18.9% 7.4% 6.8% 17.8% 4.7% 7.9% managing the portfolio operationally and has a strong capital allocation track record. Annualised total shareholder return (TSR) for UL including dividends (or other distribution) reinvested amounted to 19% per annum over the past 10 years, versus 7% for the FTSE EPRA/NAREIT Europe Index.
UL has a high-quality retail portfolio and results for the first six months of 2014 revealed footfall growth of 3.1% and an increase in tenant sales of 3.6%, outperforming national sales indices. Given the current macroeconomic environment, these indicators are attractive together with a l i ke-for-l i ke rental growth of 2.6%, rental uplift of 23.1% from re-lettings signed during the half year, a noticeable decrease in operating expenses and a further reduction in the cost of debt to 2.9%, the lowest among its European peers.
UL’s performance during the f irst half of 2014 demonstrates the strength of its business model. The strategy of owning large shopping centres located in densely populated catchment areas of major European cities with aboveaverage incomes per household, which offer visitors a unique experience and brand offer, a range of international premium retailers and top services have all contributed to the 8% growth in recurring earnings.
The risks posed by online retailing continue to be relevant, however highquality portfolios are considered to be more resilient as retailers are unlikely to close stores in busy locations with high footfall and high sales per square foot. This preference for high-quality space, together with UL’s €7.9bn development project pipeline, should result in steady market rental growth for UL going forward.
The company’s 2014 target of at least 5.5% EPS growth is expected to be achieved through continued tenant sales growth, low vacancies and good rental spreads, together with the contributions from the group’s accretive acquisitions and development pipeline schemes. Medium-term growth outlook is attractive and exposure to high-quality retail assets should mean that over the long term earnings growth should be above average versus other property types.