European retail REITs face return to "hard economics"

Deutsche Euroshop AG

16/07/2021 10:56

** European retail REITs footfall and sales are bouncing
back quickly as COVID-19 restrictions ease, although the lifting
of government support will reintroduce the "hard economics" of
tenant cost to sales, HSBC says
    ** The broker says landlords will have to go through a grace
period with tenants to negotiate how to recover rent arrears,
which will frustrate efforts to rotate tenants profitably
    ** "Tenant insolvencies, especially in the UK but also to an
extent in mainland Europe, are likely to escalate, causing
vacancy rates to increase," it adds
    ** HSBC double upgrades Unibail-Rodamco-Westfield  URW.AS 
to "buy" from "reduce" as it offers more significant upside than
Hammerson, which the broker also raises to "hold" from "reduce",
in an asset disposal and recapitalisation scenario
    ** The broker also double upgrades Deutsche Euroshop
 DEQGn.DE  to "buy" from "reduce" and cuts Klepierre  LOIM.PA 
to "hold" from "buy"; it says both have persevered thanks to
relatively strong balance sheets and low asset price deflation
    ** The "opportunistic" acquisition by Capital & Counties
 CAPCC.L  of a stake in its closest peer, Shaftesbury  SHB.L ,
could offer economies of scale over time, HSBC adds

 (Reporting by Diana Mandiá)
 ((diana.mandiaalvarez@thomsonreuters.com))