Following a thorough assessment of its current portfolio versus fundamental market and
consumer trends and insights, Wereldhave has decided to initiate a major transformation of its portfolio. The company will move from a pure retail focus to a ‘life central’ focus for its assets, whereby shopping centers will be converted into ‘Full Service Centers’. These offer consumers a balanced mix of retail, high-quality food & beverage, entertainment, fitness, wellness, healthcare, co-working space offices, residential use and services. It will enable consumers to get more out of life, tenants to get more out of their business and shareholders to get more out of their investment. It caters to the increased importance of sustainability and the rise of ‘shopping as a social experience’ and the longing for more balance in the hectic everyday life. This new strategy comes at a time when Wereldhave’s direct and indirect results continue to decline, and market developments cause a significant devaluation of our assets.
Mathijs Storm (CEO): “We have the opportunity to reinvent ourselves. Our mission is to be customer centric and to offer our customers a more balanced everyday life. That’s why we are transforming our traditional shopping centers into Full Service Centers".
First transformation strategy in European Retail Real EstateLifeCentral program: Asset-by-asset transformation towards portfolio of Full Service Centers with mix of ‘life central’ experiences as base for sustainable growthFocus on Benelux, and phase out France, proceeds to be invested in transformationTotal investments in LifeCentral: 300-350 million euroTotal targeted divestments: book value of 1,075 million euroWereldhave to adopt a total property return investment approachNew target LTV of 30-40%, without an equity / rights issue.
Schiphol, 7 February 2020 – Following a thorough assessment of its current portfolio versus fundamental market and
consumer trends and insights, Wereldhave has decided to initiate a major transformation of its portfolio. The company will move from a pure retail focus to a ‘life central’ focus for its assets, whereby shopping centers will be converted into ‘Full Service Centers’. These offer consumers a balanced mix of retail, high-quality food & beverage, entertainment, fitness, wellness, healthcare, co-working space offices, residential use and services. It will enable consumers to get more out of life, tenants to get more out of their business and shareholders to get more out of their investment. It caters to the increased importance of sustainability and the rise of ‘shopping as a social experience’ and the longing for more balance in the hectic everyday life. This new strategy comes at a time when Wereldhave’s direct and indirect results continue to decline, and market developments cause a significant devaluation of our assets.
Wereldhave’s LifeCentral program is part of a larger strategy that consist of three pillars:
• Actively transform shopping centers to Full Service Centers
-- Right-size the assets to new reality
-- Restore the retail balance
-- Add new functions & uses
-- Transform on average 25% of retail space
• Strengthen the balance sheet
-- Phase out France (duly inform and consult French works council)
-- Divest selective assets with below threshold IRRs and/or that cannot be transformed into Full Service Centers.
• Build on strong team and presence in Benelux
-- Become market leader in Full Service Centers in the Benelux
-- Broaden customer experience and digital capabilities
Wereldhave is moving its focus from short-term to long-term to facilitate the transformation to Full Service Centers. The transformation requires repositioning of several assets which incurs capex and other expenses that occur in the short-term, whereas the pay-off in terms of rental and capital value growth will come once transformations are completed. We have therefore adopted a total return strategy. LifeCentral transformations have been put into a disciplined forward-looking capital allocation framework, based on a total property return for shareholders in the long-term as the key metric for all our investment decisions. Capital allocation will now be entirely driven by our IRR framework. We apply a hurdle rate of an unlevered IRR of 6% and our action plan includes clear quantified financial targets, offering transparency to our investors what to expect and to judge our rate of success.
LifeCentral; transforming shopping centers and offering tenant and consumer services With LifeCentral Wereldhave is entering a new phase. The strategy involves converting assets to ‘Full Service Centers’ – these Full Service Centers go beyond traditional shopping centers with a mix of retail, high-quality food & beverage, entertainment, fitness, wellness, healthcare, co-working space offices, residential use and services. Full Service Centers facilitate consumer daily needs under one roof.
Wereldhave identified four customer need areas:
• Fixing the basics (shopping, groceries)
• Self expression (looking good and making the right impression – fashion, cosmetics)
• Enjoying life (spending time with friends and loved ones – leisure, entertainment, food & beverage)
• Well-being (taking care of personal health and development – healthcare, well-being, fitness)
With Full Service Centers, we give consumers more alibis to visit our centers. Retail will still play an important role – but will, in most cases, occupy – proportionally – less floorspace in the centers than in the past. We acknowledge that some of our assets can be classified as “oversized convenience”, hence right-sizing the asset is crucial. We are on average transforming 25% of traditional retail space into new uses.
To implement this strategy, a selection of the right assets needs to take place. Broadly, these assets will be close to areas of
population density, well connected to public transport, with free parking, and support from local government. Given the increasing importance of sustainability, the company will also focus on assets that can be ‘Paris-proofed’ – i.e. brought into line,
in terms of environmental performance, with the maximum +2°C warming scenario agreed in 2015 as part of the Paris Climate Agreement. Wereldhave will invest in its chosen assets. The company estimates total investment between EUR 300 million and EUR 350 million.
Over time, Wereldhave aims to lower its loan-to-value ratio to within a range of 30%-40%. Capex needed for the transformation will be financed by divesting selective assets with below threshold IRRs and/or that cannot be transformed into Full Service Centers. We explicitly state that no equity or rights issue is needed.
see & read more on
https://www.wereldhave.com/siteassets/coporate-press--updates/2020/press-release-strategy---results-fy-2019-wereldhave.pdf
