Unibail First-Half Net Rises 66% on Valuations, Rents

Unibail SA, France's largest real estate company, said first-half earnings rose 66 percent on rent increases and valuation gains from shopping malls it owns.

First-half net income rose to 1.03 billion euros ($1.3 billion) from 621 million euros a year earlier, after valuation gains of 733.7 million euros. Paris-based Unibail didn't provide per share data for net income.

``We expect to see double-digit growth in recurring profit for the year,'' Chief Executive Officer Guillaume Poitrinal said in an interview. ``We are quite optimistic for the end of the year.''

Unibail, which owns seven of the 20 largest French shopping malls, benefited from surging French consumer spending that made it possible to raise rents at its malls, pushing up the net value of its assets. French consumers' purchases of manufactured goods such as televisions and cars rose the most in a year in June after unemployment declined to a three-year low.

French spending on goods such as televisions and cars, which accounts for about 15 percent of the economy, increased 1.7 percent from May, when it climbed a revised 0.9 percent, according to Insee, the Paris-based national statistics office.

Retailer revenue in Unibail's malls rose 2.6 percent in the first half.

``We didn't expect such a large increase because of all the renovations,'' Poitrinal said. ``Consumption has been good.''

Unibail's shares closed down 1 percent at 144.2 euros today in Paris. The stock has gained 28 percent this year, making it the fourth-best performer among the 15 companies in the Bloomberg Europe Real Estate Index, which has risen 20 percent.

Leverage Drops

Net recurring profit, which removes the effect of valuation gains, rose 13 percent to 152 million euros, or 3.32 euros a share, in the first half from 135 million euros, or 2.98 euros, a year earlier.

The company's net asset value, the measure used by analysts and investors to gauge the performance of real estate companies, rose 22 percent in the first half to 115.8 euros per share from the end of 2005. That helped reduce its leverage to 30 percent at June 30.

The increase in earnings and net asset value were ``stronger than expected,'' Kempen & Co. analyst Boudewijn Schoon, who recommends investors ``add'' to their holdings, said in a note to clients.

Selling Space

Poitrinal said the company will decide by yearend whether to spend 1.7 billion euros on acquisitions or return the cash to investors.

``We are still looking at both sides, either we find the right acquisition or we will send the money back to investors,'' Poitrinal said. ``We are not under pressure. We will decide by the end of the year.''

Unibail returned 1 billion euros to investors last year in a special dividend. It plans to increase selling space in its shopping centers by 68 percent over the next five years with a 1.2 billion-euro investment program, raising rental income by 82 percent.

Rental income rose 3.8 percent to 211 million euros. On a like-for-like basis, rents gained 7.8 percent, Unibail said. Office rents in Paris, where Unibail completed a 46,000-square-meter (495,000-square-foot) development in the first half, rose 6.7 percent in the six months to June 30 after five years of declines, Poitrinal said.

The completion of the Capital 8 project last month means 20 percent of Unibail's offices were vacant with 90,000 square meters of space available for letting, Poitrinal said.

``That is great news when the market is recovering,'' he said.

All of Unibail's assets are in France. The company would consider acquisitions in one of the other 11 countries that share the euro if it could ensure a large market share, he said.

To contact the reporter for this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net

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To contact the editor responsible for this story Rob Urban at robprag@bloomberg.net

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