Access the main content

Interviews

[#PAFh19] "We are moving from a pure retail player to an actor who diversifies their activities"

By Raphaël Héron, Senior Investment Manager Offices, Hotels and Mixed-use Projects Europe - Unibail-Rodamco-Westfield, at the Paris Asset Forum >hospitality.

We are particularly well known for our shopping centres, which represent more than 85% of our portfolio in terms of value. But, Unibail-Rodamco-Westfield is also a hotel and office space business, mainly concentrated in Ile-de-France today for about 7% of the value of our portfolio. We are present in 12 countries.

There are two things to remember in the history of our group. There is what happened last year, with the merger between Unibail-Rodamco, for the European presence, and Westfield, for American and English activities, to create one of the world leaders in commercial real-estate today. The other thing to remember, and this is what we are discussing today, is the decision that has been taken to increase our efforts to increase the density of our existing land, and to develop mixed projects.

Our development pipeline currently represents a volume of more than €10 billion, which already includes a number of mixed projects and a number of hotel development projects. In the deliveries that will take place in the coming years, there is, for example, the renovation of the Pullman Hotel (one of the three largest hotels in Paris, with nearly 1,000 rooms.) There is also the Hamburg project (which includes a little more than 800 keys distributed between three hotels of different positioning), the Sisters Towers project in La Défense (including a hotel that we signed last year with the Radisson group to make it a Radisson Collection with just over 300 keys), and a tender offer that is currently underway for the hotel at the Triangle Tower for just over 125 keys.

Where are we today on the development of our mixed projects? First of all, we have a project that will be delivered next year: the Gaité workshops project. In conjunction with the renovation of the Pullman Hotel (nearly 1000 keys), it is also - and this is where we see the ambition we have for mixed projects - offices for about 13,000 m² (we signed a lease last year with Wojo), as well as 30,000 m² of retail space (which turns this islet next to Montparnasse into a destination) and 60 apartments.

Another project we have is the Hamburg project, Überseequartier. It is one of our three largest development projects today. The work is already underway. The vast majority of building permits have been obtained. It is about 100,000 m² of retail space, if we take into account traditional retail, leisure and F&B offerings that we are setting up in this project. There are also three hotels, which are a very important part of this project, and about 50,000 m² of offices. There is also a fairly strong residential component, the development of which we will leave to third parties for the vast majority of them.

The Sisters Towers, with the Triangle Tower, are good examples of synergies that can be seen in the alliance of offices and hotels. The Sisters Towers are 70,000 m² of offices, approximately, and 90,000 m² in total, with a Radisson Collection Hotel of 300 keys (delivery planned for 2023). There is good news on this project, since the appeals we had were dismissed at first instance. Then there is the Triangle Tower, which is experiencing the same scenario, for a slightly more distant delivery horizon. We are in the process of finalizing a tender offer for this project, which represents approximately 125 keys within this asset, which mainly includes offices, but also includes some spaces that will be open to the public. 

To give an idea of our ambition for mixed projects, there is a project in South London, in Croydon, which we have, in partnership with Hammerson, a shopping centre, which is ageing. We are therefore thinking about restructuring this district, since it is really a district in this specific case, with the questions we are asking ourselves about these ambitious mixed projects: What is the place of the hotel business? What is the place of offices? How to size them? How to position them? and so on. On this point, we are planning to develop a hotel with 300 keys in the centre of this new district, but it is still under consideration.

In our 2018 figures, you can see that we are already in this process of transformation. We are moving from a pure retail player to an actor who diversifies their activities. We are moving increasingly towards mixed use, since in our project pipeline in 2018, we have more than 50% that is not retail in the pure sense of the word; in particular, more than 350,000 m² of offices and more than 130,000 m² of hotels. In addition to this pipeline, we have systematically reviewed our retail portfolio to see on which sites it might be relevant to densify with the contribution of other components, other asset classes, whether offices, hotels, residential (on which we are thinking more and more intensively.) We have thus identified additional potential to the pipeline, which represents a little over 2 million m² in the long term, even if the deadlines are varied. In particular, we have a strong hotel component, with just over 300 keys that have been identified as additional development potential.

There are three main reasons why we have asked ourselves all these questions: two of them are part of an overall favourable market, and one is more specific to the quality of our assets and our group. The first two reasons are the evolution of mindsets at all levels. We notice that mixed use is required by the users of our assets. Investors, via public authorities, are increasingly supporting this type of project. The conviction that we are convinced that the intensification of uses within the same land, the same plot, has a particularly interesting meaning. The synergies between the assets, the power of the destinations that can be created by relying on our commercial and leisure destinations, give a particularly interesting meaning to the development of hotels, offices and other asset classes related to this destination. The third reason, which is more specific to us, is the market shifts of many of our retail assets today. This change in context is often linked to the fact that assets, which were rather peripheral, become assets that are now an integral part of cities or even city centres, where public transport has been installed or improved, and on which the sense of developing other asset classes is particularly important and relevant.

To illustrate this, there is the example of an asset in Copenhagen, called Fisketorvet. It is now in downtown Copenhagen, but when it was developed, it was on the periphery. After systematically studying our assets, we decided to plan a number of developments: a hotel with more than 260 keys (for which we are finalizing a call for tenders), and offices (with a surface area of around 20,000 m²), and at the same time an expansion, an extension of retail. This example illustrates our densification strategy quite well. In 2002, the area around the shopping centre was relatively undeveloped. Today, we already have a certain development, with a lot of tertiary, but also residential. For the future, even more developments are planned in the new district, with residential, office, etc. that make the place much more relevant compared to what it was in 2002, thanks in particular to the arrival of the metro in the coming years. So, it's a completely different context. This is a situation that we are experiencing for a number of our assets.

How large are the hotels in these mixed projects, and particularly in these densification projects? We are not yet one of the major hotel players. We have 456 keys currently, and just over 2,000 keys in the project pipeline. We are have made offers for 1,329 keys, and we have identified, in development potential, a little more than 3,000 keys. In the coming years, we will move from 450 - 1500 keys (if we include the Gaïté project, for which the hotel already existed) to just over 6,500 keys, long term.

How important are hotels in our assets? It is the same answer to the question "Why develop mixed projects?” Hotels will benefit from the transformation of our assets, the destinations that make up our shopping centres and the city districts that we are developing on projects such as Copenhagen. Hotels have an economic sense that meets our expectations when the location is well chosen and the market lends itself to it.

What is our strategy? Let me give you some criteria for our hotel developments. It is, first of all, on a case-by-case basis: it is not systematic. We will not acquire hotel projects that are stand-alone but only in a mixed project context. Then, the volume must be sufficient. Also, our assets are always located in very large cities, and it is very relevant, when communications are right, when there are offices nearby, etc., to develop these hotels. We will develop hotels with more than 100 keys when the conditions are right, as part of a mixed project.

We are able to make leases, management contracts, even if we have some constraints on the management contract, particularly in terms of guaranteed income and employee portability. In terms of disposal strategy, it is also on a case-by-case basis. It will depend on how they intertwine with the overall project. Generally speaking, hotels are not on an asset class that we will want to keep over the very long term, like retail. We will therefore make arrangements in the years following delivery.

Therefore, we must retain the pipeline volume. The transformation that has already begun in the existing pipeline will continue as part of our densification strategy. This densification strategy is based on retail, which creates the destination and is thus really used as a catalyst for these projects. Finally, hotels are an integral part of our thinking on these projects, and perfectly correspond to our vision of the synergies that can be created in such projects between the different asset classes.

 

Loading...

You have consulted 10 content. Go back home page or at the top of the page.

Access next article.

Sign up to add topics in favorite. Sign up to add categories in favorite. Sign up to add content in favorite. Register for free to vote for the application.

Already signed up? Already signed up? Already signed up? Already registered?