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Edited Transcript of URW.AS earnings conference call or presentation 31-Jul-19 4:30pm GMT

Q2 2019 WFD Unibail Rodamco NV Earnings Call

Aug 5, 2019 (Thomson StreetEvents) -- Edited Transcript of WFD Unibail Rodamco NV earnings conference call or presentation Wednesday, July 31, 2019 at 4:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christophe Cuvillier

Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board

* Jacob Lunsingh Tonckens

Unibail-Rodamco-Westfield - Group CFO & Member of Management Board

* Jean-Marie Tritant

Unibail-Rodamco-Westfield - President of US

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Conference Call Participants

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* Bruno Duclos

Invest Securities, Research Division - Financial Analyst of Real Estate

* Florent Laroche-Joubert

ODDO BHF Corporate & Markets, Research Division - Analyst

* Jaap Kuin

ING Groep N.V., Research Division - Research Analyst

* Jonathan Sacha Kownator

Goldman Sachs Group Inc., Research Division - Financial Analyst

* Michel Varaldo

Societe Generale Cross Asset Research - Head of the Real Estate Research Sector Team

* Pierre-Emmanuel Clouard

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Robert Woerdeman

Kempen & Co. N.V., Research Division - Research Analyst

* Sander Bunck

Barclays Bank PLC, Research Division - VP of Real Estate Equity Research

* Valerie Guezi

Exane BNP Paribas, Research Division - Real Estate Analyst

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Presentation

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [1]

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Good evening, everyone, and welcome to our H1 2019 presentation. You will see we delivered solid results despite a somewhat challenging retail environment, made great progress in delivering our strategy of concentration, differentiation and innovation, and we are starting to see the positive impact of the Westfield transaction.

I will start with the global financial results at group level. Please bear in mind that we have been operating as one group, Unibail-Rodamco-Westfield from the completion of Westfield acquisition on June 7, 2018. So for the results at group level, we're comparing 6 months as URW this year, to just one month last year.

The like-for-like perimeter therefore, only compares to the former Unibail-Rodamco perimeter in Continental Europe. The adjusted AREPS for H1 2019 reached EUR 6.45 versus EUR 6.58 in H1 2018, a decrease of minus 1.9% mainly due to the impact of the 2018 and 2019 disposals. Restated for these disposals, AREPS growth would be plus 3.7%. The like-for-like NRI in Continental Europe grows by plus 3.3% and is split as follows by sector: plus 2.1% for the Shopping Centre division on very high comps in 2018, I'll come back to this in a minute; a very strong plus 9.4% for the office division and plus 14.7% for our Convention Exhibition business; restated for the INTERMAT's triennial show that took place in 2018, the growth would even be plus 36.7%. EPRA NAV stands at EUR 216.10, a decrease of minus 2.6% versus end-of-2018 and flat compared to June 2018.

Let's start with the highlights from our Continental European operations. The like-for-like NRI performance of the Shopping Centre division is detailed in this slide, overall, plus 2.1% over H1 2018; a strong performance in Spain, plus 5.3%; in Central Europe, plus 4.1%. France grows by 2% and the Nordics are down by 2%, both on very high 2018 comps. The performance in France is affected by the departure of 2 large tenants, one in the Forum des Halles, for which the unit has already been relet, but the tenant will only open later this year, and the other in Carrousel du Louvre. These 2 elements alone impact growth over last year by 0.6%.

Germany and the Netherlands are slightly positive. You see here now the very strong base effect of H1 2018 in Continental Europe where growth was plus 4.2%, which explains the lower growth than usual in 3 of our top 4 regions that you can see here on the slide. This was anticipated in our budgets, as the plus 2.1% actually exceed our forecast for the H1. France at plus 2% had achieved a very high plus 5.2% in H1 2018; growth in H1 2019 is in fact slightly higher than in H1 2017.

Central Europe, although very good at plus 4.1% had achieved plus 6.6% in H1 2018, there again the growth in H1 2019 is above that of H1 2017. And the Nordics had an unusual plus 6.5% in H1 2018, which mostly explains the also unusual minus 2% of this half. On the contrary, Spain, which had a low H1 2018 posts a very strong H1 2019 with growth equivalent to that of H1 2017 so you can see here the swing from one half to the other. In most regions, part of the difference is explained by the "other" category, in the split of year like-for-like NRI, which stands this year at plus 0.3% versus plus 1.3% in H1 2018.

We have taken somewhat a cautious view of the current environment, which is reflected in higher provisions. As I said, this was anticipated in our budgets, and thanks to an intense leasing activity including the reletting of vacated space and a less demanding H2 comp, we forecast the overall growth of the full year of our like-for-like NRI in Continental Europe to be around plus 3%.

MGR uplifts for H1 2019 stand at plus 12.2%, above our objectives for the period and above H1 '18 when MGR uplifts were plus 10.6%. Uplift in the flagships centers are plus 13.8%. The rotation rates reached 5.3% in line with our objective of at least 10% for the full year. The leasing teams signed 700 deals on standing assets versus 688 in H1 '18, which is a very satisfying result in this still pretty tough retail environment.

Tenant sales now. Growth is very strong, plus 5.3% through June, of which plus 5.7% for flagships. Footfall is up plus 3.2% and plus 3.6% for flagships. These figures reflect the superior quality of our portfolio and the efforts we've made in the last years to concentrate on the best assets, in the best catchment areas and to significantly improve our tenant mix.

The comparison with national sales indices, as usual, at the end of May -- June is through May because these are the latest available figures. We once more outperformed the market, this time by 242 bps and 284 bps for flagships. You see an excellent outperformance in France, 260 bps (sic) [270 bps] above the global retail IFLS index and 470 bps above the Shopping Centre's CNCC index and a spectacular performance in the Nordics, mostly due to the positive impact of Tesla, having started deliveries of its Model 3 in March of this year. We have the only 2 Tesla stores in Shopping Centres in the Nordics, actually the only 2 Tesla stores in the Greater Stockholm area, definitely a differentiating retailer and a great result for our leasing teams.

In addition to the automotive sector, H1 2019 also saw a great performance of our strategic segments such as a sports, dining, entertainment and health and beauty, with growth ranging from plus 8.8% to plus 4.1%. This is another illustration, I think, of the strategic vision of the group and the successful leasing efforts of the teams to grow such sectors that we deem essential to our differentiation and the future-proofing of our assets.

Two very good examples of such successes are our latest dining and leisure extensions. In Vélizy 2, the 20,000 square meter extension was fully let at opening in March with 23 new restaurants and a new 18-screen cinema. Three months after opening, the Vélizy 2 UTC cinema already ranks in the top 10 in France, when the previous cinema was not in the top 200. And I think this is an outstanding result, and the cinema is still growing. As a direct result, since the extension opening, footfall in the whole center increased by plus 13%. In Carré Sénart, initially extended in H2 2017, a similar phenomenon was achieved, although, at a smaller scale, with a further extension of the dining plaza and the addition of an IMAX screen in the Pathé cinema.

Let's move now to the former Westfield geographies, the U.K. and the U.S. In the U.K., footfall was strong, up by plus 6.3% in Westfield London, and plus 6.5% at Westfield Stratford City when the global footfall index in U.K. was down by minus 1.1%. Tenant sales are up by plus 7.1% through June, reflecting the growth of plus 12.5% at Westfield London, driven of course, by the opening of phase II in March 2018 and of plus 2.3% at Westfield Stratford City. At the end of May, we outperformed the national sales index by 846 bps.

Vacancy is still too high though, as we showed during our investor days in London in June, at 8.7% mostly due to Westfield London Phase I where the backfill of retailers having expanded in Phase II is not complete. The like-for-like NRI growth of minus 3.1% is mostly due to the impact of CVAs and tenants and administration as well as some non-renewals at Westfield London. The strength of our London assets, however, is reflected in the MGR uplift, which are a plus 15.9% overall. So while the U.K. is going through a tough stretch right now, and it is impacting URW, too, we have no doubt about the underlying strength in these 2 flagships and their continuous appeal to both retailers and visitors. The teams, I can tell you, are hard at work.

In the U.S., occupancy is slightly down compared to June 18 at 93.4% overall and 94.6% in flagships. This is also due to bankruptcies and departing tenants. It is still pretty challenging market as Jean-Marie Tritant presented in detail in London last month. Tenant sales, however, are showing very encouraging signs at plus 3% overall as at end of June, of which plus 4.9% in flagships. Slightly higher vacancy and strong growth in tenant sales result in a sharp increase in the specialty sales per square foot, plus 11.3% overall, of which plus 12.8% in flagships.

Rental spreads on relettings are broadly in line with last year, plus 5.2% overall and plus 7.7% in flagships. And comp NOI is back in positive territory, plus 2.2% for the total portfolio and plus 5.5% for flagships. Westfield Center City and Westfield UTC are now, of course, included in the comp NOI since they were delivered in 2017.

As you know, the main challenges in today's environment are leasing and tenant monitoring. H1 '19 has been very busy in this respect, especially, of course, in the U.K. and the U.S. but also in Continental Europe. There have been several retailer failures this half, including CVAs, administrations and bankruptcies. All in all, and in all transparency, 250 stores within the group have been affected out of a total of more than 15,000 stores in our standing assets. You see the detail here by geography, 85 in Continental Europe, 20 in the U.K. and 145 in the U.S. The total potential exposure for URW is 1.5% of the group's retail MGR. However, the situation is actually better than this.

Given the quality of our portfolio and the time and efforts of our leasing and operating teams, the actual spot exposure, which you see at the bottom of this first slide here, as of June is only 0.7% of our MGR retail on an annual basis, and here are the details: 67 stores are actually unaffected and continue to trade with no rent cut, 46 are trading but with the rent cuts, and 33 have closed but have already been relet. So out of the 250 stores concerned, 58% are still trading or have already been relet to new tenants. And we'll still need to deal with 104 of them in H2.

You know we have already exceeded the cost synergy targets set for the Westfield acquisition. We are starting with the revenue synergies. For those who attended at our Investor Days in London, you will remember that David Ruddick, our EVP Group International Leasing, originally from Westfield, announced a first-of-a-kind deal in the industry: the global agreement with The VOID, an immersive virtual reality operator, to open in our portfolio more than 25 permanent locations, both in the U.S. and in Europe.

The first large-scale transatlantic deal made possible by the creation of Unibail-Rodamco-Westfield. The partnership will start this summer with pop-up destinations in 4 U.S. flagships. You can see the operation being set up at Westfield World Trade Center on the picture of the bottom right of the Slide. We've already signed the first firm 6 leases for the U.S., and the rest will follow in the coming weeks, with opening phase from now until '22, and some additional locations are also currently under discussion. Around 20,000 square meters of GLA are involved in this very exciting strategic partnership.

Another key area for revenue synergies is the Commercial Partnerships Activity, which is also headed by a former Westfield executive. The first half has been excellent in Europe. Continental Europe is up by plus 12%, ahead of our target of plus 10% CAGR over the duration of our 5-year plan, and the U.K. is up by plus 24%, thanks to a new long-term advertising contract with JC Decaux. The official perimeter of revenue synergies announced in commercial partnerships is only Continental Europe where we are targeting EUR 25 million of synergies by 2023, but our close relationship with JC Decaux in France certainly played a key role in securing the new contract at Westfield London and Westfield Stratford City.

Last chapter of revenue synergies for today, the launch of Westfield in Continental Europe. With the rebranding in September of our first 10 flagships led here again by former Westfield executive. You can see on this slide our very ambitious calendar from Westfield Les Quatre Temps on September 12 to Westfield Mall of Scandinavia in September 27. The rebranding of a shopping center, as you can imagine, is much more than changing logos. It consists of thousand of details from wayfinders to uniforms, internet site, smartphone applications, advertising with the creation of a new cinema, TV, prints and social media campaign and the organization of major launch events in all 10 centers. A very busy summer indeed for the teams in charge, in France, in Sweden, in Poland and in the Czech Republic.

Now we focus on our other divisions, office and convention exhibition. We had a very strong first half in offices, with like-for-like growth of plus 9.4% overall and of plus 13.8% in France. The consolidated figures, of course, reflect the massive disposals made in 2018. Our like-for-like in France now only concerns a small number of assets of which, among others, Michelet-Galilée in La Défense where Alstom has vacated the building at the expiry of its lease and which will enter the pipeline shortly to be redeveloped; the next and first half as well for the convention exhibition business, with a growth of plus 9.1% of our NRI over H1 '17 and of plus 13 -- NOI and plus 13.8% of our recurring net operating income; in addition to traditional shows, including a very good addition of the international air shows. We had the fourth edition of Vivatech at Porte de Versailles, which proved extremely successful with 124,000 visitors, 24% up on 2018. This show, created in 2016, is now proving to be the leading high-tech show in Europe. And the Congress segment grows by plus 13.9% year-on-year.

Now a couple of words on development and value creation through developments. The URW total investment cost of our pipeline stands at EUR 10.3 billion as of June 30, down EUR 1.6 billion from December 31, 2018. This is due to several aspects: one, the deliveries, including Vélizy 2 and Carré Sénart extensions, the Parly 2 Cinema and the Versailles Chantiers office building; savings on certain projects, for instance, on the Westfield Milano scheme; and following a review of our pipeline this half, the removal of certain projects, which require major redefinition or which have been postponed significantly for administrative reasons. This accounts for EUR 1.1 billion. Out of the EUR 10.3 billion TIC, EUR 2.9 billion only are committed to date. This leaves us plenty of flexibility. EUR 2.8 billion have already been invested on all projects and EUR 7.5 billion remain to be invested.

Olivier Bossard, Chief Development Officer and I, spent a lot of time during the investor days in London explaining the shift in our development strategy, aiming at diversifying the use in our projects and densifying our best flagship destinations. Our pipeline is indeed increasingly diversified and will enable to create or redevelop 2.2 million square meters, of which 50% roughly is pure retail; 16% is dining and leisure; and 16% is residential, of which half by third parties.

Near-term deliveries include 2 major office buildings, Shift in Issy-les-Moulineaux, which will be delivered in H2 2019 and which is fully let, as you know, to Nestlé; and Trinity in La Défense, which you see here on the right of the [clip] to be delivered in H1 2020; and 2 major retail deliveries, Westfield Valley Fair in San Jose to be delivered in phases starting March 2020. Preletting stands at 75%, and recent significant signings include Tiffany's and Chanel Beauty. And Westfield Mall of the Netherlands already partly open, which will be fully delivered by H2 2020. The parts open include its new Fresh! district, and the state-of-the-art new Jumbo hypermarket, and recent signings include Zara and 3 other Inditex brands on 6,500 square meters, Media Markt on 3,600 square meters for The Sting, HEMA, BESIX and Rituals.

Some words now on sustainability before handing over to Jaap. CSR, as you know, is an essential part of our strategy and a key commitment of the group. In September 2016, we launched on the former Unibail-Rodamco perimeter a very ambitious CSR strategy called Better Places 2030, aiming at reducing the carbon footprint of the group by minus 50% between 2015 and 2030. We have already achieved significant progress. For instance, all our European countries are now 100% supplied with green electricity, including the U.K. since October 2018, and our CSR efforts have been widely recognized.

The group was, for instance, ranked #1 among all listed European real estate companies by GRESB and #1 among all listed global retail real estate companies. However, the change in the perimeter of the group following the Westfield transaction created the challenge to extend this strategy to the U.S. and the U.K. Our teams prepared for this in the last 12 months, and we presented a couple of weeks ago the new extended Better Places 2030. We kept, of course, the global objective of cutting by half the carbon footprint of the group by 2030, but this time -- and trust me, it's a very ambitious objective, including the U.S. We not only extended the geography of Better Places 2030 but also its scope, which from now on, will also tackle challenges such as responsible consumption and the circular economy. Better Places 2030 rests on 3 pillars: better spaces, better communities, and better together, targeting our assets, the communities in which we operate and our own teams with clear, ambitious and measurable objectives for each of these 3 pillars.

I invite you to go to our website, urw.com, for more details. And now I'd like to leave the stage to Jaap for the finance evaluation and outlook sections. Thank you.

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [2]

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Thanks, Christophe. This half, the teams both in Europe and LA, have been very active on the credit markets on the leadership of Fabrice, including the bond offering, which closed on July 1, we have raised a total of EUR 3.2 billion of bonds, with an average maturity of 12.6 years at an average cost of 1.66%. It reflects a spread of 79 basis points over the weighted relevant government bond rates at the time. Now as a personal aside, I have to say, there seems to be somewhat of a disconnect in the market here between the credit and the equity markets.

A 30-year bond at 1.75% which is the lowest coupon ever achieved a by corporate issuer for this maturity and the first-ever 30 year bond to be issued by a real estate company in Europe, compare that to the current dividend yield of about 8.7%. I mean go figure, right? The proceeds that we've raised were used to refinance debt, some of which matured in July and some of which will mature this fall and obviously, part is to pay the dividend.

In addition, on July -- or in July, we refinanced the 5-year Westfield Stratford City GBP 750 million CMBS, collateralized mortgage-backed security, which was issued in 2014 at an all-in cost of almost 2.7%. We refinanced with a new 7-year issue at a coupon of 1.64%, reflecting the investors confidence in the assets despite the current headwinds in the U.K. retail. And the coupon of this new issue is the lowest ever pound sterling benchmark note in the real estate sector.

So the average maturity is a new high. As a result of these issuances, the cost of debt remained stable at 1.6% and is below what we had assumed for the year. This 1.6% represents the blended average cost of debt on a standalone basis of only 1% for the ex-UR, an all-time low, and 3.5% for the old Westfield. Obviously, the U.S. dollar funding costs are higher as a result of a base rate differential.

Now pro forma for the 30-year bond issued on July 1 and the repayment of 80% of the (inaudible), the average maturity was 8 years, which is again, for us, a record long. Our liquidity needs for the next 12 months, they are covered by a record EUR 9.2 billion of undrawn lines and the EUR 1.3 billion of cash on hand.

Now not all of what I'm saying here is going to be new for those who have attended the Investor Days, but over the last 12 months, we've sold or agreed to sell EUR 3.2 billion, of which EUR 1.2 billion in the first half. We raised EUR 2.3 billion through sale of 3 office buildings, Capital 8, Tour Ariane and Tour Majunga at a weighted net average initial yield of 4.2% and a 6.2% premium to the last book value.

We also sold EUR 800 million of retail assets, 4 in Spain, 1 in Finland, at a weighted average net initial yield of 5.4%, and an average premium versus last book value of 8.4%. And lastly, we have sold EUR 100 million of resi development rights in Westfield Hamburg and Cherry Park near Stratford City. Now as to the ongoing disposals, there's active chatter on the market that we are marketing a portfolio of high-quality French shopping centers. But keep in mind, disposals rarely proceed in a straight line, and for example, you may recall Capital 8 and rumors that we weren't able to sell it, well, actually, we did in great terms.

Now historically, you know me by now, I'm not going to get into the details or ongoing discussions, other than to say, it's fair to say that we're actually in active talks with a number of investors regarding numerous retail assets. Considering the quality of the assets in our portfolio, we're confident we'll be able to complete the remaining disposals.

Another illustration of why the URW business model has proven to be such an effective one. We delivered a 65,000 square meters of Majunga in 2014 for a total investment cost of EUR 462 million, and that includes the lease incentives. The sale this year generated EUR 850 million in net disposal proceeds, reflecting a net initial yield of 4.16%, and that's in La Défense. That's a pretty impressive accomplishment. The total acquisition cost reflects a price of EUR 13,500 per weighted square meter, and it has generated an unlevered IOR of 12% for URW over the last 13 years. The skill set of office's team is now also being deployed at a number of the group's mixed-used development projects that Christophe just referenced, Westfield Hamburg and Westfield Stratford City.

Our balance sheet, pro forma for the disposal of Majunga on July 3, the LTV was stable at 37.5%, 39.4% on a proportionate basis, and the interest coverage ratio was 5.8x. Our debt is fully hedged. As result of debt, we've kept at fixed rates as well as macro hedges. Just to give an illustration of the sensitivity, if interest rates were to increase by 50 basis points, the financial expenses would be EUR 18 million higher. And if further 50 basis points increase, would only increase the interest expense by a further EUR 3.8 million. And the detail by currency we have for the financial resources, note in the appendix of the press release. And on the other side, if rates were to drop a 50 basis points, we'd be better off by EUR 36 million. Future cash needs for the next 3 years are 100% hedged, 85% of those needs are hedged for year 4 and 75% for year 5.

Now at our Investor Days in London, we were asked by how far yields would have to move out to drive the LTV above 40%. Now the answer was 41 basis points. As I said before, at the 37.5% loan-to-value, we're well within in our covenant levels. However, despite that answer, we've heard that someone uttered, well, try 100 basis points. Okay, here we are. We gave it to you. As you can see, the 100 basis points shift across the entire portfolio would bring the LTV up to 45%. Now this is obviously a very conservative approach because we've applied the 100 basis points across the entire portfolio. If that were to be done purely on retail, it is obviously a lower LTV that comes out of that. Now as you may recall, at least the people who follow us for a while know that we've shown this type of sensitivity a number of times before. And again, in light of the concerns that seem to persist around retail and even for the quality of the portfolio at Unibail-Rodamco-Westfield, we've run the sensitivity up to and including the 130 basis points that happened during the great financial crisis. The 130 basis points yield shift, right, would present our covenants or get to the covenant level of 47.1%, so by no means, a crisis.

Now I show you the LTV the way they are calculated in accordance with the bank covenants. We provide you with the data in our MD&A that allow you to calculate the leverage ratios in different ways. And you may come up with a different ratio, and that's fine. However, for us, the covenant metrics are the ones that we consider the most relevant. They govern our access to liquidity. Now ultimately, the appraiser set the values by their discount rates and the cap rates. We have very little influence over that effectively. What we can influence and what we're focused on is the operational performance, and that's what we will continue to focus on.

Now as you can see, the yield spread differentials, again, nothing new for most of you, it remains very substantial in our most important regions. And I think it's fair to say that all signals at this point, points to a lower-for-longer rate cycle. Now I do expect yields to widen some more, especially considering what's going on in the retail environment as appraisers take a more conservative view. I'll go through that in the NAV shortly. However, these kind of buffers should provide some stability and headroom. Now since we've been saying this for a while, but you will note at this point that we are no longer the only one who's actually talking to you about this. Some of our colleagues take the same view.

With respect to NAV, the going concern NAV per share as of December 2018 was EUR 233.90. And just a quick reminder, the absolute NAV doesn't take into consideration the hybrid. The big move this half were the EUR 5.40 of the dividends that we paid in March as well as a EUR 10.68 negative mark-to-market of the debt in the financial instruments. Obviously, rates dropped markedly following the ECB's June communication that they would be considering further quantitative easing.

Adjusted for these 2 factors, the December going concern NAV was 12 -- -- 21.7 -- EUR 217.82. And as of June 30, that number was EUR 217.70. The AREPS of -- the REPS of EUR 6.63 was offset by EUR 4.11 of asset revaluations, net of capital gains on disposals as our appraisers widen yields on concerns about the retail industry despite very limited transactional evidence, particularly in the flagship asset quality category. Now this resulted in a negative market or yield effect of EUR 6.49. The rent effect though was positive at EUR 2.31.

Flipping back to the full column that shows the value differentiation, the other category includes principally, the lower amount of the deferred taxes added back compared to 2018. As in the first half, we effected the tax step-up in the U.S, which removed a net EUR 1.1 billion of deferred tax liabilities from our balance sheet. This will allow us to dismantle most of the Australian holding company structure, further reduce expenses and having increased the base of the assets to provide further depreciation and tax shield in the U.S. The NAV per share, as Christophe mentioned, is EUR 216.10, compared to EUR 221.8 as of December 2018, a 2.6% move. This NAV does not include the EUR 12.90 of goodwill that's not attributable to the fee business, so you can do your own calculations off of that.

We're actually going to be increasing the guidance on the back of our performance through June 30, which was very solid despite the challenging headwinds we actually see. We expect Continental European like-for-like net rental income to grow faster than in H1 and grow by around 3% for the all of 2019. And obviously, the financing conditions continue to provide some level of tailwind. As a result, we increased the AREPS guidance by EUR 0.30 of which approximately EUR 0.18 are due to the implementation of IFRS 16 to the -- a range of between EUR 12.10 and EUR 12.30 compared to EUR 11.80 to EUR 12 a share, previously.

Now we continue to hear that people are concerned about the dividend, considering the current yield at 8.7%. When we released our 2018 results and we explained our expectations based on the 5-year business plan, we said that going forward, we would expect to maintain our dividend at a minimum of EUR 10.80. There's apparently also concerns that the disposals will cause us not to be able to cover the dividend. I want to point you to Pages 48 to 51 of my presentation during the Investor Days, which you can find on our website, which show the detail demonstrating the ability of URW’s underlying business to support the dividend. If some feel that the current dividend yield makes no sense, we agree. It may very well because of the denominator effect, not the numerator effect.

In conclusion, the industry backdrop remains challenging, and we expect that to remain the case for at least another 2 years. It's going to be tough, especially in the U.K. However, this industry will know winners. And with a very high quality asset base and the teams that we have at URW, we'll be one of those. The robust operational performance during the first year -- first half of this year already gives proofs of that with very strong tenant sales growth and solid like-for-like in most of the regions. We're delivering on the strategy, concentration, differentiation, innovation. We've progressed significantly towards total disposal progress, again, at/or above book value. We've achieved the cost synergies well above the target. The revenue synergies are starting to come in. And lastly, the financing conditions will continue to remain supportive, we believe, for the time to come. And this fundamental element helps lead us to increasing the earnings guidance I've just talked about.

Now with that, let me open it up for questions.

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Questions and Answers

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Michel Varaldo, Societe Generale Cross Asset Research - Head of the Real Estate Research Sector Team [1]

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Michel Varaldo, Societe Generale. I have 2 questions. The first one is it possible to have a little more about the disposal for shopping centers? Because it is crucial for the market at this moment, I think. And the second point is your guidance. If you multiply the earning per share of the first half by 2, we have EUR 12.9 but your guidance is much lower. What will happen in the second half?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [2]

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Let me take the first -- the second question first, Michel. You will appreciate that obviously the sale of Majunga in -- on July 3 basically means that in the second half of 2019, we'll see no contribution from Majunga. In the offices segment also, Christophe referred to an indemnity we have received, which was received before June 30. That obviously boosts the numbers.

In addition, the Convention Exhibition business is seasonal and most of the -- this very strong first half will not be repeated in the second half and that's again a normal pattern. And again, we are expecting some disposals in the -- even in the retail sectors to occur this year. So if you'll put all of those together, it's kind of logical that we're not seeing effectively just a simple doubling of the H1 guidance.

Now with respect to disposals, all of the references I've made to ongoing disposal conversations, detail -- detailed conversations about retail assets only. And that's all about what I want to say about it.

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Florent Laroche-Joubert, ODDO BHF Corporate & Markets, Research Division - Analyst [3]

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Florent Laroche-Joubert from ODDO BHF. I would have several questions. So first one, it's about your removal in France. In your financial reports we can say that -- see in France that it is minus 0.7%. It is due to the departure of large tenants. So just a figure excluding these departures. And is it possible to have, maybe, more information on that? And yes, maybe a follow-up question on the disposal plan. So is it possible to have -- to know the average amounts of retail assets that you wanted to sell? Just two.

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [4]

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Sure. With respect to the nitty-gritty detail of the basis points growth, I would refer to Sam Woodward (sic) [Sam Warwood] and Maarten Otte, who can actually answer that particular question. But it's easy as Christophe has already mentioned, there were 2 tenants in particular which had an impact of approximately 60 basis points on the growth during the first half. With respect...

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [5]

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There again, we can, I think, give the names of these tenants because you can see the vacancy in the shopping centers. One is the Apple store of Carrousel du Louvre, which departed as you probably know to relocate to the Champs-Elysées right before the yellow-vest protests. And the other one is Forever 21 from Forum des Halles, which has already been re-let to a pharmacy, but which will open in the second half of the year. So this is a vacancy at the end of this year -- at the end of this half, sorry. And Forever 21 had left at the end of 2018. So this is a full vacancy. And I said, this explains for about 0.6% of the growth in France, so almost all the negatives in the "other" category.

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [6]

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With respect to the disposals, I mean I don't think you'll be surprised as I'm not going to be -- we're not going to give details in terms of by half. And you'll appreciate if you think about it from the perspective of the teams that are speaking with investors, the moment I start giving you, okay, we're going to do all the X or X or Y in this particular period, we put pressure on ourselves, we have no interest in actually giving.

We are a very disciplined seller of assets. I think in terms of, if you look at the Investor Day presentations, the EUR 4.4 billion worth of retail assets we sold over the last 4 years, I think we do pretty good job. We know that there are buyers for the retail assets. And I think Euro commercial has demonstrated that earlier this year during their announcements with respect to Passage du Havre. So overall, we're comfortable about our ability to execute on it, but I'm not going to give you a time frame. I know it's difficult for the model, but I'm sorry.

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Pierre-Emmanuel Clouard, Kepler Cheuvreux, Research Division - Equity Research Analyst [7]

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Pierre Clouard from Kepler Cheuvreux. I just wanted to come back on the disposal of cost -- sorry, better? Just wanted to come back on disposals especially in France, can we consider today that every nonbranded Westfield shopping center is for sale today? And can we expect total amount of disposals especially in France that could be significantly higher than the guidance given during the Investor Day? This is my first question.

And the second one is just to come back on your NOI outlook of plus 3%, just to make sure that this is for only shopping centers are not for the entire company?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [8]

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So this is an easy one. Plus 3 -- around plus 3% is for shopping centers only in Continental Europe to be compared with the first half of 2%. Okay? So 2.1%. So this is only for shopping centers not for the whole.

We don't give a guidance division by division so on, but I think it's important for you to know that as I showed -- and even if it's just math, but you the very high comps that we have in H1 2018 explain a great deal of this somewhat lower than usual plus 2%. And the guidance we gave for the plus 3% for the whole year is just to tell you that business is normal. It doesn't mean it's easy but it's ongoing. Sorry for the question I answered, I mean it's not minus 0.7 of other, obviously, it's minus 0.7 of re-lettings and renewals, net of departures, this explanations for the 2 tenants. Excuse me, for my mistake.

As far as the Westfield assets or non-Westfield assets, I appreciate your impatience. I mean I'm very impatient as well to see the first 10 assets but it's also question of capacity for the teams to do it well. So this is a first batch only and there will be more assets to be rebranded, which will be revealed in due time. Actually there are 2 more, which we already talked about. One is more of the Netherlands in The Hague, which will be rebranded Westfield of the Netherlands. And the other one is La Part-Dieu. You know we are undergoing a very important extension of 30,000 square meters currently. The shopping center in under works. Now is not the time to rebrand it Westfield, but of course, La Part-Dieu will be among the future shopping centers called Westfield La Part-Dieu in this case.

And the others will go along the way. We are already preparing the second batch, it's a bit too early to say. And then there are assets, which will not be rebranded Westfield but which are excellent assets. Some for cultural reasons we feel should not be rebranded. I'll give you one very simple example, which you'll understand. The Carrousel du Louvre, I think, should not be rebranded Westfield because du Louvre is du Louvre, right? So no mixture of brands here, so this one will not be branded Westfield, but we'll definitely keep it. One example.

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Operator [9]

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We have a question by phone from Jaap Kuin from ING.

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Jaap Kuin, ING Groep N.V., Research Division - Research Analyst [10]

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Can you hear me?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [11]

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Yes, we can.

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Jaap Kuin, ING Groep N.V., Research Division - Research Analyst [12]

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Okay. Maybe first question on the developments. I've just been looking at your table and it seems that you've got the Czech projects. You've pushed out NEO to noncommitted stages and we see Maquinista and Fisketorvet is gone altogether you're saying. So could you maybe highlight those specific projects and talk about the reasons for doing so?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [13]

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Sure. I mean most of the reasons are the stage of development for each project and the administrative path to glory, I would say. And sometimes, it's a little more difficult, it takes a little more time than anticipated. So the project, which are advanced but have a setback because there's a claim, which is unfavorable to us and we need to go and appeal and so on, can move from category from -- to category and this is pretty usual. There are other projects, which have been removed because there is a major redefinition, for example, of the zoning plan. And this is one of the elements, for example, for the Czech Republic project Bobigny where the municipality of Prague changing the zoning plan and therefore, changing radically the way the asset will be developed. Long term, it is good news because there will be more potential for mixed-use developments with offices, hotels and potentially, residential to be added.

Short term, that means extra delay and the redefinition of the projects. So this is what we are doing and until we have a project, which is submitted to the senior management team and the management board for 6 Amigos. This is our investment decision process. The product has been the removed, but I have all trust that it will be coming back in the pipeline in due time when the project is a redefined. So this is the life of development. Projects that have are more remote chance of being transferred from secured activity to controlled because of the administrative reasons, might leave the pipeline temporarily. And when they are redesigned, they will come back or not, but they will come back, I trust.

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Jaap Kuin, ING Groep N.V., Research Division - Research Analyst [14]

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Okay. And just looking at the total size of the pipeline. Do you have any intention to further shrink the pipeline? I mean there are still a couple of projects that were kind of on the discretion, like, and still in there. I mean is there some kind of idea that we should expect further decreases in the total expenditure plan here?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [15]

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No. Mathematically, the pipeline, if everything stays equal, the pipeline will decrease at the end of '19 because we'll be delivering Shift in the second half, for example.

So the pipeline is living matter. You have projects in and projects delivered. So mathematically -- and we have a very strong pipe of deliveries in next 12 months with Shift, with Trinity, with Westfield Valley Fair. So mathematically, if there are no new projects, which will enter, and I'm not saying no project will enter, we're working on several projects as you know, which are not in the pipeline today. The pipeline, everything else being equal, once more will mathematically decrease because of the deliveries. But there is no strategy to decrease the pipeline as such. We strongly believe that the projects are what they are and that the projects will lead to future value creation.

I think we've demonstrated along the years. As far as Croydon is concerned, and I think we are -- were pretty clear in the IR days in London, the project in view of the recent developments on the British market needs to be reworked and this is what we're doing with our partners, Hammerson. We are progressing well. Progress has been made to design the future-proof project, and there again, a more mixed-use project. But the potential of Croydon is intact, it's a great city to do business in.

The project and the site is in between 2 major railway stations. It's highly connected to public transport and train so on, so there's a huge potential in Croydon. And we will get that potential in due time. Today, it's work in progress for the teams of Unibail-Rodamco-Westfield and Hammerson in full transparency with the Council.

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Jaap Kuin, ING Groep N.V., Research Division - Research Analyst [16]

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Okay. Further question on maybe Trinity, could you -- I mean could you make a quick comment on chance for pre-leasing this year or appetite for as we generally see in the area? And then finally, is there a chance you could provide tenant sales excluding Tesla?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [17]

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I didn't get that last part.

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [18]

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Tenant sales without Tesla.

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [19]

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Oh, tenant sales without Tesla, we disclosed this in the MD&A. I think it's 2.9% at the end of May, so this is disclosed. So yes, Tesla has a positive effect, but still it's very, very impressive without Tesla. And of course, Tesla is part of our tenant base. So don't blame us for having negotiated several Tesla stores before everybody else. I think it's part of our tenant base. And they are doing indeed very well, not only actually because of the Model 3 but because of the brand itself and its appeal.

As far as Trinity is concerned, conversations are having -- are taking place. As you know, before it's done, we don't announce anything. And a building of that size will probably be leased in phases, like we did with Majunga, which is slightly bigger than Trinity, but Trinity is still around 50,000 square meters, so it probably be done in phases. And if you recall, when we delivered Majunga, it was not let, but 18 months later, it's fully let. And yet I think we showed the successful disposal this year and the great IR that we achieved on this one.

So this is the kind of things, sometimes, the buildings are pre-let, was the case for [our sale,] was the case -- is the case for Shift, so I'm not -- sometimes they are not pre-let but the location of this building, its quality and its appeal is great.

So we are very confident on that one, and the market in Paris, as you know overall, although first half has been slightly lower than the previous one, mainly because of lack of availability, but the Paris market is hot at the moment so that's great.

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Jaap Kuin, ING Groep N.V., Research Division - Research Analyst [20]

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If I can squeeze in one more. The vacancy level in London, you reported a number of vacancies. Is there a square meter vacancy? Can you maybe disclose that as well?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [21]

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I think the vacancy we disclose is a net per vacancy.

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Jaap Kuin, ING Groep N.V., Research Division - Research Analyst [22]

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Net?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [23]

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Yes, it is. And you've got the detail between the 2 centers actually in the London presentations because we disclosed them both in Westfield London and Westfield Stratford City presentations, all right?

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Operator [24]

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Next question from Sander Bunck from Barclays.

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Sander Bunck, Barclays Bank PLC, Research Division - VP of Real Estate Equity Research [25]

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I have 3 questions for me. First one is the MGR uplifts. I think they are still well above double-digit, but if you look at the contribution to NRI, it has slowed down materially. Can you explain to me how does exactly possible?

The other one is on your LTV and you communicate that as far as you're concerned, you look at the LTV as you reported. Now a slight question on that given that I think, it was a Moody's report back in April that was looking at your metrics more like a debt-to-asset ratio for around 45%. So can you just explain why you think it's warranted to look at it from a 37.5% as opposed to closer to 45%?

And the last one slightly more technical one, I think in -- you're saying that the IFRS 16 impact has circa EUR 0.18 impact. But if I look in the income statement or in your report, it looks like the income statement impact is around EUR 12.2 million. If I just simply divide it by a number of shares, the impact is only EUR 0.08. So what's the difference between this EUR 0.08 and EUR 0.18, please?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [26]

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The difference between this and the EUR 0.18 is the first half and full year basically, I guess, on this one. The report is for the H1 and the EUR 0.18 the guidance for the full year -- is the -- back for the full year, okay?

As far as the MGR uplift, there is no immediate connection between the MGR uplift and the rental -- and the NRI uplift or increase because when you renegotiate the lease it might come into operation slightly later.

And MGR place are only on the leases, which are re-let or renewed. So it's only a fraction, say, about 10% of our base if the leases last 10 years on average. So the impact, the direct impact is a bit delayed obviously. I've seen some reports of some other REITs. We say we've had a great NRI because we had great MGR, this doesn't work that way. There's always a delay because what we signed this half might open this year in the second half or even in the next -- first half of next year. There's always a delay between the signing and the opening or the entering into action of a lease, so there's always a delay, okay. For the NAV, Jaap?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [27]

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The LTV Sander -- I'm sorry, I wasn't clear enough during the presentation. As we've explained that we are looking at the covenant calculation because that defines the access to the liquidity that we have, EUR 9.2 billion of undrawn bank lines on. Moody's calculation doesn't follow the covenants.

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Sander Bunck, Barclays Bank PLC, Research Division - VP of Real Estate Equity Research [28]

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Okay. But it was one of the reasons to put you on a negative outlook?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [29]

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I think the metrics that Moody's looks at is a number of metrics. I think we'll have the, as you read the report, there is obviously a comparison that they're drawing to some of the U.S. market in terms of the net-debt-to-EBITDA.

And obviously, for us, that net-debt-to-EBITDA in a trailing 12-month EBITDA is about 10x, but if you think about it, the 10x includes the funded CapEx in our development pipeline.

It's not yet generating cash flows, if you were to adjust for that, it's somewhere around 9.

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Sander Bunck, Barclays Bank PLC, Research Division - VP of Real Estate Equity Research [30]

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Okay. And then just very quickly, back on the MGR uplift because MGR, I understand the concept of timing. But just to understand because the MGR uplift have been pretty steady over the last 18 months, which is very good. So how is it possible that the contribution can be so different? And if the number of leases signed is similar. And MGR uplift are very similar as well, why is there a timing difference this time?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [31]

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I'm not sure I understand your question, but probably see you -- I don't know if you'll be at the breakfast tomorrow morning so we can enter into more details. But basically, as you know, we've had a regular MGR placement, slightly higher than 15% or slightly below 15% but pretty regular. That's on leases, which are renewed or relet on average, I think it's about 7 years.

And then there are other elements. I mean there are tenants departing, there are tenants entering, there are delays, there are lease incentives, there are very numerous elements, which go between the MGR uplift, which is what you see and which is improved actually H1 '18. I remember some people were worried at 10.6 we had posted. I hope the same people -- are happy with the 12.2%.

But it's a mixture of so many different things including SBR, including provisions. And we have been, as I said, pretty cautious in the overdues. So we are -- have a cautious stance here. So this explains actually part of the others, as I said in my opening speech. Maybe we'll go into more detail because I'm not sure I fully understand your question. But...

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [32]

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Are there further questions in the audience? Over here, Bruno?

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Bruno Duclos, Invest Securities, Research Division - Financial Analyst of Real Estate [33]

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Bruno Duclos from Invest Securities. There's been a rise of temporary leases over the past months or semesters in the U.K. and the U.S. Could you elaborate a little bit regarding your portfolio? What is the part of temporary leases that has been signed among the leases signed during the first half?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [34]

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We have here the President of our U.S. operations and Chief Operating Officer Mr. Jean-Marie Tritant.

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Jean-Marie Tritant, Unibail-Rodamco-Westfield - President of US [35]

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That's part of the leasing strategy to avoid the increase of vacancy. When you have some departures, so what we do is that preparing the redevelopment of some assets, so we have development renovation plan. So what we are trying to do is so, as you know, you have short-term leases that will lead to a long-term leases when we do the remodeling of the -- or the renovation of the malls. And then you will have the brands that go for long-term leases with the remodeling of the stores. So what we are trying to do is align with what we are doing in the assets with what the retailers should do with us. I'm not having any of them starting the work before we start the works.

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Bruno Duclos, Invest Securities, Research Division - Financial Analyst of Real Estate [36]

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Okay. One of you competitor mentioned 25% of the lease that were signed during the first half were temporary leases. Is it the same thing for you? Is there difference in the U.K. and in the U.S.?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [37]

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So for Continental Europe, this is absolutely not the case because this is the bulk of our business. In the U.K., I don't have the stat. What we can do -- it's better to have a temporary lease to get some revenues and to have time to work for a strategic review. And I think this is also one of the important things that when you look at the MGR uplifts in U.K. they're actually pretty good in spite of vacancy. Because sometimes you prefer to wait and to keep a tenant in place, for example, extending its lease in order to have time to negotiate with the new incoming tenants at the right conditions.

And in certain cases, we had some CVAs where we had accepted a rent cut. You see it's not necessarily the majority given the majority of our assets, but this gives us time. And I think Michel showed at the investor days in London that for certain tenants, there was potentially the possibility to introducing new tenants in the space, including large tenants or to repurpose part of the area into some other uses, for example, offices, which as you know, it was for London, is a great location for offices.

So I don't have the stat on the top of my head, and it's not -- for me, it's not something I look at on the definite basis. I more look at the combination between occupancy or vacancy and the new leases signed for long-term occupation. In the U.S., Jean-Marie?

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Jean-Marie Tritant, Unibail-Rodamco-Westfield - President of US [38]

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In the U.S., what I will say is that they will recognize that kind of percentages. That's the share.

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [39]

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And I will just insist on one thing because obviously, we've had seen some results of some competitors in the U.K. I hope you agreed with me and the metrics that we just showed show that our situation is obviously very different. I remember people getting worried when we said we would enter the U.K. and we said, guys, we are not entering U.K., well, we are. But we are just acquiring the best 2 assets in London and I think these figures show that we own the best 2 assets, not only in London, but in the U.K. for that matter. And in the very difficult market, which you know very well and there again, some recent publications prove it. We are doing a pretty good job, I think, at maintaining the assets at very good level. And footfall is up, tenant sales are up, so I'm pretty confident. Of course, there will be headwinds. Of course, the situation is not clear today in the U.K. And of course, everybody wants to know which kind of Brexit we're going to have. But long term, medium to long term, when the dust settles, I can tell you these 2 assets will be the best in the U.K. without any doubt.

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Bruno Duclos, Invest Securities, Research Division - Financial Analyst of Real Estate [40]

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Yes. And of course, the weight in the portfolio is relatively limited, but I assume that for your like-for-like NRI in the U.K. -- last question about the U.K., it's down because of the Phase 2 extension and the switch of the tenants between phase I and phase II.

You won't public give a figure, but could you give us a hint about the NRI like-for-like for the other center?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [41]

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No. We don't speak by center, having just 2, if I give you 1 you will deduct the other. And kind of late for us.

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Bruno Duclos, Invest Securities, Research Division - Financial Analyst of Real Estate [42]

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No, of course. [But third, is the third down]?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [43]

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No, but basically the main reason for the NOI being down is the impact CVAs administration and bankruptcy in the first half. It would be roughly flat, slightly negative for that impact. So this is the main reason CVA is [slowing]. As I showed, we're dealing with them one by one with much less affected by the market but when the tenant departs or fails, of course, you get direct impact. And then, you have temporary solutions, short-term leases to fill the vacancy and to get customer repeat as well. Because there is nothing like a store which is open for customer. It's much better than the holding with a closed store. And then, we have long-term relettings and we just opened, for example, 2 new stores from the Abercrombie & Fitch group, a new Hollister and a new Gilly Hicks in London on previously vacant space and we are going to reuse the Hollister's space to put in a brand-new Abercrombie & Fitch so all this is part of our business. It takes time but there is appeal and this is a good sign, I think.

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Operator [44]

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Next question from Robert Woerdeman with Kempen.

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [45]

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Robert, we are waiting for you.

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Operator [46]

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Sir, your microphone is open?

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Robert Woerdeman, Kempen & Co. N.V., Research Division - Research Analyst [47]

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Apologies for that. I'm wondering what is the obsession to maintain the dividend at EUR 10.80. I reckon that the value of the business is not on the level of the DBS, but more on the total return that you generate.

And I think it would take away a lot of noise around your stock. And it would actually help you to step up the disposal base and on the long term, increase the quality of the overall portfolio.

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [48]

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Not sure I agree. I mean I think it's very important for investors to -- first of all, it's not the stock price that dictates the dividend. I'm awfully sorry. And some people might not have understood yet Jaap's humor, but when he says we agree that the dividend yield is crazy, it's because of the denominator obviously. Actually tonight, I think the dividend yield is 8.9%, which makes actually no sense because it's the cash flows that generate the dividend. And the cash flows, as you can see, are fine.

Jaap went through an extensive demonstration at the investor days in London, which showed that even if all disposals, the EUR 4 billion disposals that we needed to make, in addition to the EUR 2 billion disposals already made in 2018 in the second half of 2018, if all of these EUR 4 billion disposals had occurred on the 1st of January, the EUR 10.80 dividend would still be covered.

So I honestly, on a personal basis, I don't know why people don't want to understand that or maybe we haven't given the right explanation. And we're going to be very happy during the road shows tomorrow and Friday and next week in the U.S. to explain again, the cash flows drive the dividend. And as far as we know, there again, based on our 5-year BP and based on our disposal plan, the EUR 10.80 is covered. Why is it important to us? Because it's important to investors and because it reflects the quality of our company and the quality of the work of the teams.

As far as disposals are concerned to streamline portfolio, I mean I think we've done a pretty good job with a more than EUR 10 billion disposals in the last 10 years to streamline the portfolio. If there again, you go back to the presentations we did or I did at Westfield London -- at London actually. It was at Westfield London, and you see the average value of the Unibail-Rodamco assets or shopping center, I think it's above EUR 700 million, it's EUR 719 million off the top of my head. And you compare with our peers, you will see that we have done a job that some people have not done or didn't have the same strategy, which for us is fine. But I don't think that we should cut the dividend to hasten the disposal at any price. This is not a strategy, and I don't think this is what investors expect from us. I think the investors expect delivering the results, operating results, leasing results. And I think that's what we have done in the first half and that's what we will continue to do in the second half.

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Robert Woerdeman, Kempen & Co. N.V., Research Division - Research Analyst [49]

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Okay. That's a fair point, but it's just interesting to see that the entire world is questioning the dividend, whereas, I can imagine that you'd rather focus on increasing the total return and focus on that rather than on a certain dividend yield.

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [50]

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Robert, let's have this conversation offline because it just gets a little bit unhelpful because the concept is not about decreasing the dividend yield by disposing. It's basically during the cash flows Christophe has laid out, which we've demonstrated. And if people buy the stock, yield comes down. It's very simple.

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Robert Woerdeman, Kempen & Co. N.V., Research Division - Research Analyst [51]

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Okay. Just a nitty-gritty a question though. Westfield brand rollout cost? Is that significant and on top of that, is there any fees being paid to the Lowy family or do you own the brand in full?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [52]

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We own the brand. And it's -- we don't consider it as a cost although there are costs attached to it but we considered that an investment. It's a long-term investment in the best shopping center brand worldwide, which has been developed by the Lowy family, which we acquired on the June 7, 2018. It's a bet to roll out the Westfield brand in countries where it has never been done, but it's going to be rolled out on the best assets of these countries so where we are very well confident that this will be hugely successful.

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Robert Woerdeman, Kempen & Co. N.V., Research Division - Research Analyst [53]

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Okay. That's clear. And then just out of curiosity, how much are the costs, give or take?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [54]

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Give or take. No, we're not going to give you all the cost of everything we do, otherwise, we have no job. And you'll be so convinced about the EUR 10.80 dividend that you'll have to buy the stock. So as convinced as the management team of Unibail-Rodamco, by the way, which are holding their stock.

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Operator [55]

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Next question is from Valerie Guezi from Exane BNP Paribas.

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Valerie Guezi, Exane BNP Paribas, Research Division - Real Estate Analyst [56]

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I've got 3 questions actually, 2 on the U.S. and one on your pipeline. The one on the U.S., I mean, I see you changed the methodology for net mature yields and now your flagships are valued at 3.7%, which from your standpoint or the team's seems quite low, especially given that as you mentioned financing these costs are higher in the U.S. I was just wondering how profitable are you with this 3.7%? Have there been any recent contractions in the U.S. to support this yield? That's my first question.

My second question is, your like-for-like in the U.S. went up despite occupancy going down. You mentioned that there was a change in the like-for-like after EBITDA. So is it the only reason or is there any other reason?

And my last question is you said that in your strategy to decrease the pipeline as such. Yet if I look at your LTV pro forma of Majunga disposal, it went up by 50 basis in H1. So how do you think about that? I mean investment [basis, there are investments]. Do you have the sort of net debt target or what happens if your LTV goes higher basically?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [57]

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Valerie, let me answer the net initial yield and the valuation of the U.S. assets. It's a very granular detail but the U.S. appraisers would typically look at the net initial yield based on the rents that they will expect to be there 12 months after the actual valuation date. We've asked them to do this as soon same way we're doing it in Europe; divide the valuation, right? It's a result of the assumed growth in term -- ERVs and growth in exit cap rates. And then, divided by the rent actually contracted in place at the top of the valuation. That automatically is a result of the structurally higher vacancy results and lower net initial yield. I think if you want to look at the real cap rates, if you will, you should be looking at the exit cap rates that the appraisers give and that we give in the IFRS 13 table in the NAV note.

In terms of the loan-to-value versus the pipeline, it is obviously something that we measure consistently. If you recall from Fabrice's presentation during the investor days, he showed you, kind of gave everybody all the net-debt-to-EBITDA trajectory following the execution of the 5-year business plan including the deliveries of the pipeline as well as the CapEx that we assume in the plan to deliver on the pipeline projects we expect to move into the committed part over the period of the 5-year BP. I hope that's clear.

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [58]

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May I add that our strategy is not to decrease the pipeline but our operational behavior is to make sure that when we start developing a project, it will be successful. So we're putting ourselves hurdles because of course, we are working on the different elements on the balance sheet obviously. And it's important to us and it's important to Jaap and to Fabrice and to the whole team. So we will be cautious in some developments and we are reworking as I explained a couple of projects to improve their future-proofness because of what we've seen the evolution of retail and increasing their mixed-use components. So it's not a strategy to decrease the pipeline but it's definitely a strategy to future-proof the pipeline and to increase their mixed-use components and to start projects when we deem it's the right time to do so, sometimes with harsh pre-letting conditions to reduce the level of risk and to secure the returns.

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Valerie Guezi, Exane BNP Paribas, Research Division - Real Estate Analyst [59]

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And I had a question like-for-like in the U.S.

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Jean-Marie Tritant, Unibail-Rodamco-Westfield - President of US [60]

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Do you hear me? A question on the vacancy, just the -- first, the first wave -- the main waves of closing of stores are usually in Q1. And we have -- and then we have today on the negotiation, and on the lease commitments, 1.9% of the GLA that is on the negotiation that we should had in the coming weeks or to months to the level of occupancy that we have. And on the comp NOI, we show the effect of the deliveries that happened during last year of 2017, so you have UTC and very fair that they are coming. Plus the effect of some of the closings that were trading during the first half of the year.

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [61]

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I think, Valerie, if you think about it, comp NOIs are trailing, its trailing period versus spot NOI, so that's why you might see a spot vacancy or occupancy. So that's why you see some of that impact.

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Operator [62]

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Next question from Jonathan Kownator from Goldman Sachs.

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Jonathan Sacha Kownator, Goldman Sachs Group Inc., Research Division - Financial Analyst [63]

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A few questions on my end. Just have to come back to Valerie's point on the comp NOI in U.S. I'm not sure I understood the nature of the improvement and the source of the improvement so if you could comment on that, that will be helpful.

One other question on the C&E portfolio, it seems to be having a good performance yet the valuation has come down by 6.2% on the like-for-like basis. I think you mentioned the cost of capital has gone up in the value of the assumptions but yet interest rates are coming down. So I don't know if you have more clarity on that, it'd be helpful.

And questions on the Nordics' performance, not sure if I understand exactly was happening there and why like-for-like rent growth and occupancy were a bit negative. If you could give a bit more color that would be helpful.

And then, perhaps the last question, sorry that's 4. To the extent that you have some confidence in the disposals, which seems to be the case, notwithstanding your objective to reduce LTV of course, how would you feel given the level of the share price today to look at a share buyback program?

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [64]

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Just on the very quick question -- not a question, I'd love to ask you a question Jonathan but I have to answer yours. Very quick answer on your comp NOI in U.S., one of the main factors is the introduction of Westfield Century City and Westfield UTC in the comp NOI. You remember that last year we were not heard that we said that our best assets were excluded from the like-for-like basis or the comp NOI and it was one of the explanations when you exclude your best assets for a not-so-good performance. This year they're included and performance is good. So this is -- don't blame us for that, it's normal. These assets have been delivered at the end of '17 so they should be included in like-for-like. And this is what they are. Okay? I don't think there is any more information needed on that.

On the other -- the bridge in the Nordics, I mean, take it on the base of the very strong H1 2018 to explain the minus 2%, which I agree with you is unusual. In addition, we had some departing tenants in Täby and so on. And there again, the teams are at work, the Stockholm economy and the Stockholm environment is actually pretty good. And as elsewhere, negotiations do take time, okay? Jaap, for the C&E business or valuations rather?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [65]

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Again very granular answer is that the appraisers in their mind need to reflect a cost of capital they think that a potential buyer would want to use. If we were to go along with the just the purely risk-free rate at a negative yield, this one for the French government's bonds, I think we'd actually see the valuation explode. Now nice for the NAV of course, but not very realistic, which shows you need the limitation of the concept of an NAV in the first place. So it's a basic evaluation methodology where they increase the discount rate, effectively.

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Jonathan Sacha Kownator, Goldman Sachs Group Inc., Research Division - Financial Analyst [66]

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And do you disclose that discount rate actually?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [67]

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I'm sorry?

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Jonathan Sacha Kownator, Goldman Sachs Group Inc., Research Division - Financial Analyst [68]

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Do you disclose that discount rate?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [69]

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No. We don't disclose the discount rate. It's an asset by asset discount rate to reflect the particularities of the assets including whatever incremental risk associated with the fact that there is, of course, leasehold in a number of the C&E assets.

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Jonathan Sacha Kownator, Goldman Sachs Group Inc., Research Division - Financial Analyst [70]

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Would you think about the -- is it in line with your view about the business at all or not really?

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [71]

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I think the view that we have with respect to whether it's in line or not relates primarily to a share price relative to the underlying performance in the assets. We've had many discussions as to how we think about or what we think about the appraisers' view on assets. It is their view. We will accept it. We will put it on as we're required to do so. And we will take it from there, Jonathan.

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Christophe Cuvillier, Unibail-Rodamco-Westfield - Group CEO & Chairman of Management Board [72]

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And the performance of the C&E division the first half has been pretty exciting right? So the results are extraordinary. And the new categories, which are congresses or corporate events and so on, are showing double-digit growth. So the activity is here in the C&E business.

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Jacob Lunsingh Tonckens, Unibail-Rodamco-Westfield - Group CFO & Member of Management Board [73]

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And then your last question Jonathan with respect to confidence in the disposals and a buyback, let me just tell you I'd rather not speculate. Let's first complete the disposals and then we'll make a decision with the Supervisory Board, senior management team as to what we think the best use of the disposal proceeds are if it's not the pipeline.

Are there any more questions in the audience? And if no more questions online, we'd like to thank you very much for your attendance. And obviously, the IR team stands ready to answer any detailed questions you might have that we haven't answered here. Thank you.