Unibail-Rodamco (ASX:URW) share price struggles despite reopening progress

Here are the latest financials from the international Westfield operator…

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The Unibail-Rodamco-Westfield CDI (ASX: URW) share price is under the microscope this morning. Investors are turning their eyes to the real estate investment trust (REIT) following the release of its third-quarter financials.

Unibail shares are trading down 0.39% to $5.15 at the time of writing after closing at $5.17 apiece yesterday. Following this move, the Unibail Rodamco share price is now 20% away from its 52-week high set in June.

Let’s lift the lid on the latest quarterly details.

Unibail Rodamco share price on watch after reassuring quarter

  • Continental Europe tenant sales reached 92% of 2019 levels
  • United States tenant sales surpassed pre-COVID levels
  • Rent collections increased to 88% in Q3 compared to 80% in Q2
  • Overall vacancy levels improved to 7.9% compared to 8.3% at the end of FY20
  • Total turnover for the first nine months fell 15.6% to €1,610.4 million ($2,488.9 million)
  • Gross rental income for the first nine months dropped 13.2% to €1,352.8 million ($2,090.8 million)

What happened during the quarter?

The third quarter for Unibail Rodamco was largely defined by ongoing COVID-19 impacts, but with improving conditions. Importantly, the international Westfield operator navigated the period with all of its centres reopened despite some restrictions in place. This accommodated a pickup in the company’s operating metrics, in some cases beyond pre-pandemic levels.

However, while there were glimmers of revival in the shopping centre chain, overall performance remained dampened. For instance, the total turnover for the first nine months was down 15.6% to €1,610.4 million. The worst segment was its services revenue from convention and exhibition operations, down 33.5%. Meanwhile, shopping centre revenue was less negatively affected, down 11.9%.

Across its portfolio of shopping centres, Germany and France were the biggest drags on gross rental income. These two European countries exhibited a decrease of 25.9% in rental income. In contrast, Austria and the Netherlands booked an increase of 16.2% and 14.5% respectively.

Signs are promising in the United States, where tenant sales were 102% of 2019 levels. This is potentially an early indication of the company’s emergence from COVID, boding well for the Unibail Rodamco share price.

Management commentary and outlook

Commenting on the past quarter, CEO Jean-Marie Tritant said:

Since the reopening of all of our centres and despite some ongoing restrictions, we have seen a marked recovery in activity in Q3. Overall tenant sales for Continental Europe reached 92% of pre-COVID levels in the quarter and 89% including the UK, while the US is even stronger at 102%. This return of activity has supported a major improvement in rent collection, sustained letting activity, and a decrease in vacancy levels.

Furthermore, on the topic of what the future may look like, Tritant stated:

Considering the positive momentum in Q3, the gradual lifting of restrictions, and the ongoing progress of vaccination programmes in our regions, the Group expects Q4 to reflect a continued return towards more normal levels of pre-COVID activity, allowing our tenants to capture the key holiday trading period.

With visibility for the remainder of the year now improved, URW expects full-year Adjusted Recurring Earnings of at least €6.75 [$10.43] per share, slightly above 2020, adjusted for disposals.

Finally, it was mentioned that a longer-term vision will be provided at an investor day planned for 30 March 2022. This will cover the company’s plan on delivering sustainable growth from its core portfolio.

The Unibail Rodamco share price is up 75% in the last year.

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