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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to the Unibail-Rodamco-Westfield Conference Call. I am pleased to introduce the group's Chief Executive Officer, Mr. Christophe Cuvillier. Sir, please go ahead.
This is Christophe Cuvillier. Good morning, and welcome to our Q3 2020 results presentation. So I'd like to begin with a couple of words to summarize the past 3 months. The COVID-19 pandemic continues to significantly impact URW's business, and once the recovery accelerated through September, the environment has worsened again as evidenced by the recent lockdown measures in France last week and in the U.K., this weekend. As a result, our environment and outlook continues to be uncertain, but we continue to make progress, as we'll show you with one of our results. For instance, rent collection is making good progress, and we're executing on our disposals with the signing of an agreement for the sale of the SHiFT office building for EUR 620 million. With that, I'll start with the financial results at the group level. The adjusted recurring earnings per share for the 9 months ending September 2020 reached EUR 6.57 versus EUR 9.43 for the same period last year, a decrease of 30% or EUR 2.86, primarily due to the impact of COVID-19, more on this later. The like-for-like NRI for the group is at minus 15.3%, of which minus 12.3% for the Shopping Centre division, with minus 8% in Continental Europe, minus 1.3% for the Others division and minus 88.7% for our Convention & Exhibition business, as you know, severely hit by the pandemic with the cancellation of all events initially in March and then new restrictions again, banning all exhibitions and events from October 6. EPRA Net Reinstatement Value stands at EUR 180.90, a decrease of 21% versus the end of 2019. Now on to an update on how the COVID-19 pandemic continues to impact our business despite some encouraging trends we are seeing. Challenges certainly remain, but a recovery was underway and even accelerating through September. Footfall showed encouraging recovery, demonstrating the resilience and the appeal of URW's portfolio in its flagship locations. In Europe, all centers had been opened since June 15, and in the U.S., all centers have reopened again from October 8, the Los Angeles and closed operations being the last ones to be authorized to reopen. Footfall in Europe in August and September was around 75% of 2019 levels, but has since then moderated with new second-wave restrictions. Tenant negotiation. This is very important. They're well on track with 72% now agreed, up from 25% at the end of July, with outcomes in line with our expectations. We're now in a position to give some guidance to the market on this, we expect total COVID-19 rent relief for the period the centers were closed in H1 to be in the range of EUR 250 million to EUR 290 million. On top of that, we're making solid progress with rent collection, which improved month after month with 52% of Q2 rent collected versus 38% reported as of July 24, and 79% of Q3 rent collected, of which 91% in Continental Europe. But the collection rate in the U.S. lag should not be a surprise as most centers were closed there for longer. However, the COVID-19 situation, is deteriorating quickly in both Europe and the U.S. as at end September 30, 96% of the group's shopping centers had reopened. As I said, only LA centers had not reopened. But as at October 31, because of the new restrictions, 65% of the group's shopping centers by value or 75% by GLA only was fully opened. Okay, then by difference, of course, the others were closed or partially closed. As you can see on the right of this slide, many countries are reimplementing restrictions with a second national lockdown in France introduced just last week, and a month-long national lockdown in the U.K., announced on Saturday. This second wave could, of course, dampen consumer spending and retailer prospects again across Europe and the U.S. for the next X months, hopefully, as little as possible. Many of the group's retailers are, of course, affected by these restrictions. They are changing on a daily basis basically with all European countries now reimposing restrictive measures, and you have the detail here of restrictive measures or lockdowns. As a result, many of the group's retailers have had, and will have to close again. And we recently had to close nonessential shops in our centers in the Czech Republic, in Catalonia, in Slovakia, in France and now the U.K. In other countries, you're talking about more limitations in terms of number of visitors per square meters, which we can handle. In terms of sales performance, we've seen a gradual recovery, as you can see on this slide. Tenant sales in Continental Europe were minus 26% in June, minus 16% in July, minus 12% in August, minus 15% in September, showing a more rapid recovery than footfall as most remaining restrictions have been lifted and higher conversion rates in average baskets were recorded. The U.K. figures are progressing, but from a lower base as centers reopened later and London, as you know, reopened slower compared to other European capital cities and work from home is more general there than elsewhere. Overall, these upward sloping trends are encouraging and showing that people want to be together when they have the right to. But as we discussed on the previous slides, restrictions across Europe are changing again on a daily basis. As you know, the situation in the U.S. has been uneven, and you can see that on this slide, with states only gradually lifting restrictions; with New York State, New York City, in particular, and California, especially Los Angeles, being the last ones to ease restrictions in September and October. Although all U.S. centers have now reopened, around 10% of stores remain closed, which is impacting tenant sales. As of September, tenant sales were 76% of 2019 levels or 83% on the pro rata basis, only including sales from stores that were trading. So minus 17% compared to the same month last year, which I think is comparable to the minus 15% in Continental Europe. So in itself, pretty encouraging. Tenant negotiations, which, as you know, only started after the reopening of the centers. So we knew how long the centers have been closed and what we had to negotiate. They're making solid progress. So as at October 27, they were 72% complete, up from the 25% reported as at July 24 when we published our half year figures. We've also reached, and I think this is really important, agreements with 9 of our top 10 international retailers. As previously indicated, there's no one-size-fits-all approach, and negotiations are done on a case-by-case basis based on a fair sharing of the burden. Negotiation outcomes are broadly kind of in line with our expectations. Total rent relief expected, as I said, to be between EUR 250 million and EUR 290 million. In terms of the impact in 2020 on the P&L, as at September 30, the cash impact was EUR 54 million, and the P&L impact was EUR 32 million. And we anticipate that the impact in Q4 will be significantly higher due to the legal finalization of our negotiations. You know that the impact is only registered when the negotiations are signed. Similarly to rent negotiation, the rent collection continues to progress. Q2 collection now stands at 52% for the group, up from 38% as at July 24. Only 12%, as I was mentioning before, rent relief has been registered at this stage with a further 27% to be legally concluded or still under negotiation. The Q3 collection rates stand at 79%, with 91% in Continental Europe. Collection is partly driven, of course, by the tenant negotiations as some tenants wait for the outcome of the negotiations to release rent payments. However, potential rent relief is always linked to payments in full of the remaining outstanding amounts agreed upon. In certain cases, where no agreement has been reached, the group has drawn on security deposits or initiated legal action to enforce these agreements. Let me quickly now hand over to Jaap, who'll walk you through the details of the COVID-19 impact on our adjusted recurring earnings per share for the period.
Thanks, Christophe. We prepared a bridge to kind of show the details of the evolution of the AREPS for the 9 months ending in September compared to the same period last year. A couple of big steps. Impacted disposals that were made in 2019 was EUR 0.35. The impact of expensing internal letting fees was EUR 0.32. And the COVID impact accounted for EUR 2.42, of which the key elements are the P&L impact of the rent relief that has been granted, and that's been charged to the income statement, which accounts for EUR 0.23, an impact of doubtful debtors provisions that we've made of EUR 0.88. Lower sales based rents, commercial partnership and media income impact EUR 0.43, and less services income of EUR 0.35. The obviously 90% decline of the Convention & Exhibition revenues has impacted us by EUR 0.36. And lastly, higher financial expenses as we increased liquidity during the half and drew on bank lines, EUR 0.17.With that, Christophe, back to you.
Thanks, Jaap. Now I'd like to give brief focus on some -- on the more usual operating highlights, obviously affected this -- for these 9 months by the COVID-19. Our focus is now dealing with the negotiation of rent relief, and the leasing activity is, of course, still at a low level. 1,042 new leases have been signed, down 41% versus the 9 months of 2019, of which, out of these 1,042, 560 renewals and 482 relettings. Despite a tough environment, we had a number of significant successes. You can see here, double-digit MGR uplift in France, plus 16.2%; and in Spain, plus 30.3%; good figures also in Central Europe, plus 8.5%; and in the U.K., plus 5.6%. Overall, plus 3.4% in Europe despite strong dullness in the Netherlands and in Germany this period. The U.S. market is unsurprisingly more difficult with MGR downlift of minus 18.4%. While the [indiscernible] leasing deals to renewal, which typically have a lower uplift than relettings have influenced the total, it's I think pleasing to see that the relettings themselves saw plus 9.6% average uplifts in Europe. Our exposure to bankruptcies now, varies by region. This is monitored as you can imagine on a day-by-day basis. Group wide, 69% of the affected units are still trading or have been replaced, 69%. The potential total impact of bankruptcies on an annualized basis amounts to 3.8% of the group's NRI, but, of course, several tenants will emerge out of bankruptcy or will be replaced along the way. COVID had an adverse impact on vacancy, reaching 7.7% for the group versus 6.8% at H1 2020, of which 4.7% in Continental Europe versus 3.9% as at June 30. So you see vacancy still increasing. This uptick in vacancy is due, of course, to new bankruptcies in Q3 linked to or accelerated by COVID and to some delays in the relettings. This will have to be closely monitored and dealt with in the coming weeks and months in parallel with the risk of further bankruptcies or CVAs. Despite this context, we opened a significant number of new stores across our portfolio, demonstrating the appeal of such portfolio. In Q3, this represents close to 170,000 square meters of openings, including a new Uniqlo flagship at Westfield Mall of Scandinavia; a new Versace store joining the luxury precinct at Westfield Topanga in California; LUSH at CentrO; a new LEGO store at Westfield Montgomery; and Polestar, electric car manufacturer with a store at Westfield Mall of the Netherlands and one that just opened at Westfield London; and a spectacular store, the one you can see on the top right of the picture, which is this Sir Norman Foster designed flagship Apple store, which just opened Friday, not last week but the week before at Westfield Valley Fair, and which was inaugurated by Tim Cook himself, which is absolutely fantastic. Events are also back -- or were back, I should say, of course, socially distant brand events, underpinning the long-term attractiveness of our assets, such as the SoulCycle's open air activation at Westfield Century City; family-friendly drive-in movies at Westfield Mission Valley and a lot of U.S. malls; an inverted Red Cross store for used clothes at Westfield Forum des Halles, and this is circulating throughout of French portfolio; or a live concert in Wroclavia. But of course, the events will have to be halted in November because of the lockdowns and where there are lockdowns. Now on to pipeline. During this quarter, we continued the in-depth analysis of our pipeline and removed a further EUR 1 billion of projects to reach EUR 2.6 billion removed in total since the beginning of 2020. After taking into account the EUR 2.3 billion invested to date, the overall pipeline to be funded is now EUR 3.1 billion, of which EUR 900 million expected to be spent by year-end 2021, so that at the end of 2021, EUR 2.2 billion will be left to remain to be spent, of which only 36% committed. Jaap, why don't you handle now the financing, balance sheet and valuation part, please.
Of course. With respect to the debt maturity profile, we have generally a long-term debt maturity profile that's well spread over the next 24 -- sorry, that's well spread generally. But if you think about more short-term nature, which is clearly one of the key elements of looking at the RESET plan. Over the next 24 months, we have EUR 6.7 billion of outstanding debt as well as almost EUR 6 billion of revolving credit facilities that will need to be either refinanced or renewed. And this illustrates why the unrestricted access to the credit markets is so important. Talking about credit and credit ratios. With respect to leverage, as of September 30, the LTV came to 42.5%, which is obviously above the upper band of our target of 30% to 40%. I'll get to the valuation in a second. But part of the explanation of the change since December '19 is that the gross market value of the entire portfolio has come down by about 7.8% on a like-for-like basis. Pro forma for the receipt of the proceeds from the SHiFT office disposal, our LTV stands at 41.9%. As Christophe noted, the group NOI during the period was down by 17%, which resulted in an interest coverage ratio of 4x calculated on a trailing 9-month basis. Net debt-to-EBITDA -- EBITDA stands at 11.7x, reflecting the impact of COVID-19 so far. You will recall the RESET target pro forma for the execution of the plan is to bring it down to the low 9x by year-end 2021. With respect to the shopping center valuations evolution, they clearly have been impacted by COVID-19. Just as a quick reminder, we do not set our own values. These values are determined based on long-term DCFs prepared by the appraisers, where they make assumptions about the estimated rental values, reletting spreads and vacancy or occupancy increase, and they apply exit cap rates based on observable evidence. Clearly, that's scarce right now. However, risk is also reflected in the discount rates. And as you can see at the bottom of that particular slide, the discount rates have increased by about 30 basis points since the -- since the end of 2018. Like-for-like valuation decreased by 7.8% from December 2019, of which 5.2% in the first half, and it was driven to a large extent by the drop in valuation in the U.K. where exit cap rates, discount cap rates have increased more significantly. The U.K. exit cap rates have increased by 80 basis points, and the discount rates have increased by almost 100 basis points since December. So overall, the like-for-like valuation since December '18 is down by almost 10%. While some decline had already started before the current crisis, this decline clearly is driven mainly by COVID-19, reflecting the impact on cash flows and appraiser's underlying assumption. You know that I'm always somewhat reluctant to comment on where values are going to go up, but I don't think anybody should have any illusions that the values would go up. I think the trend is likely to continue as we continue to deal with COVID-19, and the cash flows that are obviously impacted by the dynamic. With respect to deleveraging, and we've said this before, our clear priority is to reduce the leverage of the group, and we're hard at work to be able to do so. Obviously, the announcement of the transaction on SHiFT is a -- should be seen as evidence that the teams are hard at work in terms of delivering on that EUR 4 billion disposal plan. RESET will allow us to strengthen the balance sheet, enable us to execute on the long-term strategy and is really most importantly geared towards preserving the investment-grade credit rating. The cost of debt we can live with relative to cost of equity, but the key element remains access. And so the plan, which we think is a credible plan, is the combination of the measures we've laid out, is really to design to ensure that continued exit of the debt market with an objective of an LTV between 30% and 40% at the low end, obviously, is the target and net debt-to-EBITDA below 9x, all of which we expect to be accomplished by the end of 2021. With respect to the outlook and the dividends. I really would like to put a health warning here, because it's important to keep in mind that the outlook is based on the current information and today's economic and health context, and it's likely to be impacted by lockdowns, additional bankruptcies and how consumer confidence is impacted. We have looked at the situation based on the plan that we had in place, finished by October 15. The outlook for 2020 on the left-hand side, you see the usual inputs, indexation, leasing activity, rental uplift, vacancy and collection rates, doubtful debtors, and tenant negotiations. Based on our results through September 30 at this year, the rent relief negotiations with respect to the closings in H1, which we expect to sign in Q4, the vacancy for year 2020 and ending up December, the results of the C&E business effectively closed for almost an entire year as a result of the restrictions that were put in place on limiting crowd sizes, and then the full year effect of the incremental liquidity that we raised in response to the pandemic. Now since the preparation of this forecast, the authorities in Europe have imposed new lockdowns and other restrictions to combat the spread of the pandemic. And this may require us to grant additional rent relief to support tenants as we get for the period of closures during the first half. A preliminary analysis shows that this could amount in cash up to approximately EUR 40 million. As a result, the like-for-like NRI is expected to be down by between 25% to 30% in 2020 compared to '19 on a cash basis, which excludes the impact of the straight-lining that is required by IFRS for rent relief that qualifies as a lease modification. And it's -- for the year '20, we expect on IFRS basis, to be down by between 18% to 23%. For '21, we currently expect like-for-like retail NRI to be broadly flat versus that what we expected for 2020. But on a cash basis, however, meaning not considering the straight-lining impact of the rent relief we granted in '20, the 2021 like-for-like retail NRI will grow between 10% and 20% versus that expected for 2020. So if you extrapolate as we compare 2019, based on what we just said, the NRI for 2021, like-for-like retail NRI would come to both on an IFRS and a cash basis, somewhere between 80% and 90% of the approximately EUR 2 billion that we recorded for 2019. Again, a note of caution here, uncertainty is high, and we only know what we know today. If the situation changes or lockdown lasts for longer than what's been publicly announced, these numbers would likely change. Equally, if, as this morning, the French economy ministry has said, stores could reopen after 10 days, if the direction of travel with respect to new cases is better, it could be better. So there's again a fair number of uncertainty. With respect to 2020 AREPS and our dividend policy, the AREPS outlook based on a weighted average number of shares outstanding for 2020, meaning before the impact of the issuance of new shares as a result of the proposed EUR 3.5 billion capital increase. The key assumptions and the development of NRI that I just referenced, as of October 15, would have led to a range of between EUR 7.50 and EUR 7.80 for the 2020 AREPS. The cash impact of the COVID-19 closings in H1 on the outlook is expected to be about EUR 1.25 per share. However, because of the potential impact of new lockdowns, we've reduced that range of EUR 7.50 to EUR 7.80 to something between EUR 7.20 and EUR 7.80 per share. On the dividend, as we have referenced in the RESET plan, we target EUR 1 billion of dividend cash savings over the next 2 years relative to the EUR 750 million in cash that was paid for 2019. Any decision of the dividend will obviously have to be based on operations, results and outlook as well as keeping an eye on the REIT distribution requirements. If necessary, a scrip option will be offered to achieve the EUR 500 million of annual cash dividend savings. With respect to timing, we expect because of valuation movements that the payment of any dividend for 2020 would happen only after the AGM approves it in May of 2021. That concludes my part of the presentation, and let's open up for Q&A.
[Operator Instructions] First question from Stuart McLean from Macquarie.
A couple of questions from myself. My first one is just on the EUR 250 million to EUR 290 million of rent relief forecast for this year. Can you just confirm that is purely for P&L and only includes the rent relief and doubtful debtors, is that the case? And secondly, does it include the additional EUR 40 million impact of the recent increase in restrictions?
So the EUR 250 million to EUR 290 million is rent relief, that does not include doubtful debtors. Of course, in some cases, it will reduce doubtful debtors because we have increased the doubtful debtors of some accounts, obviously, waiting for the satisfactory conclusion of negotiations. So EUR 250 million to EUR 290 million is about rent relief of the first wave, i.e., that includes the months from March to September in some U.S. centers. So that's the first wave overall. And of course, what we've said is that we have provisioned another EUR 40 million or planned another EUR 40 million in case there would be further negotiations needed for the second wave of November and the November closures, okay? So this is the EUR 40 million, which justified, if you [divide] that by 138 million shares, the EUR 0.30 of widening of the guidance, which is obviously prudent in going forward with the total unknown situation of how long will the lockdowns last, will there be further lockdowns, et cetera. So this is as far as we -- I mean as much as our knowledge enables to factor in.
Okay. So the rent relief to date is EUR 0.23, which is equivalent of EUR 32 million. So EUR 32 million is going to increase to between EUR 250 million to EUR 290 million. Is that the correct way to think about it?
So not really. I mean, I know it's difficult, and trust me, it's difficult for the teams as well. You have -- the rule is the following: if the rent relief is considered by IFRS 16 to be a lease modification, for instance, because it's considered a major modification of the lease. Don't ask me why but that's what it is. Or if there's an extension of the firm period and so on, it has to be straight-lined over the firm period of the lease. So you might grant 10 of relief but if the rent still has 2 years, you will need to straight-line those 10 in the next 2 years. And if you do it, upon signature of the deal, because it can only be registered when the deal is signed, then you might have only 2 months in 2020, 12 in 2021 and 10 in 2022. This is a straight-lining effect. So the EUR 0.30-odd-cents that you mentioned is only the P&L impact to date of this IFRS based rent relief, i.e., the part which is either not straight-lined because there is no consideration of lease modification or the x months or days of straight-lining according to the IFRS rules. It's very difficult to follow, I understand. So EUR 250 million to EUR 290 million, consider it as the maximum cash impact, which impacts on the P&L will be straight-lined between 2020, '21, '22 and sometimes even '23. Hence, the difference in what Jaap showed in the guidance in terms of NRI cash or NRI IFRS. This is precisely the straight lining. So the answer to your question is not really. I don't know if I was as clear as I could be. I mean I know I was as clear as I could be, and I hope I was clear all together.
No. That makes sense. So it's over a number of years. That's not the impact to FY '20. I understand that. On a similar topic, accounts receivables are now down to a delta of EUR 348 million versus Dec '19. Where do you think this will land when we get to December '20?
We've taken provisions. I think, if I recall correctly, is about somewhere and the team correct me, I think, somewhere around EUR 173 million so far.
Yes. So do you think the remaining EUR 170 million is going to cash flow statement this year, or…
Sometimes it depends a little bit. I know where you guys want to be. Sorry, I have an echo on the line, I'm not sure what's going. The difficulty is we make the estimates with respect to provisions, really based on the tenants, what we believe the tenant health will be in the likelihood of collection. So if that improves, and the teams do a better job and tenant is around to pay, that amount of this provision may be reversed. So it's really hard. I don't know yet. I think what we have given you in terms of the outcome, for the AREPS of the year would reflect the best estimate of what we expect to get paid for this year.
Okay. And one last question. Just in the prior release, you talked about URW is working on reviewing strategic options in the U.S., what can we expect here? And then secondly, on the strategic side of things, if the equity raise is not approved, what's the strategic plan for URW going forward?
I'm sorry, the phone is not very good. I'm not sure I understand. You're talking about strategic options for the U.S., right? Is that correct?
Yes. That's what Stuart asked.
The line is very bad here in Paris, I'm sorry about that. We are -- the U.S. is, of course, something which is very important to us in terms of how we can improve the situation. We announced -- on the day of the announcement of the Westfield transaction, we announced that we would not be long-term holders of the regional assets to start with. And we've confirmed that in our RESET plan, we will not be keeping the regional assets, and we actually have sold a couple since the Westfield acquisition. You know also that the market, in terms of investment for retail real estate properties in the U.S. is significantly down. So we consider, and I think our opponents or the consortium of activists recognizes also that their plan would take 2 to 3 years. So I think what is important to say is that we are constantly reviewing all our options. And obviously, that also concerns the United States. And we will be studying in the coming weeks, months, years, as we always do, on a significant number of times per year, what the best outcome is for the United States and for the benefit of all shareholders, what we estimate together with the RESET plan. So the regional disposals or spin-off, whatever, is part of the RESET plan, the only difference is that we don't bet everything on that. And we have not factored in any net disposal proceeds from that part of the portfolio in the EUR 9.3 billion of the RESET plan. That does not mean, if we have an opportunity, we will not do it. This is part of our strategy. It's just that we're not betting on it. In the next 18 months, I think it would be foolish to do so. The second element is that what we are doing is for the benefit of all shareholders there again. And if there is a market, and if we feel that the strategy is -- to divest the U.S. or whatever, then we would do so. But as you can imagine, there are a lot of ifs, and it has to be the right decision in terms of strategy. And in this case -- and this is what we said during several roadshows, in this case, if we have executed the RESET plan as anticipated, and if the market enables this strategic initiative, then why not return the money to shareholders like we've done when we had some massive disposals like in 2010, for example, okay? But it's an option, which leads to the, of course, validation -- if validation is the best option, but we don't get everything on it, as I think you have clearly understood.
Next question from Bart Gysens from Morgan Stanley.
You've said you've now renewed a large lease with tenants and also with key tenants, and that's been in line with expectations. You've been [indiscernible] in disclosing the million -- the impact in euro millions. But can you give us a bit more color, what have you actually agreed to? Have you gone turnover linked to some of the [indiscernible] have you reset the rental level for coming years to a lower level? Could you give us a bit of color there? That's my first question, and then I have a second one as well, please.
Thanks, Bart, for asking your first question. And then the second one, not the 2 or 3 together because then at the end we are lost, as you know. So thanks. So as far as rent renegotiations are concerned, as we've already said, this is about rent relief linked to COVID. This is not about long-term renegotiations of leases, okay? That's the first thing. You know that our -- the average lease duration is around 6 to 7 years. That means that around 15% of leases get renegotiated on average every year. It's only when the negotiation -- sorry, the leases come to expiry and up for renewal that we renegotiate these leases. So it's about temporary rent relief, and it's not about changing the structure of the lease, like some of our competitors might consider, but we do not consider that. It's a question of negotiating power. And as proven by the percentage already achieved, it's proving to be pretty effective, and retailers understand that we're dealing with the current situation when we have to deal with the long-term situation. Obviously, we'll deal with it, and it will depend, obviously, on the market conditions when these leases come up for renegotiations, not before when they come up for renegotiations. In exchange -- so I mean, to make your life easier, the EUR 250 million to EUR 290 million rent relief, if you divide it by the NRI, it's more or less between 1.4 and 1.7 months of rent relief. The principle of the negotiations, which I think we've been pretty clear about, is that it's a question of sharing the burden and reaching a fair agreement. There is no one-size-fits-all since all retailers have had different lengths of closures, depending on the countries, depending on their presence in each country, since all shopping centers did not close on the same date and did not reopen on the same date, and especially so between the U.S. and Europe. So it's really a case-by-case basis based on the number of days each store was closed and based on a fair sharing of the burden, leading to this 1.4, 1.7, which is the outcome that we anticipate, okay? I don't know if that makes sense, but this is what is happening. You might -- and I'll be complete, in exceptional cases, we might agree for -- and for example, in shopping centers that would remain closed or which is severely affected or for a tenant, which we prefer to keep in place even if temporarily, we might accept a -- not exception, but this is definitely, trust me, Bart, the exception, not the rule.
Great. And then my other question, I guess it's a trickier one. But you now started disclosing the credit line maturity profile. So of your EUR 12.5 billion of liquidity, 3/4 of that are credit lines. And actually, EUR 6 billion of that is expiring or is maturing over the next 24 months. So that's quite short profile in your credit lines. We've also got a lot more restrictions coming in in Europe. With regard to your RESET plan, do you still think that EUR 3.5 billion is the appropriate number for equity, I mean?
Jaap, do you want to take that one because I've also got Fabrice on the credit lines here in Paris with me, so it's up to you, Jaap.
Why don't you have Fabrice -- why don't you talk a little bit out the credit lines, but I think just -- if I can just say, Bart, that we have measured, obviously, the EUR 3.5 billion equity in the context of the RESET plan, if we -- again, this is dilutive. It's painful. We acknowledge that. But I think the other thing is that we have a number of other tools in the toolkit with respect to the RESET plan. So I think at this point, very much the view is that the EUR 3.5 billion is the right number. Fabrice, do you want to talk about the credit lines?
No. We -- here, we have given you the details, obviously, but it's -- as you know, it's a moving matter because those lines have a given maturity. Usually, it's shorter than what you can get on the bond market. And effectively, the question now is to ensure that we can renew and bring those lines so that we can extend the maturity. As you see, we have some maturities, significant ones next year, on which we are already working. And it's true that reinforcing the balance sheet will obviously help us in the extension of these credit facilities that will mature next year and the year after.
The next question from Sander Bunck from Barclays.
This is Sander from Barclays. A couple of questions from me as well. And as preferred, other than that, one by one. First of all, can you confirm that the vacancy rate that you report, that is a spot rate so the 7.7% is a spot vacancy as of September 30?
Yes, it is.
Okay. And can you say anything on the types of bankruptcies that are coming through? Is this -- can you give a bit more color on the types of tenants that are currently struggling, and like the locations in the centers? Is it more second or third floors or any more granularity that you can provide?
It's all over the place. I mean it's -- obviously, there are significant bankruptcies in the fashion sector, as you would imagine. But all bankruptcies do not lead to closures, bankruptcies in general, are meant to be then emerging from bankruptcy. And I think I mentioned at the half year result, the example of these 3 major fashion retailers in France that went bankrupt over the last x months and which now are emerging out of bankruptcy. They all together closed 45% of their stores. And within our own portfolio, they closed 0. So this is a good example of a bankruptcy affecting a national retail or 3 national retails for that matter and not affecting us. There are other bankruptcies, of course, that do not end as well because they end in liquidation, in which case, obviously, we are faced with an empty store that we need to relet. As I mentioned, we have a significant number of stores that are still trading or that have been replaced, and therefore, we don't have the full impact of the bankruptcies. I think this is linked to the quality of our assets, and this is linked also to the quality of the negotiations of our teams. I'd like here, if you allow me, maybe it's not -- but I can't help thanking the teams and congratulating them for the unbelievable work they have been performing since March. You had no idea how much pressure they have, I mean, in the negotiations they're dealing with. And so won't be it for the leasing team, the operating teams and of course, the teams on the field. So sorry for saying that. I hope you will forgive me, but the teams are unbelievable, and I really would like to -- them to hear what I'm just saying now because it's really well deserved. So we are working very hard to combat these bankruptcies. But of course, if the retailer goes bust, it goes bust. And it's all over the place in our shopping centers. Sometimes it's anchors. Sometimes it's small stores, which are easier to relocate. Sometimes it's extremely well-located stores that we can relet or have relet, and sometimes it's more difficult. There is no rule. I think the advantage that we have at URW is that our shopping centers are of utmost quality. And for the anecdotes, in one of the bankruptcies, I was mentioning in France, I would have loved to get back 2 or 3 stores. But they wanted to keep them because they're as productive as high street stores, and unfortunately, our rents are not always as high as the best high street. So they want to keep these stores because they make a lot of sense for them. So we would like to get some back, but we don't always -- and sometimes, we would like not to get them back, but we have no choice because the retailer goes out of business, okay? So all over the place. All over the place but dealing with them one by one.
Okay. That is understood. And you mentioned like one tenant reemerged from bankruptcies, you're expecting to maybe come back into the centers. And is your current base assumption that they would pay, once they reemerge from bankruptcy, the same rent as they had done previously?
There again, it depends. Our goal here is to evaluate the potential of these tenants because usually, when they go into bankruptcy, there are 2 reasons: either their financial structure is too stressed, but they are viable operations and can come back; or their financial situation is stressed -- obviously, otherwise, they wouldn't be bankrupt -- but their operations are not up to the standards, and they are generating themselves, by lack of focus, by lack of creativity, collection, store concepts or whatever you want, they're all responsible for their own counter performance. So our job is to evaluate whether or not they're an interesting addition to the shopping center. If the answer is yes, and they need help, then I think we should give help, and this is what we do, temporary help, okay? Or sometimes permanent help. There, again, no one-size-fits-all. If it does not make sense, or if we feel that because the tenant is out of date, and we were already considering evicting the tenants, so sometimes a question of letting them go and taking the time; sometimes a bit more time during COVID obviously than in normal periods, but taking the time to relet the unit to a future-proof category as we name them, i.e., sports, health, wellness, beauty, whatever, which have got probably a brighter future than an average middle range ex-retailer in fashion, for instance, that does not change the world and is not up to the taste of today's millennials, for example.
Okay. That is understood. And then just a follow-up question on the values because, obviously, in the third quarter, property values were written down by 2.7%. Can you give a rough breakdown, like, how much of that was due to COVID? And how much of that was just due to kind of normal market circumstances?
So I'm happy to have that discussion. We're still pulling some of those materials together. I think the key element is there was clearly a COVID impact. The difficulty is that over time, that the COVID impact [indiscernible] the trends start kind of mixing to the point where it's really difficult to extrapolate purely what COVID related and what is more a more normal trends. I think COVID [ relations -- ] I think part of what you're seeing is the discount rates have gone up. We've seen some ERV reductions. But again, is the ERV reduction a result of COVID? Or is it a trend that was already existing? So it's very hard to sometimes separate those -- the impact there. So I don't have those exact numbers because there is no exactitude, although I've asked the team to look at it to give us a better -- to see what they can extrapolate from the data. But right now, it's still -- it's still a work in progress because we haven't detailed line by line.
That's understood. And in terms of like one specific geography like the U.S. I mean, what is it for the values that they need to see to change their view on that 3.7% initial yield? Because obviously, MGR uplifts are there minus 20%. But if you look at like the valuation moves there, they're like pretty modest compared to the rest of the portfolio in the last quarter. So what is it for them that they need to see in order to take like a different stance on that portfolio valuation?
I think some of the -- the key point is that the net initial yields and outcome, right, of the process. They take a longer-term [ 10-year DCF ] value. They look at the vacancy today, they make assumptions with respect to the reletting of the vacant space and they make assumptions as to what the occupancy will be at the end of the [ 10-year DCF ] to which they will then apply an exit cap rate. That's why we are saying the exit cap rates are better indications of value. Right? So they do the -- they multiply the rents that they expect to be in place at the end of the [ 10-year DCF ]. And then they apply an exit cap rate to it, to which they apply a discount rate. The resulting value of the assets is at that point, divided by the rent in place for the next 12 months? And if you have a higher vacancy, as we see in the U.S., by definition, that the rent in place divided by the value of rents at the end of the DCF, which is more -- shows more occupancy will be a lower net mature yield. So the net mature yield is really an output of the DCF. It is not an input. Historically, we have typically seen the private -- appraisers work, adjust values more rapidly than the equity market does. So again, that's why I'm saying that we believe the trend will continue to be down. What will have the biggest impact is if you're going to start seeing trades in assets and looking at the -- the net -- net initial yield of disposals to which they then can extrapolate to an exit cap rate. So once there is more transactional evidence, you may see start -- you will likely see more valuation movements. Is that -- is that clear?
Okay. So yes, I'm just -- no, that is clear to some extent. I'm just trying to understand because is it then true that on a stabilized basis, they expect in terms of the exit cap rate, they expect the yield on the U.S. to be 5%, 4.8%, approximately, so nearly 5%. So is their assumption in that case that…
Yes.
Okay. So that means that from today onwards, they believe that when -- from the U.S. portfolio can effectively move up to 30%?
That's their assumption. But then don't forget -- we have a vacancy of about 10%, 11%. All right? So if you make assumptions about occupancy, by definition, if that comes back, you're going to see a growth -- you're going to see absolute growth in the rents. That is much higher than just the like-for-like rental growth, if you will, of stores in place.
Sure. But I mean, so occupancy, if you take 10% occupancy into account, you get to a stabilized yield of a bit over 4%, that still means that rents are expected to grow by 20% while you're currently signing MGR uplift 20% below. So that's a 40% delta. And so I'm just trying to understand how they get to the different -- how they get to the different conclusion?
Well, keep in mind, right, the rents we're signing are not going to be rents that we're going to be signing for the next 10 years, right? In order to stabilize occupancy where we can, we will make shorter-term deals 2, 3 years. And if you make an assumption as the appraisers do that after that period, you're going to revert to a more normalized environment, especially in the flagship assets. They're making an assumption on the -- on what rents will be over time. The discussions we have with the appraisers, really, we provide them with our views. They take their own. And -- and they set the value. So there is not much for us to negotiate with them, but we try to be consistent. We try to be realistic. But they [indiscernible] -- that's the benefit of independent appraisers. I can't tell you much more than that, Sander. We take the values. We receive the values, and that's about it. The moment I'm going to start putting an override, a management override on these values, the whole valuation exercise becomes kind of a superfluous because it's -- I can say, well, I think this one is worth a lot more, so we write that one up. That one is a lot less, so we'll write that one down. That's not how it works. These are independent appraisers. Every value is checked by our -- and challenged by our auditors to ensure that the values [are some in the day,] feel that they can sign off on when they sign off on the financial statements. And that's how -- that's effectively how it goes.
Okay. Okay. I mean -- sorry, just I know it's done a very difficult one, but just as a last, do you agree with the valuers. Because at the end of the day, I mean, at the end of the day, yes, someone is signing off on these accounts. But do you agree what the valuers -- because they obviously are very -- they could potentially have very different assumptions than you have, and you take that on board. So do you agree with that current calculations and the current estimates? Or are you somewhat more cautious than the valuers?
Tough [indiscernible] question.
It's fair to say same value is for everybody in Europe. So I think we are just like another one. And it's fair to say that in the U.S., we don't have a lot of appraisals for our competitors. So we have to not necessarily agree, but it's not our job to agree. Our job is to have external valuations done by professional valuators. I think.
Okay. Okay, that's understood then.
Next question from Rob Jones from Exane.
It's Rob Jones from Exane. Just a couple. Firstly, on Slide 10. As you said, Christophe, good progress in terms of tenant negotiations now 72% complete as at the end of last month. Can you remind us in terms of when you are planning on getting that to 100%? I can't remember if you said end of this financial year. And in relation to that, if there is a -- do you think effectively the national lockdowns that we're seeing in some European countries at the moment will slow the progress in terms of those tenant negotiations?
Excellent question, Rob. We might not reach 100%. We went from 25% at mid-July to 72% as at last week. We might not reach 100% because some people don't want to negotiate, and we will be litigating, okay? And you know we started some litigation with some retailers on both sides of the Atlantic. So I can't anticipate 100%, but I can anticipate that the 72% will rise, obviously, because we still have lots of negotiations ongoing. And close to being concluded. And then between the conclusion of the negotiations, i.e., the handshake, albeit through a screen, obviously, because the lockdowns and the signing of ex-contracts or ex-rent abatements for the ex-retail stores of these retailers. It can take some time, hence, the registration of our accounts, which takes time. And I think the answer to the first set of questions that we made. Obviously, the new lockdown might lead to further negotiations, hence, the EUR 40 million that we've taken into consideration to increase the -- or to widen the range of the guidance from EUR 7.50 to EUR 7.80 to EUR 7.20 to EUR 7.80 a share. Obviously, we might be facing with new negotiations. The good thing here, I mean, the bad thing is that we have to start negotiating again. And trust me, as I mentioned, it's a huge work because you can imagine it's not just one [ lego ], that's one meeting that can solve the situation, it's several meetings. And if the retailer is big, it's several big meetings. And the second thing, the positive thing is that we know and they know what we have agreed upon for the first wave. So I anticipate that the second wave negotiations, if any, will probably be faster because if you agree on the principle, you can stick to your principles if you're a man or a woman of principles.
Okay. Fine. And then just second question, just kind of linking back to Stuart of Macquarie's question at the start of the Q&A session. The EUR 250 million to EUR 290 million rent relief. Just so I understand it, is that in relation to H1? Or is that for the full year?
That's in relation with the first wave, which is more than H1. Because, as I mentioned, in the U.S. in July, August, September, beginning of October, we still had many stores closed, including California. So that's for the first wave, up until, say, the 15th of October, when we started thinking, and it's -- the reason why we've been slightly delaying our publication is that they are much more extensive than the usual Q3 publication. I know there was an anxiety about why we're pushing it back by 3, 4 days and why we're publishing on a Sunday. It's just because we need to publish x days ahead of the AGM, as you can imagine, but we needed y days of work and y is largely superior to x. So for those -- and I do apologize for publishing late last night, but it's due to the unbelievable extra work in the middle of everything else that we had to before. So I hope you will all there again, understand and help forgive us. So it's the first wave altogether up until this week. This week, we're entering a new on loan territory. Unless you know how long you'll be locked down in London, but I don't how long I've been on down here in Paris. And I -- so it's -- we're back in a situation where we have to anticipate that there will be further negotiations, obviously, okay? And hence, the EUR 40 million provision on top of, okay?
Understood. And then just my final question, it goes back to Sander's valid point around the U.S. portfolio valuation. I appreciate this isn't obviously within your control, given it's obviously independently valued. But optically, when you look at the numbers that he points out, which is MGR at close to minus 20% and implied rent reletting over the medium-term of up 30%, of which 10% of that could be argued to be vacancy reduction. That's obviously a very big delta. I appreciate that at the moment, it's all about managing the portfolio vacancy rates in the U.S., and that might mean taking down on the rents to ensure kind of maintenance of that circa 90% occupancy level. But do we really believe that on a 5, 10-year view that rents can grow given that online retail penetration in the U.S. is most likely to continue to rise. And you obviously talked about like a lack of transactional evidence that the values can kind of hang their hats on. But obviously, Simon bid for Taubman, I appreciate that didn't go -- or hasn't gone through so far, but -- but the implied yield on that was greater than a 6. And obviously, even your exit cap rate is less than 5. So I'm not sure there's necessarily an answer to the question really, but just some thoughts maybe around longer-term rental growth prospects in light of expected continued rise in retail penetration online?
Yes, if you allow me, just one thing. I think the difficulty we face here is a very short-term situation, which is in the middle of a crisis when you're dealing with emergency situations. For a duration, which is totally unknown today, but definitely not hopefully infinite, hopefully. And a long-term view, as you mentioned, 5, 10-year this year. And in the essence, it's 10-year this year. Based on what has been observed in recent or past situations in the U.S. betting, I guess, and if the appraisers work on a recovery at one stage. Even the activist consortium is betting on a recovery of the U.S. So it's not just the appraisers. And last but not least, I think it's also a question of the quality of the portfolio. When we talk about store openings, I think it's a good sign to not say that everything is fine. Far from that, everything is very challenging, and we are, there again, entering unknown territory, which, by the way, justifies the RESET plan because we said we wanted to reduce uncertainty, and we're definitely in a very uncertain period. But think about the quality of our portfolio. We have 2 types of assets you know very well in the U.S. We have flagship assets, and we have regional malls. Regional malls consider them 3% of the GMV of the group, okay? And flagship malls, 22% roughly. So the flagship malls is what it's all about. And when you look at Century City, UTC, Topanga, Garden State Plaza, [ Viedmont ] they got potential, including for rental uplift going forward. This is what the appraisers think. This is what the appraisers think. So it's the same thing, and I -- your point on Internet penetration is a fair question. Undoubtedly, Internet penetration will continue to rise. But undoubted, and I'm ready to take whatever euro bet or pound sterling bet that the Internet penetration next year in April, if there is no lockdown, will be lower than this year in April. And I'm sure I'm going to win my bet. So it's very difficult to have seen studies by renown strategy consultants that base their long-term projections on April Internet penetration, I'm sorry, but I don't believe they're right. It's on long-term things. I believe that Internet penetration will be higher and we'll have gained 1, 2, 3, 4 years, we'll see at the end. But I don't think that you can base everything on a lockdown period or on negotiations, which are, of course, in the heat of the moment. So that's their view, Rob, you might agree or disagree. That's their view today or the long-term view over a short-term situation.
I'll give you another example. Rob, just a quick example, right? Alternative rent revenues, especially in California, Redwood Climate is -- obviously works in our favor. We have seen a number of tenants move outdoor, and we've granted them space to move their operations outdoor, terra space and others, if you want. And typically, that the value of a square meter of outdoor space is not very much, right? And so initially, the leasing teams said, okay, well, we can rent the stuff to these tenants who want to go their outdoor, and we'll charge them the usual rate. And Jean-Marie was, are you kidding? This is critical for them. So now we're letting them at 3x the value of a square meter of terra space today for tenants who can operate outside is much higher than the value inside. So you can generate incremental revenue through leasing periods or space that previously was not considered particularly valuable. Now that is not the entire portfolio. Clearly, but it's just an illustration of the fact that there are -- there's more money to be made than just accepting an inevitable decline. It's about agility, changing your mind about how you'll operate the space and what we can do to help. And obviously get compensated for it.
One last thing maybe if you allow me, is that I think a lot of observers, and I know it's not your case, Rob, but a lot of observers have got a static view of the situation, i.e., they consider the tenants in place. Consider that x will go bust and therefore, the vacancy and all they will be replaced by tenants in the same category, which is obviously challenged. But I think what is underestimated. And there again, I'm not saying the appraisers are right or wrong, whatever that's their view, and that's what we have to report. And as we have said, if we started putting our view, then there wouldn't be a standard appraisal, and we'd be in 2 other types of trouble. So I think what is underestimated is the capacity to relate to new retailers. In the U.S., for instance, there's a sector which is recovering extremely well, it's luxury. For a reason is that the luxury retailers in the U.S. do not depend on Chinese tourists, contrary to other places in the world where actually we don't have luxury retailers because, as you know, apart from Westfield London, we have no luxury in our shopping centers in Continental Europe. And luxury is doing well, and we're increasing the size of luxury. A very good example is Westfield Valley Fair. We have an extension there. We introduced a new Gucci store. Gucci was not in the center before. And they introduced a significant flagship. We have a huge flagship of Tiffany's, and I welcome the final acquisition of LVMH of Tiffany. We are discussing to expand retailers and so on. We opened Versace, we opened Jimmy Choo. So this is replacing, in the case of Westfield Valley Fair, it's been the extension for most of these retailers. So it's not replacing anyone. It's just increasing the appeal of the shopping center, and therefore, generating what we call marriage value, i.e., making the center more attractive, thanks to new tenants or new anchor tenants, bringing more people to the benefits of existing retailers. And in other cases, like in Topanga, for example, we are increasing the size of luxury at the expense of declining retailers. And if luxury does much more sales per square meter or per square foot in the U.S. than other retailers, then they have the capacity to generate rent, okay? So it's not easy. It's one by one. But it's not static. It's dynamic. And this is what makes the difference is the quality of your properties, because of course, for example, or an example that I use, luxury do not go everywhere, as you would imagine. And quality of the property, quality of the teams and negotiations. And in this respect, actually being on both sides of the Atlantic is certainly a plus.
Next question from Florent Laroche-Joubert from ODDO BHF.
Yes. So I would have 2 questions, if I may. One -- the first one is on a follow-up question on the credit side. So we understand that some of them will expire in the short term. And we can imagine that you have started discussion with your banking partners. So could you please tell us what your banking partners ask you as conditions to renew this credit plan? So for example, do they consider the expected capital raise as a prerequisite condition?
No. I think they, of course, take into consideration the latest developments. And again, this is why it's important to ensure that the recipient can be completed to improve our bargaining position. This being said, the discussions are facilitated by the fact that usually in those credit facilities, and it's a bit technical, but what is called a rating grade, meaning that the price differs depending on the rating of the company. And therefore, the potential in rating is obviously factored in. So in terms of cost, this is not really the question. Your question is more the exposure that the bank may want to have within the company, depending effectively on the rating. And hence, again, the importance to keep a strong rating to facilitate the discussion in terms of quantum of credit facility to be retained by the group.
Okay. And yes, and my second question actually is on the Reset plan. So because as sell-side analyst, we have been able to have lots of contacts with investors. And some of them can be surprised by the timing of the capital raise. And think that URW can have access to the debt market even with a BBB rating, for example. So based on your cursory results, could you please confirm why it is so critical to do this capital increase by the end of Q4?
Could I make one [ option ]? Sure. Sure. I think it's really important, right? And this is one of the things I find so much surprising. If you take a snapshot, right? And say, oh, can we access a BBB? Yes, there's access to a BBB -- for a BBB issuer. To note, though, we are not a telecom company. We're not a utility, which typically benefits from some kind of implicit, at least implicit safe support perceived by the market. If you go to the regular companies other than a Volkswagen, which we are not size-wise, we are we -- the debts -- the bonds that URW has outstanding is about EUR 9 billion more than the next largest BBB issuer. And so what you need to think about is the [ active ] volume and the ratings trajectory. Investors do not look at just a snapshot, they look at where the credit is likely to go because they need to make a determination. First of all, are they getting compensated for the risk? And second of all, is there a risk that they need to sell those bonds down the road if the trajectory were to be -- continuing to be negative. We started out at an A2A, right, in June of 2018, we were then down -- the outlook was changed to negative. That came down to an A3/A- from both Moody's and S&P's, and they continue to have us on negative watch. When we presented the Reset plan to them, which is a EUR 9 billion plan, which is massive. We still got the downgrade by Moody's to Baa1 but with a stable outlook. And that's really what we aimed for because we need to make sure that there is not a perception that this trajectory will continue to go downwards. Assuming that the market is going to ignore where the rating came from and where it's likely to head is an absolute display of ignorance about how bond markets actually work. And I'm sorry to -- I get a little excited about this because there is a very easy argument that they're trying to pitch, which does not correspond. And it's enormous debt on the accessibility and just effectively cross your fingers and hope the access will be there. For us, the importance is to make sure that as managers of a public traded company, we have taken the absolute steps required we deem necessary in our best business judgment to ensure that uninterrupted access to the credit market. So it turns on a judgment. If I just look at what's happened in the BBB space generally over the last year, spreads have come in, the URW spreads have widened. Reflecting already a certain element of risk that's being priced into our bonds. I'm sure that [indiscernible] can tell you, spreads are wider than we would typically price even with the bond buying program of the ECB. So the date as to whether or not it's BBB flat. And what happens if the rating agencies were to have a continued negative outlook in the absence of equity. At that point, you're taking a risk that becomes very quickly, very difficult to -- to manage. And it's our responsibility to make sure that we don't get in that particular situation, hence, the Reset plan and the equity.
Next question from Rob Filley from Green Street.
I wasn't sure I'd get the question in. For me, this is perhaps the elephant in the room, and it's on the potential EUR 3.5 billion capital raise. Could you tell me what you think and maybe what the Board thinks is the minimum issue price per share you consider is okay to reduce this uncertainty or reduce incremental risk of financial distress on the company? That's the first question.
As you know, the conditions of the capital raise will be set after the AGM. It's not -- it's not unsurprising. This is French law. And so far, we can't answer that question. The conditions will, of course, depend on market conditions, and a lot of them depend on external factors, as you can imagine. So I can't answer this question as for now. I'm sorry.
Okay. Perhaps then, if you could just talk a little bit about strategically and the timing of the decision. I understand what Jacob just said about bond markets and trajectory. So my question is, there seems to be a bid for office assets. And even if I read in the paper, maybe shopping centers in Central and Eastern Europe. So why were disposals, why our disposals not expediting first before maybe the EUR 3.5 billion. And part of that maybe, is just been the place for office assets in Unibail's portfolio.
Can I say that I find your question a bit surprising. I mean we've been interacting with shareholders now for the past x years and especially in the past 2 years, post the Westfield acquisition and with analysts and so on. And I think there is a common understanding that our leverage is too high, that's one thing. And two, that we're executing the disposals in a quite good way, EUR 5.3 billion already executed when we had anticipated EUR 3 billion when we announced the Westfield disposal. And I'm sure you remember. So we've increased the target from [ 3 ] initially to [ 8.8 ] achieved [ 5.3 ] so we've got 3.7 -- sorry, [ 3.4 ] to go, [ 3.5 ] to go to reach our target after the disposal of the SHiFT office building that we announced. It's fair to say as well that some market observers don't believe that we're capable of doing the [ 4 ]. So I think -- so we've already done [ 0.6 ] out of the [ 4 ]. So I think we're proving that the way we do it is the right way. We do not announce disposals before they're done for reasons you can understand because a lot of disposals and a lot of deals do not happen eventually. So you need to be 2 to sign a disposal, the one that sells, that's us and the one that buys that's other people and different people in different markets. And I think the [ tenants ] of the disposal teams is to find the right acquirer, which are not that numerous, but to find the right acquirer in each market. You will remember, and I think nobody believes we would be capable of selling Spanish assets, our noncore Spanish assets. And however, we did so to a South African investor because he was the guy, the one willing to buy these assets at that date. There were not that many others. I think a lot of market observers thought we were not capable of executing the disposal of French assets in the Spring. And we did. That's one of the very rare and especially the only transaction of that size that actually closed in this period. So I think there, again, they saw the [ tenants ] of the teams and the way we negotiated it. However, betting on more, faster and so on, we think would be irresponsible. And this is why we think that the opponents' plan is irresponsible. Because the market is what it is. It is difficult. The uncertainty of COVID and the uncertainty the further knockdown makes it more difficult betting on more and on an accelerated rhythm, it doesn't work that way. So what we think -- and that's the -- I mean, I say the beauty of the Reset plan is that it's 4 blocks. Which can be activated independently from each other, but simultaneously. Capital raise, disposals, cash savings on dividends, CapEx savings, that's 4 main blocks, plus, of course, the OpEx savings and so on, but that's taken by [ growth ] for granted by everybody, although we still need to achieve that. And we have exceeded what we had anticipated in the first half with EUR 65 million of the gross admin savings against 4 [ T sorry ] anticipated in mid-year. So these 4 blocks are activated independently but simultaneously. The opponent's plan is do disposals but we don't know when, we don't know at what price. We think that's not the right thing. This is a private equity stand. We're a public listed company and the responsibility of the management and the responsibility of its Supervisory Board is to make sure we take our responsibilities for all shareholders, and we do not take unreasonable risk by betting everything on a better future. We all hope that the future will be better. We all know or hope there will be a vaccine one day. I've heard lots of comments from shareholders. Some say we are right, some say we should wait for a vaccine. So even give us the data of the vaccine. Unfortunately, since we met them, the date has not been met. We're still waiting for the vaccine. So our job here is to take, yes, the painful decision, which is the -- we know it's not easy. Trust me, it was long debate. In the end, the Supervisory Board recommended unanimously for this capital raise, but after long, lengthy and active debates, trust me. And because we think as a listed public company, this is the way forward, you can't bet everything on disposals that might never happen. It's not a question of short-term bankruptcy. I mean, first of all, we're not bankrupt, far from that with the job that [indiscernible] and his team made on liquidity. We access, you will remember, even during the lockdown and when as soon as the market reopened in more expensive conditions, that we raised EUR 2.2 billion of debt. But price is not the issue. Access is the issue. We launched this on the 15th of September or 16th of September, by saying that the world could remain uncertain and the situation could worsen and our job was to make sure that whatever happened, we maintain access to refinance throughout the year, this EUR 27 billion of gross debt. Unfortunately, I have to say we've been proven right in terms of how the markets have deteriorated. I guess nobody can deny this. As for timing, we will see what the market conditions are. Obviously, we're not fools, okay? But we will see and our hope is that the market conditions are made to derisk the company now rather than push the decision forward and maybe never be in a position to execute it.
We don't have any more questions. [Operator Instructions] We have a new question from Pierre-Emmanuel Clouard from Kepler Cheuvreux.
Yes. Just 2 questions on my side. So just to come back on the disposal in the U.S. So do U.S. contact have big guys there? And I imagine with the minority shareholders that have put a one on the complete disposal of this U.S. portfolio, some might think of buying this portfolio. So do you have any contacts there? And I guess that everybody has a price. So do you have an idea of what could be the price maybe at the trough, but again, everybody has a price, I guess? And the second question is on the AGM. So just wondering what could happen if the capital increase is validated and the appointment of the 3 new members of the Board is approved as well. Can the equity raise could be postponed or not?
Do you want to take this last question first, Christophe?
Yes. I mean our point is not to delay the equity raise. Our point is to make it if the market conditions are met. This is what our goal is. And this is what actually, I mean, all the proxy agencies that you've seen the proxy advisers have recommended to vote for the capital increase. One of them has recommended for but take the time to review. I can tell you, we will take the time to review immediately after the AGM and will make our decision according to what we feel together with the suppliers we bought with obviously make a recommendation. What is the right decision for the company going forward?
But sorry to come back on that. But then let's imagine that the body is [indiscernible] sold, what could be the outcome then?
I didn't get your point. what is -- the Board is what, sorry? Reshuffled?
Reshuffled. Yes.
The Board will meet in its reshuffled form. I can't anticipate that. First of all, we are very much in favor, as I think you understood of this capital increase giving positive vote for this capital increase. And there again, all proxy advisers have voted for and I've met a lot of shareholders that are in favor of this. So even say, congratulations, this was the thing to do. We know it's difficult, but this was a thing to do. And of course, others say it's not the right thing to do. We have to respect all shareholders' opinions, but we can't do everything that each shareholder says, what we have to do is try and do the synthesis and then come back with the decision that we think is right for the company. One thing is absolutely certain is that in the end, it will be the shareholders 'decision. What we made here is the proposal and they will decide whether they want this proposal to go ahead or not. And we will respect the judgment of the voting boxes, [Foreign Language] in French. As you know, it's -- that the shareholders are sovereign. So we're meeting with shareholders. And we are explaining why we do this and so on. And I can tell you, some of them understand perfectly and do support us and so on. So the reshuffled Board, if new members are elected, we'll meet right after the AGM and discuss the right way forward. There's nothing else I can say to that. I mean this is a normal way of working for a company and a Supervisory Board and Management Board working on the different hypothesis that the company might be facing.
With respect to the question in the U.S., I mean I think it's very clear that the transaction market in the U.S. at this point is pretty close to being shut down. We have been able to sell to smaller assets. But it's really, really difficult, and there are not many parties that, at this point, are in a position to -- to make large-scale commitments. People talk very kind of casually, oh, there's a price, you can sell to U.S. Don't forget though, a lot of our assets are held in joint ventures our joint venture partners have a say. And Unibail-Rodamco-Westfield and the U.S. entities have cross-guaranteed the debt to make it an integrated credit. So it's not just simply us walking away from it, right? There's a couple of things that need to be considered. And so it's a strategic option that, as Christophe said, we are looking at. And if there's a clever solution to it, we will -- it is already been discussed in the Supervisory Board as to what the options might be. And once we have reached a conclusion, we can communicate on that.
Next question from Jonathan Kownator from Goldman Sachs.
So just on the -- to come back to the guidance for 2020, you're seeing a lot of the -- a lot of renegotiations lead to effectively -- spreading around effectively any concessions that are being made. And yet you have quite low AREPS in your guidance for Q4. So of [ EUR 0.60 ] to [ EUR 1.23 ]. So can you perhaps help us understand why that is the case if a lot of these concessions are getting amortized? Are you expecting any other impact during Q4 and particularly also your negotiations -- potential new negotiations you're highlighting for EUR 40 million, this might not be concluded obviously in Q4?
Correct. That's fair. It's a fair question. And here is where the cash and the accounting gets very, very complex, very rapidly. There are going to be a number of lease negotiations that we're going to complete, which will also include rent forgiveness. And once those have been signed, that will be charged to the P&L. And I think you'll see the impact in 2020, Q4. [ Larger ] than it's been in the beginning. Because remember, if there's rent abatements, that will just be "rent abatements," meaning or rent relief without a lease modification then that can be charged to the P&L, which is what we fully intend to do. And that decision, once this conclusion has been reached and has been agreed upon, then we can recognize that. Again, our objective is to try to see if the -- we can -- 2020 is a mixed bag, it's an awful year, right? Let's be very frank about it. And there's a lot of noise in the system. So what we'd like to get back to is, okay, here's the baseline, here's where we stand. But unfortunately, IFRS 16 makes it more difficult and not all leases, therefore, get rents releases will be deemed a lease modification, which means that we can take the hit in 2020. It's not something we're looking to scare anybody. It's just a very practical element in terms of trying to keep -- keep the accounting as simple as we can. Because the cash to the extent we give a resident is not coming in anyway, right? So I have no interest in polishing numbers to make them look terrific. It's very simple. This is what it is, which is why we're sharing as much detail in terms of the impact of cash versus accounting.
Jonathan, if I may add, and yes, if you go to Page 12 of the presentation, now you have the 9-month vision of the AREPS decline. If you can consider this decline compared to NRI, you see that there are so many different aspects, which go beyond rent negotiations, such as variable income streams, advertising, parking income, energy income and things like that. And that's a direct hit in the P&L. You have doubtful debtors, which is pretty high because even if you have not concluded or registered the rent relief, if the guy is not paying, then you have a doubtful debtors that might increase. You have the convention exhibition, which is not in the like-for-like NRI retail, as you can imagine, which will have 0 income probably until the end of the year. I mean, at least, that's a possibility, et cetera. So you just have much more than rent abatement, which might affect the P&L, hence. And I think we don't publish the guidance, the waterfall guidance for the 12 months. Because as you imagine, as we used to say when I was L'Oréal, every line of your P&L is wrong, just the total is right. So there might be pluses and minuses and so on, and we just can't be judged on every single bit constituting the AREPS. But looking at it, should give you an idea that there are variables which will be affected in Q4, explaining this difference between the NRI and the AREPS percentages of decrease in this case.
Sure. But I guess here, in this instance, it's a difference in accounting treatment, you're expecting to Q4 because part of it will no longer -- will not be amortized, but actually will actually be expensed. I think that's probably the main difference why your Q4 is going to be much lower than your Q3 actually, because all the elements that you're quoting are already in Q3.
[indiscernible] timing of negotiations. That will be registered because they are -- and some of them will be taken fully in 2020 connected.
Okay. If I may, just one final question. Just coming back to goodwill impairment and the services business going forward. So just trying to understand perhaps a bit better, if you can give a bit more color on the goodwill impairment, particularly in the U.S., but not only but also, you've given guidance for next year in terms of like-for-like retail rents. I assume this is not including services or other elements. So just trying to understand how you think these businesses are going to perform next year in airport businesses and all of the services business and fee business?
Yes. I mean what the goodwill impairment reflects is the best estimates of the teams for those businesses, rent based on the -- on the model that's been used and some elements of which are coming from the 5-year business plan exercise that we have, which was not completed yet. As we have talked about. Our focus has been really on the net rental income. So in discussions with the auditors, we've looked at the assumptions to take and they say, listen, if this is your business view, and that should be the consideration on which you base your evaluation of the goodwill. And so that's reflected but in terms of a somewhat higher discount rate but also lower revenues from those particular elements.
So on -- sorry, on the goodwill, you've written off the entire goodwill in the U.S. No?
Yes.
Okay. And that's corresponding to the fee business and the services business?
Mostly, yes.
Okay. So effectively, the outlook for those businesses is quite big.
You tell me you tell -- well, if you think about it this way, what -- look at expectations with respect to airline traffic. What people are saying it's going to take you '22 or '23 to return back to normal. To make assumptions with respect to the business being back to normal by the end of '21, I think, would be overly optimistic. Don't forget, it's -- obviously, it's a noncash item. The irony is people say, we shouldn't be goodwilled, it shouldn't be taken into consideration. So we -- the goodwill has actually come down very significantly. And the underlying assumptions with respect to advertising revenues, commercial partnerships, right, those are included in the NOI outlook, right, because that goes back into the other category of the NRI. If we break down.
So one last question comes from Markus [Audio Gap] from Bank of America.
Yes. So my question is on the goodwill that has already started the answer. But I agree that the assumption on the auditors on these businesses seem a bit in contrast with the valuers' assumption for the retail portfolio, meaning you have written down just in Q3, about 20% of your goodwill. And then on the other side on the valuers' assumption, as Sander and Rob said, you have a 5% annual rent growth over the next 10 years on the fuel retail business. So do you see also this difference? And on the values assumption on NOI growth, are these really reflecting what you told us, what you said in terms of you're going to repay tenants, et cetera? Or are we 10-year NOI growth just past 10-year average with what these values are taking further this year?
Let me think about the question here for a second. The way to think about the goodwill, which was the price that could not be justified by the underlying value of the assets. Right? And there is a judgment that we as a management take with respect to the goodwill and the services. That is what's reflected in the goodwill write-down effectively. So that's -- there is clearly a view with respect to the expected revenues from some of these that no longer -- that are somewhat -- disconnect is a big word. But there is a view that we have internally versus what the appraisers have, but we've taken the appraisers' view with respect to the online value of the assets. Our view on goodwill reflects our view on the delta between the underlying values and the -- as at the date of the balance sheet and then looking forward. But I'm happy to have a more detailed conversation about goodwill with all the chief Accountant that we have, if you want.
Okay. And for the valuers, so you cannot say if their NOI assumption are based on -- on your retail story going forward for your assets? Or is it just the basic average over the past 10 years?
We give our budgets to the appraisers, right? All the cash in, all the cash out about our expectations. They then do with that, what they want. They will have their own views about estimated rental values. And so that's all we can do, right? We give them our best judgments. Based on the business plan, and they take that, and then they make their own evaluation as to whether that's likely or not. And in some cases, they think that it's better. In some cases, they think it's not going to be as good. So in the end, asset by assets may be long, but as Christophe said, on a portfolio basis, it probably gets to be about right. But again, we are takers of these values.
That was the last question. Back to you for the conclusion.
Thank you very much. Thank you all for attending and for your questions. I think you perfectly understood that we had a clear view of the situation up until 15th, 20th of October. Unfortunately, the evolution of the situation in Europe, hopefully, not in the U.S., but definitely in Europe, makes this end of the year a bit more difficult to forecast than anticipated. Hence, the caution in our accounts. I think this more than justifies the prudent stance that we have, that we have adopted regarding the strengthening of the balance sheet with action as from now to secure now what we can secure rather than just hope for the better future. I remind everyone that the proxy advisers have all recommended to vote in favor of this capital increase. We'll be talking to investors, of course, until the last day. And in the end, as I mentioned, it will be the shareholders' decision. On the 10th of November. Thank you very much for attending. If you got further questions or precision that you need, don't hesitate to contact either [indiscernible] [ Martin ] at our Investor Relations office. And so thank you very much for attending. Thank you all.
Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.