Deutsche Euroshop struggles under outstanding tenant rent payments
There will be close attention paid this week when listed Deutsche Euroshop (DES) presents its full-year figures on 16thJune.
The Hamburg-based investment company is the only public company which focuses exclusively on shopping centres in prime locations, with equity interests in 21 centres across Germany (mainly), Austria, Poland, the Czech Republic and Hungary. Last year DES generated net income of €112m on turnover of €226m.
The market cap of the SDAX-listed DES is now about €968m, about a quarter of its market cap in 2015, when bricks and mortar retail started falling out of favour. (By comparison, rival Unibail-Rodamco-Westfield has a market cap of just under €10bn.)
With the group’s shopping centres now largely re-opened, the effects of COVID-19 are being gradually revealed. Investors, naturally enough, took huge fright at the beginning of lockdown, with the share price plunging by two thirds. It has seen some recovery off its lows, and may improve further depending on developments being presented by CEO Wilhelm Wellner. Some of his thoughts and actual business figures were distributed in advance of the virtual AGM.
Among them: Wellner is calling for a relaxation of corona protection measures in shopping centres. "From our point of view, for example, blocking children's play areas, deactivating the center WLAN to reduce the time spent in the center and cancelling events and center actions should not become a permanent state of affairs," he said. He wants a "regular, local and risk-dependent assessment of the necessity of all restrictions by politicians in order to provide our rental partners with the necessary, as unrestricted as possible, platform for their business".
Since reopening, visitor frequency in DES’s shopping centres in the first week of June was recorded as being 73% of last year’s level, up from 50% in the middle of May. Tenants’ turnover in mid-May reached 66% of last years, after a halving in March.
In May, DES received only 38% of rent due from its tenants, with a further "significant increase in outstanding accounts" expected for June, said Wellner. Outstanding rent has now increased by more than €30m since the outbreak of the crisis
Retail tenants now facing insolvency make up 6% of DES’s rental income. From a vacancy rate of 2.4% at the end of 2019, this is now expected to rise significantly.
Wellner said that he is suspending the annual forecast until further clarity emerges about the pressure being experienced by tenants. The DES annual dividend is being cancelled.