Finweek English Edition - - INVESTMENT -

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.


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