Deutsche EuroShop AG (DEQ) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Stuart, your Chorus Call operator. Welcome, and thank you for joining the preliminary results for full year 2019. [Operator Instructions] I would now like to turn the conference over to Mr. Wilhelm Wellner. Please go ahead.

Ladies and gentlemen, a good and most importantly a healthy morning from the team of Deutsche EuroShop in Hamburg. This is Wilhelm Wellner speaking, together with my colleague, Olaf Borkers and Nicolas Lissner from our IR department. As usual, at this time of the year, we make this call to present and explain our preliminary numbers for 2019. However, in times of a global and continuing spread of the coronavirus and its strong impact on the economy and also our business, this presentation of the financial numbers 2019 is important, of course, but becomes secondary. Against this background, we'll present you the numbers for 2019 a bit shorter today. However, such numbers as usually are explained in the call presentation. After that, we'll inform you on the status of the current situation in our centers. And at the end, we will have our usual Q&A session. While we cannot be specific on some questions you may have at that point in time, we are at this stage or we want at this stage to outline to you, firstly, that all conceivable preparations concerning the healthy and stable operations have been taken in the centers and on Deutsche EuroShop group level and equally important that there's a professional management team in place at ECE, our partner for the operations, addressing this unprecedented situation, together with the authorities and our leasing partners, in a cooperative approach. Before we come to the status update, we want to look shortly back to 2019. It was an orderly good year. And this, besides all understandable concern one may have at that moment, should also be borne in mind looking ahead at beyond the current extraordinary situation. Starting with Slide 2. You see the retail turnovers of our tenants in 2019 with a slight plus of 0.2% on a like-for-like basis in Germany and a plus of 2.8% abroad. As you can see, many segments, under still normal market conditions, saw positive turnover development and ended up with green numbers. In Germany, this development led to rent-to-sales ratio of 9.5% and an OCR, which we repowered now for the first time, of 12.4%. Our footfall numbers came out down slightly last year by -- and they're now by minus 0.4% with a small decrease in Germany and a small plus abroad. On the next 2 pages, you find the information concerning the development of our leasing portfolio. The proportion and ranking of our top tenants was mostly unchanged. This group now accounts for 21.5% of our rental income. The weighted maturity of our lease contracts remained at 5.1 years just as the end of 2018. As you can see, '21 and '22, we'll see greater numbers of regular releases, which mainly result from the extensions of the Main-Taunus-Zentrum, the A10 and our center in Dresden, which opened 10 years ago. Our occupancy ratio now stands at 97.6%, still a very good number, even though it came down by 1 percentage point. So coming from the operations to financials and the prelims of 2019 and starting firstly with the valuation, and you can see that on Slide 5. 2019, again showed a limited demand for shopping center in our markets and few transactions. Correspondingly, prices in Germany decreased slightly on average. This development and some adjustments and expectations for the development of rents as well as some higher CapEx requirements were the main drivers for the negative valuation result of EUR 120 million. This corresponds to minus 3% of the portfolio value. The net initial yield for our portfolio came up 11 basis points and now stands at 5.12%. The sensitivity of the valuation results to changes of the main value drivers of these valuations are provided in the table at the lower part of the slide. I want to come to the financials now. They start on Page 6. Revenues increased by 0.4% to now EUR 225.9 million. This is just below the upper end of our guidance range. We achieved that result even though the stationary retail market in Germany and the impact from e-commerce especially for the textile and electronic retailers, kept demanding. And as mentioned earlier already, we also saw some insolvencies from textile chains, which are included in that number. Our regional profile remained unchanged with 82% of our revenues coming from Germany. On Page 7, we show you the development of our EBIT. Net EBIT declined slightly to EUR 197.5 million, also at the upper end of the forecasted corridor. And the corridor was EUR 194 million to EUR 198 million. The increase of operational center costs resulted primarily from higher nonrecs, so nonrecoverable costs, and write-downs on rents. However, the write-downs on rents remained at a low level of 0.7% of turnover. The operating expenses increased slightly with general high administration costs. But with a cost ratio of 10.8%, we are within the budgeted range. Let's now come to Page 8 and to the financial results. Such results came out with minus EUR 34.3 million and improved by EUR 3.9 million and that results from interest savings due to regular loan repayments and mainly from favorable refinancing of our Altmarkt-Galerie in Dresden and the Rhein-Neckar-Zentrum. The other financial income was mainly influenced by an exceptional one-off interest income of EUR 2.7 million and changes in swap values, which amount to minus EUR 2.2 million. So then on the next page, you'll see our EBT excluding valuation. And that grew by EUR 2.2 million to EUR 163.1 million. And that is slightly above our guided range. Here, the interest savings for outstanding assets and the interest income related to a tax refund were nearly offset by the changes of the just mentioned swap values. Looking at the operating profit. That's the EPRA earnings on Page 10. Such operating profit, excluding valuation, increased by EUR 10.9 million from EUR 147.4 million to EUR 158.3 million. EPRA earnings per share went up to EUR 2.56 after EUR 2.39. And excluding one-offs, EPRA earnings would have improved, and this is a better comparable, by EUR 1.9 million or plus 1.3% or by EUR 0.02 to EUR 2.41 per share. Now come to the consolidated profit on the next page. This increased by EUR 32.7 million and now stands at EUR 112.1 million. The changes are best explained by following the bridge. Tax refunds, including interest, contributed EUR 9 million. And the profit of standing assets, a further EUR 1.8 million. The valuation result after tax accounted for minus EUR 50.5 million of the change. And this big effect was more than offset by the positive effect from the release of deferred tax liabilities of EUR 73.4 million, which we, as reported, were able to achieve after tax ruling and the corresponding tax restructuring of the group. All other changes were rather small. Earnings per share increased from EUR 1.29 to EUR 1.81. And please follow me now to Page 12 and the development of the FFO. And in 2019, the FFO decreased slightly from EUR 150.4 million to now EUR 149.6 million, in line with our guidance. And that corresponds to an FFO per share of EUR 2.42. So from the P&L to the balance sheet on Page 13. Our asset base was nearly unchanged at EUR 4.6 billion. Year-end, our current and noncurrent financial liabilities stood at EUR 1.5 billion. And important to mention, the noncurrent deferred tax liabilities decreased visibly by EUR 73.9 million to EUR 378.8 million, resulting from the tax restructuring of the group that I just have mentioned before. All other positions were rather unchanged. Our group liquidity sums up to EUR 148 million, a substantial amount. The total equity, including minorities, increased by EUR 28 million to now EUR 2.6 billion. As you can see, our equity ratio improved to a now even stronger 57.1%. And the consolidated LTV now stands at 31.5%. On a look-through basis, that number is 33.7%, also a very solid number. On Slide 14, we show you our EPRA NAV, which decreased slightly to EUR 42.3 per share, mainly resulting, of course, from the lower property valuations and the dividend payment in 2019 for the year 2018. So far, the preliminary numbers, we'll provide you with further details in our annual report to be published in April. On Pages 15 and 16, we give you some information and more detail on our debt. Currently, our consolidated debt gives an average interest rate of just below 2.5% and the weighted maturity of our loan portfolio stands at 5.3 years. Our further redemption profile of our loan portfolio is outlined in the tables on the pages. And actually, consolidated debt of approximately EUR 200 million for our German shopping centers is under renegotiation for refinancing such that we have still an average interest rate of around 4.5%. And I will come back to that topic later. Coming now to the outlook 2020. We've informed the markets on Monday, and again yesterday, about the continuously changing situation and the immediate operational impact of the coronavirus pandemic on our portfolio. Due to the spread and the unpredictable duration of the pandemic, it is currently not possible to estimate the impact on the temporary closures of the majority of shops in our shopping centers on the group's earnings. Therefore, the forecast 2020, which was issued in November 2019 and which is shown on Page 17, is under reservation. The management will evaluate the situation as soon as quantifiable information is available. I come now to the situation in the centers, which is summarized on Pages 18 and 19. All centers of Deutsche EuroShop in Germany, Austria, Czech Republic, Hungary and Poland are by now subject to closings. Various types of restrictions are applied. They vary in respect of closing times, shop types, maximum number of visitors at a time or limited operating hours. The shop closings are currently announced for around 4 weeks on average, and there are only limited exemptions from the shops offering basic supplies, such as grocery stores, pharmacies, drug stores or food catering. Such exemptions account for approximately 10% of overall shop rents for Deutsche EuroShop. This is an extraordinary and serious situation for our tenants and therefore also challenging for us as the solvency risk of our retailers has increased on average. While we're at an early stage of this temporary shutdown, the German government has already announced to implement extensive programs to support the overall economic situation and also the special situation of the real estate industry. The details are yet to be determined. But the measurements shall, for example, include a special fund to support rent payments. Such a fund program would be the most direct support concerning our business. For our tenants, additionally, the short-term worker benefit programs, special credit facilities and the deferral of tax payments are important. Further, to relieve general legal pressure from those situation, also the suspension of certain regulations of the German insolvency code are in preparation too which also may help struggling companies. ECE, our operating partner, is in constant exchanges with authorities. Firstly, to secure the safely and the -- sorry, the safety and the compliance with restrictions and further, the smooth operation of the centers which are still partially open. Furthermore, ECE is in constant talks with our leasing partners in a cooperative spirit in this unprecedented event with the aim to relieve the first and imminent general pressure resulting from the upcoming rent payments in and around times of shop closures. Going forward, case-by-case solutions will have to be discussed and found. And in this situation, we are, of course, in close and daily consultations with our partners at ECE. This is a big and global challenge for all countries, industries as well as the societies, and it will have visible economic impact also on us. However, taking the China case as a benchmark, where the core period of the shutdown was approximately 6 weeks, we are very confident that we, with our strong balance sheet and financial resources, are in a good position to weather such a scenario and also scenarios beyond that scope. However, as the duration of the coronavirus pandemic and especially the shop closings is uncertain and the economic situation in the aftermath of the shop reopenings will be challenging, we have decided to take extraordinary steps as precaution. To further improve the company's financial flexibility. And this, even in historical terms, very extraordinary situation, we have decided to propose the suspension of the 2019 dividend payment to the general assembly. We will, of course, return to our policy of stable and continuous dividend payments after this extraordinary situation has been overcome. A further outlook. So after this status report about the immediate impact of the pandemic and looking confidently ahead, I want to give you a short outlook on our normal operations and on our financing activities. You will find the summary of these major points on Slide 20. Life goes on. So looking at the operations, we are happy that all of our German centers are now connected to the Digital Mall since end of last year. While the online availability check is working for 440 shops and 1.9 million products in the ECE portfolio, the next step will be the possibility to click and reserve products. On the leasing side, we are happy that we have secured the first lease with Primark, which we will welcome by 2022 in our Olympia Shopping Center in Brno. This new, strong anchor tenant, it's just their second shop in the Czech Republic, will further strengthen the attractiveness and superregional reach of this center. Looking into investments. Due to the current situation and as another precautionary step, we reviewed the CapEx activities and may, where reasonable, postpone some of it. We'll, of course, continue with all essential core investments as planned. Looking at the finance activities. We have just recently expanded our credit line for EUR 150 million for 4 years and have closed on a loan of EUR 140 million for our A10 Center. We're also making good progress for 3 refinancings, which are not immediately due but which we want to secure in due course. Out of a total amount of around EUR 200 million, EUR 62 million become due end of 2020 and the remainder, mid of '21. All banks we're working with have confirmed us that they continue to work on such refinancings, also under the current extraordinary situation. So for our presentation. As a final and closing remark for today and based on what I've said before, the management of Deutsche EuroShop is very confident looking ahead, even though this is an unprecedented and challenging situation for all of us. Keep well. Thanks for listening, and now we are happy to take your questions. Operator, please go ahead.

[Operator Instructions] The first question is from the line of Georg Kanders from Bankhaus Lampe.

I have one question. Of course, you want to continue with your former dividend policy. How far can, would you say, your rental income can fall that you do not have to cut the level of the dividend achieved last year?

I think the question is more difficult at the moment as we have not only the gross rental income you're referring to but also situations about cost, ancillary costs that are levied on tenants and shared and things like that. So I think we are too early at this stage to say a cut of, let's say, 5% in gross would reduce the dividend by also 5% or 7%. I'm sorry that I'm not precise on that end. We really have to overcome this situation, have to see what the tenants are doing. We will -- I'm sure, when we always see some insolvencies, but we might see some more. And we'll have to see what the releasing activities show at that point in time. So for you to derive probably a new or a confirmation of the level of dividends, it's too early to give you, let's say, the information, let's say, as detailed as you might want them at the moment. Of course, we hope and work on that. We keep the rents where they are. We might lose some over this year, I'm sure. And next year, we have to see. You probably have also seen that, as I mentioned, some 20% of leases come up for the next year and another 10% the year after. So there's a lot of dynamic going on. And we have to see how we come up with the new top line in the then stabilized mode.

So if I understood correctly, would be more or less a restart of the dividend policy. Is this correct? Or is this...

No, it's not a restart. I mean we have usually distributed anything between 60%, 65% of our dividend and we would, going forward, also want to do that. It's a bit difficult now to estimate the top line. But there is no, let's say, looking at the dividend policy decision made or even discussed to lower, let's say, the proportion. What has -- or is now a bit more uncertain is the level of new, let's say, long-term stable cash flow, we have to look at that, yes. So there's no change in dividend policy. It's really precautious measures. We'll do a releasing, we'll go through this year. And as I said, we'll lose some rent this year. I mean everybody, if you look at our peers, will do so. We'll look what the government support programs in respect to the rents will mean to us or to our tenants and therefore for us. But this is this year. But for the next year, there's no structural change. It's just a bit more the uncertainty going into the next budget here. And maybe, yes, to have that, talking about rents, maybe you should also have in mind that we are -- we do all those refinancing. We have mentioned that the bonds -- or not bonds, but the loans that we currently have at hand, they have an interest around 4.5%. We are still -- even though the interest rates came up by some 40 bps in the last few days, we're still refinancing on a much lower level. So there's some relief effect also coming from the financing cost. But to estimate the overall picture, it's more than just looking top line.

Next question is from the line of Rob Virdee from Green Street Advisors.

Just a bit of clarification, first of all. If you could tell me when the nonessential shops in Germany were closed. And then on Slide 19, you say closing times currently on average around 4 weeks. Is that what you are expecting? That's first of all. Secondly, I just want to understand if you have had rent deferral requests from your tenants. Are you -- are they asking for rent concessions as well? And just I know that there's not much detail or clarity around this. But the special fund to cover rent payments, is that, if your tenants cannot pay, the government will backstop that rent, they will pay it?

Yes. Rob, thank you for the questions. First, of the closing, I have a huge Excel sheet in front of me for all countries we are in and all the states. So there are various differences. But to give you a general picture, and it started last weekend, where, firstly, countries like Austria kicked in, Poland next day and the Czech Republic, this all happened within 72 hours over the weekend, was kicking in closures and Germany came in then on Monday. That's where we informed you Tuesday, Wednesday. So they all start, let's say, in the course of this week, more or less. And many of them have announced that they'll stop until around 19th of April, which is roughly a month or 4 weeks. Some are shorter, some are just for further notice, so it's unknown. So that I tried to give you the average number, it's 4 weeks, plus or minus. And we might see some extensions on that end also. We don't know. Maybe as a reference point, if you try to see it, and I've seen an interesting chart in the news or media yesterday, when you look at China, it took them, from their closedown, and this is no scientific answer here, okay, this is just by reading the media, but they even had a chart to that. It took them 12 days between a lockdown and really seeing numbers coming down. Yes, and you see that in the chart. So -- and that's -- they didn't, of course, open next day or so. So there's a good hope and belief that if these 4-week periods are introduced now in many countries in Europe, I mean you've seen it in France, in Spain, and so it's going almost elsewhere, except the Nordics. So that these 4 weeks would probably hold. We have taken the China case for our base case, put in there that probably the April and May rents are at -- yes, I wouldn't call it at stake, but in the immediate focus of the retailers. And to be frank, of course, almost every retailer is now calling its landlord. And they do so even the press, if you would google what the Zaras and the H&Ms say, that's what I said, it's a serious situation. And we'll, of course, look into that cooperatively. There's an exchange between ECE and the other peers how to handle that. And there needs to be some pressure being taken off of a system. And that's what -- and we will, of course, do so. It doesn't make sense in this extraordinary situation. But then of course, we'll have to see what this fund, and I come to that in a minute, what that fund can do. It will be just a relief. It's -- by no means, I expect any kind of guaranteed mechanism. It should be a relief we'll do, on the one hand, and when it kicks in. So I mean there are talks, and we will not put extra pressure on our customers, but of course, have to find the solution. There are stronger ones, there are ones that are open, yes. I mean we have the 10% still working and then we go from there. With this fund, unfortunately, nothing more is yet known. But our Finance Minister, Mr. Scholz, announced that in a press article on Monday morning, I'm sure they have worked on that over the weekend, maybe the week before, it will take a little time to find that out. We have asked or are in discussions with ECE how they, of course, could facilitate that to bring that to the smaller, mid-sized tenant. This fund is for smaller, mid-sized tenant. But mid-sized in Germany, it's rather big companies already. But we still have to wait. But maybe if we also can help these retailers to get faster to the funds, which we don't know how they should work, what's on the volumes and how are the mechanics. But I just mentioned that even the German government at least is thinking of something like that, which is in our direction now.

Okay. Appreciate it, that's very clear. Just one final, on the retailer tenants who are asking for concessions, are you seeing more rigorous or steeper concessions requested for by international retailers as opposed to your German ones?

To be honest, I cannot answer that. We haven't differentiated. But I would expect it's not to be like that. Because they are all in a situation, if you look at P&L of a retailer, maybe rent is 10%, 15%, maybe 20% or, or let's say, the OCR is the most important part also. So maybe take our OCRs, it's around 13%. So this is a smaller part of their P&L. So they have to look at the stock at the people and something like that. So they look where they could be -- look at the immediate pressure. And this is rents, of course. And it's not said that everybody gets concessions or so. But the rents become due rather quickly, and you can take that away. And I think in the presentation, we have called a little bit -- have with them a no-action policy. Just leave it as it is, talk about it going forward, solve the problem and not starting getting nervous on this. This is what I mean because we are all affected here by that as society, industry. I think -- I mean we're all strong enough, the countries, to go after it. But nobody should become nervous. It will be a tough job, but it can be done if nobody gets nervous and push the button.

[Operator Instructions] The next question comes from the line of Kai Klose from Berenberg.

I've got a question on the numbers for '19. Could you indicate regarding the valuation results, the split of the 3 components, which was leading to the write-down mentioned on Page 5. Then the second question would be could you also indicate on Page 4 the regional split of the vacancy rate? And then a general question on letting volumes. Could you indicate what was the letting volume in '19 split between renewals and new lettings? And what's the rent -- now what was the rental change there between these 2 buckets?

Yes. Reletting was -- or I should start with the first one probably, valuation. We do not calculate the individual effects of, let's say, whether it's rent or whether it's yield. I know others do so. But this is corresponding mainly to one discounted cash flow model. So if, for example, you have an opinion on increasing rents and you just set, many of the valuators also look at the discounted -- discount ratio to say, "Okay, if somebody plans higher rising rents, then, of course, if rents are on a higher risk, so I put up the discount rates also." So we don't differentiate on that and also not our valuator. So I mean everything goes into one valuation. And this is multiples or yields, it's rent increase, it's cost ratios. And we don't do this bit artificial split on that end.

Maybe I can ask the question in a different way. So you mentioned on Page 5, adjusted expectations for rent development and reletting periods. What has been changed and adjusted here?

Okay. So in the last annual report -- now okay, now I know what you mean, sorry. I have to look at that because we now -- we haven't shown the numbers of last year right next to it, we'll probably do so. But I think the rent increase rate was -- here, I have it, was 1.33% and we now have 1.24%, so it's 10 bps down. The cost quarter is 20 basis points up, so also a bit more cautious. And the discount yield has gone up. So this is putting all the pressure on price -- or pressure is the wrong word. It's for heading for lower prices. And the cap rate is 4 bps up, yes. So all of those, and we'll see. You see that, of course -- I mean you have those numbers in our annual report of the last year. But if you put that next, all of them have, as we described, slightly adjusted to lower values, okay? The second question I didn't understand for the purpose of the quality of the line. Could you ask them again please, Mr. Klose?

Yes. Regarding Page 4 that you show the vacancy rate of 12.4% in subsequent split here between Germany and the non-German model.

It's a bit better abroad with the centers we have because the quality is -- they're a bit, let's say, higher. We have a little -- or put it the other way around, we have some centers, like in Hameln or at the moment currently in Saarpark, where bigger tenants moved out that put a little lower number on Germany. And we can provide that probably also in the annual report or in our documentation to have a split. We look center-by-center on them and see whether there are some extreme exceptions. We have, of course, centers that are almost fully leased. But as I've just said, for example, Hameln has approximately 4% to 5% growing at the moment. And the third question was reletting. It's roughly 11% were released, and we are still working on the conversion ratio, which we haven't published so far. But it tells you that, I mean the German market, like for our peers, the conversion was probably minus 10% or so. But we have to look at the detailed numbers.

And then the -- when we talk about the renewal rate -- sorry, the new letting rate and how this compares...

You mean -- yes, I mean we do that and we prepare it for the annual report. We have the preliminary numbers. We don't have that number, also not here. But to be honest, at the moment, there is a lot of renewals. So there are -- and we have just reported that we look for the Primarks and so on. We have new players who take a bigger share that is TK Maxx, where I can't release that information yet. But we're working on 3 TK Maxx, which is newest kid in town, I wouldn't say, but in many cities that they come to. So -- but generally, mostly are extensions at the moment. Hence, and this comes from the other situation we have described before, not too many retailers are really expanding at the moment for what we have said before, the e-commerce and the digitalization. So they focus on the shops they have. So we extend with them. And that was the situation before. We now have this special situation with the coronavirus. So this will be rather a lower number, yes.

[Operator Instructions] The next question is from the line of Andre Remke from Baader Bank.

My question regarding your refinancing discussions with the banks or the negotiation with the banks. Are there already some changes in terms of margins? Or also are they asking for higher or tighter covenants, probably in new or also existing loans? What is the status here?

Yes. Compared to 1 or 1.5 year before, a period in which we have negotiated margins of 80 basis points gross and in which we negotiated loans without any financial covenant. Meanwhile, margin is between 110 and 130 basis points gross, so increased by roughly 50 basis points. Though 3 weeks ago, it was 30 basis points lower. So if we would sign any loan agreement today, our interest rate would be roughly 1.5%. And Wilhelm explained that the loans, which we are negotiating now have an average interest rate of 4.5%. So we are, by far, lower. Yes, and now all the loan agreements which we are negotiating are including financial covenants, which mostly or always is a debt service cover ratio or a multiplier but on a very flexible basis for us. We have -- we see a lot of headroom for us.

So the debt service coverage ratio, this is a new feature.

No. It's a very classical one. But saying it again, in the last 2 years, we did not have any financial covenant in new loan agreements. But meanwhile, we have the classical ones again.

Which is market standard, to put it that way.

Okay. And within your -- how is your comfort zone over the -- not over the last 2 years, but you have also older maturities. Are there any issues specific to that?

No. There aren't. For sure, we have some financial covenants, but all -- a possible or calculated impact of the coronavirus shows to us that all our financial covenants are manageable.

So in a nutshell, the EUR 100 million from the suspension of the dividend, this is more for operational reasons rather than for any refinancing reasons? Is this what...

As we said, it's a precaution. I mean we have seen -- I'm old enough now to have seen more crises. I have seen September 11, I was with Lufthansa. That was not really fun. We have seen the financial crisis in this industry, 2007, 2008 or the global financial crisis. And we have seen banks who wanted to finance, promised to do so that they dropped out. I'm not saying this is going to happen. But in this special situation, being at the helm of the company, it just makes sense to have that reserve. We are just in the first phase of the shutdown, and we have to see what are the consequences. And again, the situation can become worse if this takes longer. So I think it's very wise and advisable to be very prudent at that very moment.

And let me add that if you urgently need money from banks, then sometimes it's very difficult to get it. But if you can show them that you do not urgently need it, they feel much more easier to give you the money.

Yes. We don't want to come in any corner here under pressure. So it's -- I think it's a good decision. And it's needed in that situation to just send a message that we are just stable, that we are conservatively financed, that we have liquidity. But then if one of the banks drop out in the process, that you have at least a very good cushion to act for the next month. And we cannot address or look what the losses from rents in the next 1, 2 months will be. And surely, there will be some. And we will surely see some insolvencies here and maybe they then continue. But there's also on the profit side, I mean this will be somehow visible also for us, like for many businesses. So having that together all, we thought and decided that this is a good situation.

Next question comes from the line of Jaap Kuin from Kempen.

Two questions from my side. On the newly installed debt service covenant, could you kind of confirm the absolute level that is at, 2x or 1.5x? And the second question on valuations. Obviously, it's very early days and everybody is talking to everybody and no panic, of course. But do you have a feeling whether appraisers will take a bit of more cautionary approach, just like yourself, towards valuations in the coming 6 to 12 months?

Yes, Jaap. So thank you for the question. But we do not want to mention concrete levels as it is not helpful for you to see that because all the shopping centers are financed in an equal way. Some have -- we have, in some cases, these DSCR levels which differ from case-to-case and they are all on a comfortable basis. That is what I can tell you.

Yes. From a market view that we have over the years, they really are at the lower end, yes. But we also don't want to have the banks saying, "You said you have that one, I also want to have that." But they are really on markets on low levels. But picking up on the valuation, yes, this is, of course, a topic. I mean the prices have given in, and we said that we expect that there will be over time, with rents being a bit under pressure, a small depreciation scheme potentially. Or let's say, there was probably a little bit of a market view. At the moment, I'm sure the market will stall. Many things stall for a couple of weeks, months, maybe a year. There might be some distressed sales. So the price points you get from them will not maybe be also a fair reflection. And I think it will be a big task for the valuators to make up their mind again after a special situation, I want to call it, but it was in the last crisis, was to find, let's say, data points to support the valuations. But of course, if you look, our NAV is now EUR 42.30. And we reiterated that -- I mean the market seems to have picked up quite okay that we say, "We are prudent businessmen here, so let's keep the cash together." So the stock price came up by 20% this morning. But the difference is now so huge that, of course, the market has to make up its mind, the property market and the stock market, what is the gap. And we will talk to our valuators, maybe do a valuation, which we usually do one time a year, also mid-year, just to give you also more transparency on that end, I mean in normal times, normal swings, to get more confidence there. We're considering that. And then you said everybody is talking to everybody. It's tough to find data points at the moment and to make up a mind.

Yes. No, that's clear. And I think a mid-year valuation will be great. Just to come back on the debt service covenant, could you maybe just highlight the year-end ICR for the group level?

Even that is a level which we do not want to publish. I ask for your understanding. We do not want to have discussions with shareholders and analysts about our individual DSCR or ICR levels. Again, we are in all the cases on a comfortable basis. And regarding to the analysis which we have done, all our covenants are easily manageable. We have again discussion with the banks, and they are all in a very good mood.

Yes. It's really now the uncertainty and what's after the shutdown and how long is the shutdown and how is the economy doing. And if this really tracks longer, there, we want to have a special reserve, which may happen. We all don't know. We're in a shutdown country. And if I drive my car to work, it looks special, to put it that way. And so we have to see all those effects. There's no immediate pressure if a scenario like the China case is coming to us, and we are well positioned. I mean that's what we did over the past, having a conservative balance sheet. Sometimes we were punished by analysts that we were under-levered and so on and too conservative and yes, from that point of view. What's true this time is, I think, the other side is okay. But one thing is having low leverage. If you look at the LTVs and the others is do you have cash? And cash is, I think, for many businesses, also for the retailer, the main focus on at the moment. And that's what we also do.

Yes. No, that's a good point, I guess. And then on that, I mean you have a bit of liquidity. If and when you would see great opportunities during this year, would you want to execute on that in terms of acquisitions or other potential investments?

Yes. I mean there are always 2 hats. And I would love to look at that. But I mean being in that situation, looking at all 21 closed shopping centers, you would have to be very brave in 2, 3 months' time to be one of the first picking something, yes. And we have no whims here. But I think we should focus on asset management on things what we have at hand, which we'll manage in this scenario we were talking about. I wouldn't rule that out, but I don't want to confuse the market saying Deutsche EuroShop is suspending the dividend to hunting the first shopping center that comes to the market under the stress. It's a long shot to look at that. But there are others, they might look at and wait for. And I don't want even to look into situations like the U.K. with some of the big players being under pressure. It's not good for the property market because it gets uncertain to have too many distressed deals, yes.

Next question is from the line of Michael Browne from Martin Currie.

Yes. Thank you very much for your presentation in difficult times. I just thought I would ask a couple of questions, if I could. So in a sort of an Armageddon situation, you've refinanced EUR 130 million, EUR 140 million of your existing debt that's coming up for maturity this year of EUR 150 million. You've taken down your credit line of EUR 140 million. You've got EUR 95 million less extra in the bank, which is going to cover your interest costs, which are going to be somewhere in the region of EUR 45 million to EUR 50 million. Is that a correct way of looking at it?

Oh, that was a very fast in calculation.

And very quick. Yes, but we have running costs. We have investments pending in the, let's say, in the property companies. We do extensions -- not extensions, but we just were talking about TK Maxx, which is always a bit of costly to introduce such huge, big shops. So there are other things going on than just looking at the 4 numbers or 5 you just mentioned.

Okay, sure.

No. But it shouldn't sound unpolite. But just to say yes or no to that analysis would probably not appropriate.

I understand. I'm just looking at it. It's a pure piece of cash analysis that I was trying to do. The second question is you said you're very comfortable with -- the banks are very comfortable with your ratios, and in particular, loan-to-value ratios. Can you give me a sense of the sort of range where the covenants are on your loan-to-value ratio, so I can get a sense of the headroom that you have?

Yes. But these -- I mean it's very difficult. Again, we are at week, let's say, 1. And we did our analysis for a scenario of, let's say, the China case and even beyond. To be asked in which regard how many months or so you would survive, maybe you're heading like that, it's also a scenario that we calculate through. There are so many things you would have to take in mind, when the relief programs kick in, when the banks -- I mean they all know the situation would kick in if you come close. We're not at that stage. But if you would later on come at this stage, there is no calculation reasonably done. You probably want to do. I understand the question, if that's the question, and say, "Okay, there's a date in that year when we run out of cash." I mean there are many measures more you can do, you have to stop more CapEx and so on. So we are -- I mean I think that's good news. We are safe for the China case and reasonably beyond. For a case where months of closings would be happening across Europe, I don't want to even look at that from -- to be honest, as a human from a society point of view, from a political point of view, the pressure would be so big, you would have to open up. You can't lock away for months, societies. So even if the spread would be then still somehow in place. So I mean it's reasonable to look at next month. We have enough headroom. And it is manageable as my colleague just said. But with an easy 3-number cash flow and calculations, you probably have in mind. Again, it is legitimate, but it's not that easy to do and maybe probably not that reasonable in that situation. There are many ifs and whens.

I fully agree with you. And I was really just sort of talking about, in my first question, about the simple cash movements. Because it seems that you have plenty of cash in such a scenario to move forward. But I just wanted to get a sense of the overall loan-to-value covenant that may or may not be on your debt maturities, sort of '21, '22, '23?

What we can confirm is that we especially feel very comfortable for the loan-to-value covenants. We have a very, very, very limited number of LTV covenants in our portfolio. We hated that also in past. And so we feel very comfortable, especially for these loan-to-value covenants.

Yes. We issue the loan-to-value for our -- on a group level, you have seen just the numbers. And in a look-through basis, it was around 33.5%, if I recollect right.

Yes.

And we also split that roughly the same over the property companies. There might be one with, I don't know, 29% but another one with 42% or something like that, just to give you a feeling. And our target was always to be between 35% and 45% LTV range. And we said at the end of a very long, booming phase, starting 2009 until probably beginning of this year, we wanted to be at the lower end after the appreciation of values. And it has proved now that we have plenty of headroom, even at 20%, 25% devaluation on the gross asset value would leave us within that range, so again -- but this is LTV. The other thing is cash. And this is how banks conceive us. It's most important to look at now. In boom times, it's always safe. But now they look at it, and I think it will be -- besides we think for our own, it's the right decision to suspend the dividend. And I tell you, it broke our hearts here after 20 years of stable growth of dividend. But as a precautious measure, I think, it was important and it will help us also with banks to see reasonable decisions are being taken. Deutsche EuroShop is really conceived to be on the most safe side, let's do business with those guys. That's also the message into the market.

Yes, sure. One final question, which I think is just a factual one. I don't know the answer to. Is your debt secured at the company level? Or is it secured on each individual shopping mall?

It's secured on the individual shopping mall. We have individual finance, debt financing for each individual shopping center.

Okay. That's what I thought. Thank you much for confirming that.

There are no further questions at this time. And I would like to hand back to Mr. Wilhelm Wellner for closing comments. Please go ahead.

Yes. Thank you for listening and for the open questions. Just stay healthy. And I think this is beyond a lot of things we have all seen. So everybody hopefully takes reasonable decisions. It doesn't put too much extra pressure on the system. And then we'll just manage through. But we will all get a bit of scratches, but we are well positioned to take them. Okay. Thank you. Stay healthy.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day.