Due to the health crisis, footfall in shopping centers is still far from what it was in 2019. However, as evidenced by the 2021 accounts published this morning by Unibail-Rodamco-Westfield, retailers have managed to do more turnover relative to the fall in traffic. Financial analyst Florent Laroche-Joubert, of private bank Oddo BHF, notes that “retailer revenue is 93% of what it was in the second half of 2019: retailer revenue continues to outperform footfall (81% compared to 2019 traffic in Europe) and there are still disparities between regions in the normalization of activity, with in particular strong momentum in the United States (retailer revenue at 100% in the second half versus the second half of 2019), a solid and ongoing recovery in continental Europe (90%) and in London (92%). » In the United Kingdom, however, merchant turnover is only 83% of what it was before the crisis. But, overall, the recovery in activity was felt in the second half.
These operational data, comforting in view of the fear of Covid in the United States, health restrictions in Europe (the centers were closed 94 days on average last year, after 84 days in 2020) and the introduction from the summer of the health pass in France (a third of the activity), contribute to a 7% increase in the Unibail-Rodamco-Westfield stock market, which signs the best performance of the CAC 40.
The operator of shopping centers, owner in particular of the “4 Temps” in La Défense or the Forum des Halles in the heart of Paris, is remunerated by renting spaces, negotiating a fixed lease and deducting part of the turnover signs. It records, for the 2021 financial year, net rents of 1.72 billion, down 3.7%. Its recurring adjusted earnings per share amounted to 6.91 euros, down 5.2% over one year but higher than the forecasts communicated by the group, partly thanks to a better rent collection rate (88% on the 2021 as a whole compared to 79% in the first half alone and 80% in 2020).
Figures published by Unibail-Rodamco-Westfield “show gradual improvement”we also note within the financial analysis firm Invest Securities, which points “a positive reversal [évolution des loyers au moment des échéances de baux] of +1.8% for leases of more than 36 months and above all a drop of 190 basis points in average vacancy to 7% in the second half (4% in continental Europe against 5% in the first half and 11% against 14 % in the USA). » Invest Securities notes, however, that while commercial real estate attracted new brands last year (2,400 leases were signed, +60% compared to 2020, +2% compared to 2019), “The proportion of short-term leases signed in the second half remains high (45%) even if it is down compared to the first half (56%). » The chairman of the management board of the multinational, Jean-Marie Tritant, explained this morning, during the presentation of the accounts, that the decision to accept “a higher proportion of short-term leases” had been taken, “with higher rents”in order to “protect our occupancy rates”.
Deleveraging advances
Moreover, for a highly indebted company like Unibail-Rodamco, the good state of progress of asset disposals is another element appreciated by the stock market. Unibail-Rodamco-Westfield sold 2.5 billion euros of European assets between early 2021 and early 2022, including the sale, announced this morning, of 45% of the Carré Sénart complex, located south of Paris, for 1 billion euros. “The company has confirmed the rumored sale of 45% of its Carré Sénart center. The 155,500 m² complex, which has been extended four times since its creation in 2002, is one of the most successful centers in URW’s heritage. Its occupancy rate at the end of 2020 (94.8%) was satisfactory. In 2019, Carré Sénart posted one of the main increases in tenant turnover (+6.9%) within the French portfolio of URW, driven in particular by the opening of twelve new catering units and leisure spaces »comments Invest Securities, which questions the merits of this sale. “Even if the presence of Galeries Lafayette can be interpreted as a weakness in a difficult context for Department Stores and if the many extensions have made Carré Sénart a mature asset, it remains one of the best heritage centers in URW. » However, this operation is positive for the shopping center operator’s balance sheet. And as indicated by the management during the presentation of the accounts, there is no question for the group of completely leaving “this high-potential asset”.
The objective is still to reach 4 billion in disposals by the end of 2022. In the future, the arbitrations will mainly concern the United States, where the group has announced, there are a little more than a year, its intention to withdraw (it had entered the American market in 2018 after the takeover of Westfield). The strategic review, across the Atlantic, has been finalized. The Chairman of the Management Board spoke this morning about“a substantial disposal plan in the United States”. More details will certainly be given on March 30, when the group presents its new strategic orientations. “The asset disposal plan is continuing, a necessary condition for URW’s debt reduction which has crystallized investors’ concerns in recent years, and the appraisal values are stabilizing, thus allowing the key LTV (Loan to Value) ratio to decrease to 42.5% pro-forma”rejoices the management company Clartan Associés.
For the new financial year, the management of the company is optimistic and expects a net recurring result of between 8.2 and 8.4 euros per share, which implies an increase of 18 to 21% compared to profits. of 2020. However, as previously announced, the payment of a dividend will remain suspended this year.