PARIS-French-Dutch retail mall, office and conference center REIT Unibail-Rodamco continues to look for 'critical mass' in capital cities around Europe, but it is unenthusiastic about Germany and sees Russia as not yet ready, says its co-CEO Peter Rossum.

The combined Unibail-Rodamco group owns 469 shopping centres 111 office assets and 54 convention and exhibition buildings. With market value at around €12 billion it is the largest cap listed real estate group in Europe by far, and has a property portfolio of €22.8 billion.

In the Netherlands, Unibail-Rodamco owns many key retail malls in major cities. "There we have very sizeable critical mass size shopping malls that we like that have good quality. The high street shops by and large have been sold…and a lot of the smaller shopping malls that we had in the Netherlands have also been sold out of the portfolio." In Germany it is under-represented mainly because consumer spending is weak and, assets are expensive.

"If you are very conservative and the only thing you're looking for is an inflation hedge then Germany's great," Rossum said. In Russia, U-R is putting a toe into the water, aiming to take a 50% stake in the giant Metropolis mall in Moscow, but conditions precedent have to be met first. Is this the start of activity that could become much bigger in Russia? "It's something where we're going to wait and see," Rossum says. "It's very early days."

U-R in 1H09 reported net rental income up 8% at €634 million, but it took a mark-to-market depreciation of a 8.2%, giving an IFRS loss of just over €1.3 billion. A 8.2% downward valuation of the portfolio in the first half stood in contrast to many other listed companies, and followed a 10.7% depreciation in all of 2008. Net asset value per share declined 13% to €131.70, compared to its recent stock price around €143.