EUROCOMMERCIAL PROPERTIES N.V. PRESS RELEASE
Date: 5 November 2021
Release: Before opening of Euronext
THIRD QUARTER RESULTS 2021
Key highlights for the third quarter to September 2021
Performance and business highlights
- Continuation of the strong recovery in retail sales which for Q3 saw an increase of 6.5% compared to Q3 2020. Overall retail sales have fully recovered to their pre-pandemic levels and were 1.5% above Q3 2019.
- Strong tenant demand resulted in 5.4% rental uplifts on renewals and relettings, with 271 deals signed during the 12 month period ending 30 September 2021. All countries showed positive uplifts with Italy (6.9%) and Sweden (5.6%) being most prominent.
- EPRA vacancy rate remained very low at 1.5% extending our long-term low vacancy record.
- Improved rent collection saw 89% of rent collected for Q3 and 86% so far collected for the first nine months of 2021.
- Exceptionally strong trading across our seven Swedish shopping centres (22% of the portfolio) with Q3 retail sales growth of 7.4% and 8.5% compared to Q3 2019 and Q3 2020 respectively, resulting in full rent collection.
- The 7,000m² conversion of the former hypermarket at Fiordaliso, Milan will open on 11 November 2021 fully let with tenants including Adidas, JD Sports, New Yorker, Hollister and Bershka.
- Loan to value ratio (on the basis of proportional consolidation) marginally lower at 43.5% compared to 43.8% at 30 June 2021.
- Net earnings €1.57 (direct investment result) per share for nine months to 30 September 2021.
- Termination of depositary receipt structure completed and STAK wound up.
- Eurocommercial maintained its GRESB 4 Star Rating, achieving its highest score and also received an EPRA Gold Award for sustainability reporting for the eighth consecutive year (sBPR).
Board of Management's commentary
It has been most encouraging to see that the swift rebound in retail sales in our shopping centres that we reported in June has been maintained. Retail sales during Q3 increased by 6.5% compared to Q3 2020 and were 1.5% above the pre-pandemic Q3 2019. Footfall is at the same level as last year but remains slightly below pre-pandemic levels and was suppressed in France during August and September by the requirement to show the Pass Sanitaire to enter shopping centres of more than 20,000m² in some French départements. The fact that retail turnover has produced like-for-like growth on lower footfall further demonstrates the high sales conversion rates and increase in basket size which our retailers have regularly commented on.
Against this background, tenant demand for our shopping centres continues to be characterised by strong letting activity with 271 lease renewals and relettings completed over the last 12 months producing a rental uplift of 5.4%. Our vacancies remain at around their historically low levels at 1.5%, varying between 0.4% and 2.4% in our four markets.
Q3 rent collection has increased to 89% and is at 86% for the first nine months of 2021, a figure that will improve following the recent EU approval for the rent support package in France which has delayed Q2 rent collection covering the third lockdown period.
In the Half Year report we referred to advanced discussions on further property sales and these negotiations are now in their final stages. We will announce these sales as soon as there are signed, binding contracts.
High participation at recent national retail events confirms that our tenants remain positive and continue to view prime physical retail space as the foundation of their omni-channel business. With all our shopping centres fully open and trading at close to full speed since June, we remain hopeful that the effects of the virus can be managed without the need for significant further restrictions. Against this background and with full occupancy at affordable rental levels, we can envisage the return of stable income and future growth encouraged by meaningful rental indexation from January 2022, which based on current inflation data is estimated to be well over 2% for our portfolio.
Operational and financial review
Retail sales
Following the general reopening of our shopping centres from May 2021, there has been a quick and full recovery in retail sales. For Q3 2021, retail sales increased by 6.5% compared to Q3 2020 with all sectors showing positive growth. Overall, retail sales in Q3 were higher than pre-pandemic levels and were 1.5% above Q3 2019.
Like-for-like retail sales by country*
Q3 2021/Q3 2020 | Q3 2021/Q3 2019 | |
Overall | 6.5% | 1.5% |
Belgium | 6.6% | -8.4% |
France | -1.7% | 0.9% |
Italy | 9.6% | -0.9% |
Sweden | 8.5% | 7.4% |
* Excluding extensions/redevelopments.
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Like-for-like retail sales by sector*
Q3 2021/Q3 2020 | Q3 2021/Q3 2019 | |
Fashion | 6.8% | -3.2% |
Shoes | 8.4% | -9.3% |
Health & Beauty | 5.2% | 1.4% |
Gifts & Jewellery | 9.5% | 10.8% |
Books & Toys | 0.3% | -0.2% |
F&B (Restaurants & Bars) | 14.3% | -4.2% |
Services | 15.6% | -14.7% |
Sport | 8.3% | 10.2% |
Home Goods | 2.1% | 12.0% |
Telecom & Electrical | 5.6% | 2.8% |
Hypermarkets/Supermarkets | 1.5% | 8.9% |
*Excluding extensions/redevelopments.
Retail sector sales recovery in Q3 for Eurocommercial's portfolio compared to 2019
120%
100%
80%
60%
40%
20%
0%
2020 vs 2019 | 2021 vs 2019 | ||
Visitor numbers
Footfall has also recovered well since the full reopening of the shopping centres and during Q3 2021 reached the same level as Q3 2020, but was 17.7% below the equivalent pre-pandemic period in 2019.
Footfall
Q3 2021 vs Q3 2020 | Q3 2021 vs Q3 2019 | |
Overall | -0.2% | -17.7% |
Belgium | 5.5% | -21.3% |
France | -6.1% | -19.5% |
Italy | 1.0% | -23.0% |
Sweden | 5.3% | -0.9% |
Footfall has improved during October and was 6.4% above October 2020 and only 11% below October 2019. The biggest improvement during October was in Italy which was 15% above October 2020 and 11% below October 2019. The full recovery of retail sales on reduced footfall confirms the high sales conversion rates and increase in basket size which many of our retailers continue to comment on.
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Renewals and relettings
Strong leasing activity has been maintained over the last 12 months with 271 leases renewed or relet producing an overall uplift of 5.4%. These leases represent €24 million equivalent to 12.5% of the annual minimum guaranteed rent. 104 of these transactions were lettings to new retailers entering our shopping centres achieving a 7.1% rental uplift. All countries recorded positive uplifts in their renewal and reletting programme and the leasing teams have been able to maintain standard lease terms and conditions including lease length.
Tenant demand has been consistent throughout the period and in Q3 2021 alone, 48 lease renewals and relettings were completed, producing an uplift in rent of 4.6%.
Relettings and renewals, 12 months to 30 September 2021
Number of relettings | Average rental uplift | % of total leases | |||||||
on relettings and | relet and renewed | ||||||||
and renewals | |||||||||
renewals | (MGR) | ||||||||
Overall | 271 | 5.4% | 12% | ||||||
Belgium | 25 | 2.2% | 20% | ||||||
France | 40 | 4.0% | 6% | ||||||
Italy | 110 | 6.9% | 12% | ||||||
Sweden | 96 | 5.6% | 18% |
In Woluwe Shopping, Belgium, 25 leases were renewed or relet over the last 12 months producing a rental uplift of 2.2%. Hubside and Xandres opened in September following several other new international brands who have recently established at Woluwe including Maje, K-Way, Jott and Bexley.
In France, 40 lease renewals and relettings were completed over the last 12 months producing an average uplift in rent of 4%. Lease renewals produced an uplift of 8.6%, while new lettings were slightly down at -0.6%.
Italy produced the highest rental uplift of 6.9% on 110 lease transactions. 42 of these transactions were signed with new retailers achieving an overall uplift of over 10%. International brands establishing in Italy continue to take space in our centres with recent examples being JD Sports, Nike, Adidas, Pepco, Starbucks, Dyson and Pull & Bear.
In Sweden, 96 lease renewals and relettings were completed producing a rental uplift of 5.6%. 69 of these lease transactions were renewals producing an uplift of 3.9%, while 27 leases were lettings to new tenants at rents 13% above previous levels. These lettings included a lease to Cassels at C4 who replaced Afound, the H&M outlet concept.
EPRA vacancies
EPRA vacancy remained very low and was 1.5% as at 30 September 2021, ranging from 0.4% to 2.4% in our four markets.
EPRA vacancy levels as at 30 September 2021
31 March 2021 | 30 June 2021 | 30 September 2021 | |
Overall | 1.5% | 1.3% | 1.5% |
Belgium | 1.2% | 0.5% | 0.4% |
France | 2.6% | 2.0% | 2.4% |
Italy | 0.9% | 1.0% | 1.4% |
Sweden | 1.7% | 1.3% | 1.2% |
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Out of a total of 1,876 shops, there were only 16 tenants in administration occupying 33 units. For the majority of these units, rent continued to be paid.
Rent collection and rent concessions
Q3 rent collection improved to 89% overall. Rent collection for the first nine months of 2021 now stands at 86%, although this will increase following the recently approved EU rent subsidy package for France which has delayed Q2 rent collection.
The figures reported in the table below are as at 4 November 2021.
Rent collected in 2021
% of invoiced | Q3 2021 | H1 2021 | 9 Months 2021 | ||||||||
rent collected | |||||||||||
Belgium | 95% | 95% | 95% | ||||||||
France | 93% | 71% | 78% | ||||||||
Italy | 81% | 84% | 83% | ||||||||
Sweden | 98% | 97% | 97% | ||||||||
Total | 89% | 85% | 86% | ||||||||
On a net basis, adjusted for rent deferrals or COVID-19 rent relief provided and booked, the collection rates for the Q3 2021, H1 2021 and 9M 2021 all stand at 92%.
Direct investment result: €78.9 million (€1.57 per share)
The direct investment result for the nine months to 30 September 2021 was €78.9 million, compared to €88.7 million for the same period in 2020. The decline was mainly due to COVID-19 related discounts to retailers and bad debts over the period from January to September 2021.
The direct investment result per share decreased to €1.57 at 30 September 2021, from €1.80 for the nine months to 30 September 2020, also due to the increase in the number of shares as a result of the July 2021 scrip dividend.
The direct investment result is defined as net property income less net interest expenses and company expenses after taxation. In the view of the Board this more accurately represents the underlying
profitability of the Company than IFRS "profit after tax", which must include unrealised capital gains and
losses.
The EPRA earnings result for the nine months reporting period to 30 September 2021 was €77.6 million, or €1.49 per share, compared to €86.5 million or €1.66 per share for the same period last year.
IFRS profit: €50.7 million
The IFRS profit after taxation, excluding the non-controlling interest, for the nine month reporting period to 30 September 2021 was €50.7 million (€0.97 per share) compared to minus €49.1 million (€0.94 negative per share) for the nine month reporting period to 30 September 2020. This increase is largely explained by a lower negative movement in value of the properties (€40.7 million negative at 30 September 2021 and €122.9 million negative at 30 September 2020) and by a €26.9 million positive fair value movement of the derivative financial instruments at 30 September 2021 (€16.7 million negative at 30 September 2020) due to an increase in Euro and Swedish interest rates.
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Eurocommercial Properties NV published this content on 05 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 November 2021 06:52:02 UTC.
