Listed shopping centre group Unibail-Rodamco-Westfield (URW) said that after a year during which its operations were heavily impacted by the Covid pandemic, it would continue with its deleveraging strategy, with further mall disposals on the cards in Europe and the US.
The property giant reported net rental income from its shopping centres fell 24% to €1.69 bn last year on a like-for-like basis from €2.29 bn in 2019 as results were hit by rent relief measures and 'doubtful' debtors.
URW said that after a strong start to 2020, most of the year was subject to various Covid restrictions, leading to its shopping centres being effectively closed 93 days on average, leaving only 70 days of normal operations. The challenging conditions were exacerbated by the malls' central locations and F&B exposure, the company said.
Thanks to a 'partnership approach' to support tenants through the crisis and an ‘innovative’ response to restrictions, URW said it collected 88% of total rents due for 2020.
Commenting on the results, URW CEO Jean-Marie Tritant said 2020 had been ‘a year like no other’ in URW’s history. ‘With restrictions in place across almost all of our markets we have realistic expectations for 2021 but are encouraged by the way footfall and sales bounced back strongly whenever restrictions were eased or lifted last year.’
URW said operations would continue to be impacted by the pandemic in 2021, with prospects of a ‘solid recovery’ starting at some point in the second half of the year, as vaccination efforts achieve critical mass and restrictions get lifted.
The impact is likely to include further rent relief to tenants, further disruption to variable revenue streams such as sales-based rent, parking or commercial partnerships, a longer than usual time needed to re-lease vacant units, and the prospect of further tenant bankruptcies.
Focus on deleveraging
Tritant said deleveraging the business will continue to be a major priority, both in Europe and the US. ‘We will complete the remaining €3.2 bn of the €4 bn European disposals before the end of 2022. We are implementing a programme to significantly reduce our financial exposure to the US when the investment market reopens which should happen with the US economy rebound in 2022.’
He said URW’s ‘strong liquidity position’ would allow it to carry out these disposals ‘over time and in an orderly fashion’.
In 2020, the group completed the disposal of a portfolio of five shopping centres in France to an entity formed by Crédit Agricole Assurances, La Française and URW, in which the group holds a stake of 45.8%, generating net proceeds of €1.5 bn. URW also completed the disposal of several non-core assets in Europe and the US.
In addition, URW sold the SHiFT office building in Paris and the Les Villages 3, 4 and 6 office buildings, which together account for €0.8 bn of its €4 bn European disposal target announced in September 2020.
As a key part of the deleveraging plans, URW has also reduced the development pipeline to €4.4 bn from €8.3 bn at end-2019. Committed projects amount to €2.9 bn, of which €1.7 bn are already invested.
The group said it still planned to deliver the Westfield Mall of the Netherlands redevelopment, currently 90% pre-let, in the first half of 2021, and the Gaîté Montparnasse mixed-use project in H2.
URW said that given the current operating environment and its commitment to deleveraging, the payment of a dividend for its fiscal years 2020, 2021 and 2022 would be suspended.
Said Tritant: ‘We will resume the payment of a sustainable and growing dividend once the deleveraging programme is completed. Having delivered on our immediate operational and financial priorities, URW will re-emerge as the most attractive retail focused listed real estate company combining strong fundamentals and outstanding growth potential.’
URW announced several board changes last year as part of implementing a new and 'agile' organisation better equipped to deal with the challenges arising from the pandemic.
