Sonae Sierra recorded a net profit of €12.6 million in the first quarter of this year. This represents an increase of 7% compared to the result of €11.8 million in the same period last year. In addition to the significant increase in net income, the expansion of its services business has provided steady growth in other countries. At the same time, Sonae Sierra completed new contracts to manage, lease, and develop shopping centers for other owners. Sales among tenants in European shopping centers rose in the first quarter of 2015 by 4% on an adjusted basis compared to the same period last year. Of particular note are the increases of 4.6% in Portugal and 6.3% in Italy. In Brazil, the company continued to see positive performance. Tenant revenues there increased by 9.6% (BRL) compared to the same period last year.
Good occupancy rate
The global occupancy rate of the portfolio was 95.8%, slightly higher than the figure of 94.6% for the same period last year. This reflects the general economic recovery and the company’s strategy of focusing on maximizing the quality of its real estate. Fernando Guedes de Oliveira, Sonae Sierra’s CEO, explains: “In the first quarter of 2015, the European market consolidated the recovery trend and our operating performance continues to improve sustainably. This is also directly reflected in the rental income. We continue to pursue a strategy of focusing on increasing the value of our real estate. A recent example of this is the refurbishment of Centro Vasco da Gama, which is one of the most profitable shopping centers in the company’s Portuguese portfolio.”
In the first three months of the year, net profit hit €14.5 million, 24% higher than in the same period of last year – despite the negative impact of the sale of the Centre Le Terrazze in Italy and La Farga in Spain last year. Adjusted for this, the increase in direct net profit even hit 29%. This organic growth in direct profit is due to the increase in rental income in the European and Brazilian center portfolio in particular. The basis for this was the general economic recovery in Europe and an increase in the rental level in Brazil. These factors have also contributed to EBITDA growth of 3% to €26.3 million. The company’s efforts to reduce bank debt by optimizing financial costs should also be mentioned.
Sonae Sierra announced an investment of €8 million in the refurbishment of Centro Vasco da Gama in the first quarter of 2015. This represents an increase in quality to be achieved in line with the company’s strategy to increase the value of the portfolio.
New service contracts in Germany
In the first three months of the year, Sonae Sierra further strengthened its services business with the completion of three new contracts for the management of shopping centers. The substance of the new contracts in Germany is the management, leasing, and marketing for three of Union Investment’s real estate holdings in Hamburg, namely Quarreé Wandsbek market, Mercado, and Geschäftshaus Ottensen, which together have a GLA of 105,800 sq m and 171 shops. With these new contracts, the number of properties in Germany managed and leased by Sonae Sierra rises to eight shopping centers in Berlin, Hamburg, Münster, Weiterstadt, and Solingen, with over 650 shops on a GLA of 300,000 sq altogether.
Sonae Sierra continues to enjoy good access to low-cost financing from banks and capital markets. The average cost of debt fell slightly compared with 2014 and is currently at 3.7%. Excluding Brazil, the average borrowing cost is 3.2% – on a par with European competitors.
News from Nova Arcada
Sonae Sierra has just reached an agreement with Ikea Portugal to open a new store at Nova Arcada Shopping Center in Braga (Portugal), which marks the relaunching of the project currently leased and managed by the company. This new store will occupy two floors of the shopping center with in an area of 22,000 sq m and reinforces the commitment of the Ikea Group to continuously increasing their offer of affordable furniture and home design to the vast majority of the Portuguese. With regard to the leasing status, in addition to the Ikea store, other important brands will also be present at Nova Arcada Shopping Center, such as a Continente hypermarket, Worten, Cortefiel, Springfield, Women Secret, Zippy, and Multiopticas. Other negotiations are also underway and proposals have been agreed with several brands to complete the new center’s commercial offer.
About this agreement: Cristina Santos of Sonae Sierra, who is responsible for the management of shopping centers in Portugal, says: “We are very pleased that Sonae Sierra and Ikea have joined together in a project for the first time in Portugal. This is a clear advantage for both companies, for Nova Arcada, and for the city of Braga. This agreement represents an important milestone in the shopping center’s leasing strategy and confirms the success of the commercial endeavor in attracting the interest of other tenants. We have been working on the diversification of the tenant mix and we will shortly announce new developments that reflect the successful relaunching of the project.”