5.2% from the previous year.

Footfall at some of Unibail-Rodamco's shopping centers in France has dropped in the aftermath of the Paris terror attacks in 2015, COO Jean-Marie Tritant said during an earnings conference call. Meanwhile, cold weather in March and unseasonably hot weather in September kept shoppers away during retailers' releases of their spring/summer and winter collections, respectively.

"Although 2016 could have been better, it has been affected by weather conditions which were quite abnormal and the security threat in some of the major shopping centers in the Paris area," CEO Christophe Cuvillier said.

The Carrousel du Louvre, an underground shopping mall at the site of Paris' famous art museum, was particularly hard-hit by security fears, with a 17% decrease in foreign visitors to the Louvre, Tritant said. If Carrousel du Louvre were excluded from Unibail-Rodamco's French tenancies, the company would have outperformed the French shopping center index by 70 basis points and the increase in tenancy would rise to 1.7% from 1.4% at the group level, he added.

"The security situation will be a long-lasting one, and in that context, our priority is people safety," said Tritant. "We have globally and specifically raised the level of security on our group, hired security specialists at corporate level and strengthened the coordination with local authorities. We will monitor our global capex and opex budget to contain the inflationary effect of this reinforced security."

Looking ahead to 2017, Cuvillier said recurring EPS was expected to grow from €11.24 to a range of €11.80 to €12. "And for the medium term, based on current economic conditions and assumptions, and resulting as usual from our asset-by-asset, five-year business plan exercise, we confirm and reiterate our medium-term guidance, i.e., a compound annual growth rate of recurring earnings per share of between plus 6% and plus 8%," he added.