2001 Annual Report - Unibail-Rodamco

BUSINESS REVIEW
second half. Overall household expenditure rose sharply by 2.9%
in value terms, according to the Insee Index.
Retail sales increased by 2% in 2001, driven by the buoyancy in
consumer electronics, health & beauty, leisure & education,
services and the household equipment sectors.
A survey by Sociovision/Cofremca confirms the strong appeal for
shopping centers among the French public and highlights their
ability to attract the most trend-conscious consumers with the
most dynamic spending patterns.
Against this background, the shopping centers in Unibail’s portfolio
recorded 4.5% sales growth in 2001, once again outperforming
their benchmark indices. Proactive sales strategies coupled with the
inherent quality of each center have driven this growth.
By focusing on buoyant consumer sectors, Unibail’s shopping
centers have achieved a greatly improved sales performance in
health and beauty (+9.8%), services (+10%), sports goods (+5.9%)
and educational products (+4.7%). Even clothing recorded a 5%
growth compared with 0.2% for the French market as a whole
(Banque de France data).
The demand for prime retail space from major national and
international chains remained very strong during 2001. Lease
transactions commanded high rents, matching their end-2000 levels.
Many of these large companies opened outlets in Unibail’s
shopping centers in 2001, including Planète Saturn (Métro group),
Virgin, Zara, H&M, Mango, Nature et Découvertes, Résonances,
Yves Rocher, Marionnaud, Timberland, Quicksilver and Maison du
Monde.These chains will provide additional sources of sales growth
from 2002 onwards.
Rents achieved through letting activities in 2002 are set to remain
high, certainly in line with the previous year. Market corrections
could reduce the cost of key-money, encouraging these dynamic,
progressive chains to expand further.
In terms of investment, the shopping center market was
characterized by a severe shortage of product in 2001. The only
major transaction was the sale of the Trema portfolio,
predominantly comprising Italian assets. As publicly known, the sale
of the Parinor shopping center is due to be finalized in the first
quarter of 2002, based on an initial yield of under 6%.
2001 financial performance
Shopping Center Portfolio Net Operating Income (€m) 1999 2000 2001
Rental income 103.3 121.7 139.9
Net operating expenses -15.3 -16.5 -19.8
Ground rents -4.0 -3.7 -3.4
Asset management costs -0.6 -0.6 -0.3
Net Operating Income - Shopping Center Portfolio 83.3 100.9 116.3
+21.2% +15.2%
Unibail’s shopping center portfolio generated in 2001 € 139.9m of rental
income, up 14.9% compared with € 121.7m in 2000.
This increase stems from:
• The acquisition of the Nice Etoile shopping center in October
2000, which generated € 10m in full-year rental income in
2001, € 0.8m higher than in 2000.
• The opening of the Gaîté Montparnasse shopping center in
September 2001, following its refurbishment and re-letting, which
generated € 1.1m in additional rental income compared with 2000.
• The acquisition of a co-ownership interest in the Toison d'Or
shopping center in Dijon generated € 0.3m in additional rental
income.
On a like-for-like basis, gross rental income rose by 7.4% compared
with 2000.
The strongest growth was recorded by the Forum des Halles in Paris
(+13.2%), Mériadeck in Bordeaux (+18.1%) and Carrousel du
Louvre in Paris (+13.4%).
During 2001, 153 new leases were signed (excluding Carré Sénart),
while 50 lease renewals and 59 terminations were negociated.
These figures reflect stronger performance than in 2000 (136 leases
signed, 55 renewed and 45 terminated).
The new or renewed leases represented over 56,000 m 2 in retail space
and increased full-year rental income by € 7.4m. Lease renewals
generated a 53.6% increase in rents, compared with 32% in 2000.
Letting activities were mainly focused on Les Quatre Temps
(La Défense), the Forum des Halles and Gaîté Montparnasse.
The financial vacancy rate for Unibail’s shopping center portfolio
came to 3.9% at year-end 2001 (vs 4.1% at year-end 2000),
representing € 4.7m in full-year rental income. Just over 40% of
these vacancies were ‘strategic’ (deliberately kept free for
refurbishments or tenant mix renewal). This applies notably to Les
Quatre Temps, the Forum des Halles, Mériadeck in Bordeaux and
Rosny 2.
Recurring operating expenses remained virtually flat compared
with the previous year at € 13.6m.
Net key money payments in 2001 amounted to € -0.5m, after
deducting the compensation paid for evictions, down on the
previous year (€ 1.3m). In addition, only € 2.8m in major works
expenses were charged to tenants, compared with € 3.2m in 2000.
This brings the total amount of property-related expenses for the
shopping center portfolio to € 11m in 2001, vs € 8.5m in 2000.
Management fees invoiced by Espace Expansion came to € 8.4m in
2001, compared with € 7.7m in 2000. These rose in tandem with
invoiced rents and the number of letting transactions completed.
Provisions for doubtful accounts stood at € 0.3m, as in 2000,
amounting to 0.2% of the total amount invoiced (i.e. rents plus
service charges). This rate can be considered as an absolute
minimum, reflecting the quality of Unibail’s tenants.
Overall net rental income totalled € 116.6m, showing a 14.9%
increase over 2000.
On a like-for-like basis, net rental income was up 6.5% compared
with 2000 (or 8.7% excluding non-recurring income and charges).
The ratio Net rental income/Gross rental income decreased slightly
to 83.5% in 2001 vs 84.2% in 2000 which recorded a more
favourable balance between non-recurring charges and income.
After taking into account asset management costs, Net
Operating Income for the Shopping Center Portfolio rose to
€ 116.3m in 2001, up 15.2% compared with € 100.9m in 2000.
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