URW suffers €2.8bn hit to portfolio value

Unibail-Rodamco-Westfield has revealed a €2.8bn (£2.5bn) like-for-like revaluation loss on the value of its portfolio for the first half of 2020. The gross market value of the group’s portfolio fell by 7.6% to €60.4bn during H1, including a 5.1% (€2.8bn) like-for-like revaluation, a non-LFL €658m revaluation, and the impact of disposals made during the period. The value of the landlord’s shopping centres dropped by 5.2% to €51.8bn, and the retail portfolio’s average net initial yield widened by 8bps to 4.4%. The UK and Italy shopping centres posted a €640.3m valuation decrease, with total value standing at some €3.5bn including transfer taxes. Although URW pointed to “little” transactional evidence, appraisers reduced the like-for-like GMV of its UK shopping centres by 13.9%, of which 12.5% was driven by the yield impact and 1.4% by rent impact. In the UK, 21 stores were affected by insolvency processes during H1 including Victoria’s Secret, Debenhams, Monsoon Accessorize and AllSaints. Rental income dives Net rental income at its two shopping centres in the UK – Westfield London and Westfield Stratford City – dropped by 34.1% on a like-for-like basis to €50m, during the first half of 2020. Like-for-like net rental income across the group declined by 14.2%, to nearly €1.1bn. Across the landlord’s shopping centres, net rental income decreased by 11.3% year-on-year, to just over €1bn. EPRA net tangible assets across the group fell by 13.3% to €153.9 per share. The landlord said that the uncertainty relating to the duration and impact of the pandemic on its operations “remains material”, and that it is too early to provide new guidance on its 2020 outlook. Cutting jobs in the UK The group has reduced its workforce in the UK and the US through its “agility programme”. URW did not disclose the specific number of jobs affected. After scaling back its development pipeline earlier this year, the landlord has also trimmed staff numbers in the relevant areas. Additionally, the landlord has reduced its overheads through partial employment and furlough schemes. These are collectively expected to save around €40m in gross administrative expenses in 2020, growing to €60m on an annualised basis. Leasing activity drops The UK centres were among the worst hit in terms of leasing activity, posting a 13.7% minimum guaranteed rent decline. This compares with a 5.5% MGR uplift at its centres in continental Europe. Across the group, URW signed 661 leases, down 44% on the previous year. UK footfall was less than 50% of 2019 levels, and restrictions remain in place for leisure operators. At the end of June, 97% of stores in URW’s European centres were open, with the remainder largely relating to delayed tenant reopenings in the UK. In the US, 77% of stores have reopened. What the chief exec said Christophe Cuvillier, group chief executive, said that URW was forced to close most of its shopping centres in March for 67 days on average. “During the crisis, URW successfully focused on preserving liquidity by raising funds on the debt markets, deferring non-essential capex, reducing the pipeline, cancelling the final dividend and implementing cost savings,” he said. Cuvillier added that the group now has a record €12.7bn of cash and undrawn facilities. He said: “URW is committed to de-leveraging, and reiterates its plans to dispose the remaining €4nn of its asset disposal programme over the next couple of years.” To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette