In a Nutshell: Shopping centers operated by Unibail-Rodamco-Westfield (URW) were closed an average of 68 days in the first half, versus 67 days in the prior-year period, it said, while some were shuttered for 92 days.
“Throughout the first half we maintained our focus on key operational and financial priorities. This includes the successful opening of our latest flagship destination Westfield Mall of the Netherlands and marked progress in our deleveraging efforts thanks to both European disposals and the on-going streamlining of our US portfolio. This process is supported by favourable access to credit markets, giving us ample liquidity to cover all refinancing needs for the next 36 months,” URW CEO Jean-Marie Tritent said.
The company is “cautiously optimistic” about the near term, but keeping an eye on coronavirus trends and government mandates, Tritent said.
As of June 30, the mall REIT’s portfolio was valued at 55.0 billion euros ($65.37 billion), 86 percent of which are retail-related. URW owns and operates 86 shopping centers, including 53 flagships in Europe and the U.S.
Though the mall operator has been offloading some properties, it still has European assets valued at 4 billion euros ($4.8 billion) and expects to right-size its portfolio of over the next 18 months. The company has shed or agreed to divest 1.7 billion euros ($2.0 billion) in European properties, and its working on its American holdings.
URW said vacancy rates stabilized at 8.9 percent in Q2 and were down in Continental Europe from 5.4 percent at the end of the first quarter of 2021 to 5.0 percent at the end of the first half. In the U.K. over the same period, vacancy was down at the end of the half to 12.2 percent from 12.6 percent.
The company has also appointed a chief customer officer to address evolving consumer preferences and help drive future growth in advertising, data and omnichannel retail.
Net Sales: For the half ended June 30, net rental income fell 26.2 percent to 785 million euros ($932.9 million) from 1.065 billion euros ($1.27 billion), mostly due to temporary closures in Europe.
Foot traffic declines tapered off when centers reopened in April and May, with most now open and in some cases operating with restrictions. U.S. foot traffic data was not available for all centers, but reached 75 percent for the half year versus 65 percent of 2019 levels for data that was available. In the U.S., Westfield San Francisco Centre remains more heavily affected than others, the company said.
Jewelry retailers performed well at up 2.1 percent in June, followed by food stores and mass merchandise at down 2.0 percent, sport at down 2.5 percent and home at down 3.8 percent, URW said. Fashion continue to lag at down 16.4 percent.
Earnings: For the half, the company reported a net loss of 460.8 million euros ($547.6 million), versus a loss of 3.71 billion euros ($4.41 billion) in the year-ago period.
URW believes the pandemic will continue to weigh on second-half results. “The development of new variants and the restrictions contemplated to mitigate them generate additional uncertainty for URW’s activities. Given this, URW is currently not providing any guidance for 2021,” the mall operator said.
The company has 12.5 billion ($14.86 billion) in cash and available facilities, and has secured refinancing for the next 36 months.
CEO’s Take: “URW has demonstrated continued resilience in the face of tough operating conditions, with substantial lockdowns across our network during the period. Whenever restrictions were lifted, we have seen a recovery in both footfall and sales, in most cases at higher levels than those seen during the reopening in 2020,” Tritant said. “Letting activity improved, as brands continue to choose URW destinations as part of their omnichannel approach. Our teams have worked hard to stabilize occupancy levels, adopting a pragmatic approach to lease structure and duration that positions URW to benefit as market conditions improve.”