Hello, welcome to the Klépierre first half 2020 earnings call. During the call, you'll be on listen only. You will have the opportunity to ask questions after the presentation. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you'll be connected to an operator. I am now handing you over to your host, Mr. Jean-Marc Jestin, Chief CEO, to begin today's conference. Thank you.
Good morning, everyone. Thank you for joining us this morning. I am Jean-Marc Jestin, Chairman of the Klépierre Executive Board, and I am happy to be here with Jean-Michel Gault, our Deputy CEO, to present Klépierre 2020 half year earnings. In this presentation, we will cover three topics. First, I will provide you with an update on our business. Jean-Michel will go over the financials before I wrap everything up. Let's start with a review of our business. Good news is that all our malls over Europe have reopened since the second week of June. As you are aware of, there has been a lockdown in most countries where we operate, roughly between mid-March and mid-May. Except in the Netherlands, Sweden, and Norway, where stores and malls remain open over the period, even though the pandemic impacted the footfall.
Since early May, our malls started gradually to reopen, first in Germany, then in Poland, Denmark, and so on. The reopening process ended with large malls in the Paris region and in Portugal. Today, all restrictions have been lifted and pretty much all our stores have reopened as well. As you can see on the chart, reopening is gradual as reopening a store requires time to implement proper sanitary measures, time also to mobilize staff which were in furlough scheme, and also time to readjust assortments. In the coming weeks, we expect the store opening rate to keep improving, notably with the reopening of cinemas and travel agencies that are still closed in some cases. Obviously, for these reopenings, we have made sure that our places were and continue to be today, as safe as can be.
Our sanitary protocols, which have been certified by Bureau Veritas, were ready before the end of the lockdown. This allow us to be very swift in the reopening. Our teams have done a fantastic job in this respect, and this has been key in the successful return of our shoppers. I want to thank our teams for this absolutely remarkable achievement. I must say that we have been positively pleased with the pace of recovery that we have been experiencing since the end of the lockdown. We have different benchmarks from other countries in Asia, so honestly, I did not expect such a quick restart in terms of footfall and sales. In June, excluding the days of closure, retailer sales reached 85% of last year level. This is also a significant improvement compared to May.
It is also more encouraging than sales and promotions that usually occur in June were pushed to July and August, making the comparison to last year even more challenging. We also see footfall improving in July, which is once more an encouraging trend. Sales performance show disparities, notably by mall, as shopping centers that rely on commuters or office workers or tourists take more time to recover. These disparities tend to narrow over time. There are also disparities by countries. It is encouraging to see that in countries where stores remain broadly open, meaning that they only enforce partial lockdown measures, sales have almost fully recovered already. In June, retailer sales in these countries, i.e., Norway, Sweden, and the Netherlands, reached 96% of last year level, showing also a clear improvement compared to 83% in May.
The recovery has been particularly strong in Norway, where sales were 9% higher in June, year-on-year. We can also see dispersion in terms of retail segment. Household equipment, consumer electronics, or supermarkets have all recovered already. On the other hand, segments such as fashion, food and beverage or health and beauty are yet to fully recover, notably due to the sanitary measures in place, which make their business less customer friendly to operate. Still, they are showing an improvement compared to the first months of reopening, and we expect this trend to carry over in the coming months. Let's now turn to rent collection. We have collected over the first half, 83% of the non-deferred rents and service charges. This collection rate stood at 62% for the second quarter only.
You may know that we have deferred part of the Q2 rents with the cash position of our retailers, this represent about a third of the EUR 341 million that we have invoiced for the second quarter. Obviously, rent collection has been impacted by the lockdown period, either because we decided to defer payment, as I said, or because retailers paused payment on their own or due to grace periods decided by some governments. In total, for the first half of the year, EUR 221 million in rents and service charge remain to be paid as of June 30. This is a bit more than what the lockdown period represent, i.e., EUR 194 million, for several reasons. The most straightforward explanation being that some of our tenants wait for the outcome of our negotiation with them before resuming payments.
We have indeed engaged in intensive discussion with them regarding the payment of Q2 rents, with a special focus on the lockdown rents, proposing rental arrangements against lease extension or other forms of compensations. To be fair, as for retailer sales, rent collection rates also vary from one country to the next. Countries where stores did not close or which were among the first ones to reopen are posting better numbers as we started negotiation earlier. This include Norway, Sweden, the Netherlands, and Germany. In these countries, rent collection is now standing at 88% for the full first half and 77% for the second quarter only. On the other hand, in geographies where lockdowns ended more recently, i.e., France, Italy, Iberia, rent collection for Q2 is lower, with 76% for the first half and 40% for the second quarter only.
This is set to improve as discussions with our tenants progress. Indeed, as I said earlier, we have entered into negotiation with our retailers to find mutually acceptable deals to settle the lockdown rents. Actually, we notice a clear correlation between deal-making and rent collection. Negotiation have intensified as we have already approved 900 deals, representing about 10% of our rent roll, and we expect to finalize all the deals before the end of the year. When it comes specifically to the month of July, the collection rate is standing at 68%, and this is growing every day. Although a lot of our efforts have been dedicated to the lockdown and its consequences, we have been able to pursue our current leasing activity. We have signed close to 400 leases in the first half and kept opening flagship stores throughout our portfolio.
This has been done with a positive reversion. Among the landmark openings of this half, I would like to stress the opening of a Primark store in Belle Epine in Paris, where Zara and Bershka stores have also been fully refurbished and right sized. On another note, the sports segment has kept its dynamic trend with, among others, new stores of Foot Locker, Nike, Decathlon, and XXL. Lastly, on top of these iconic stores, the group has also inaugurated two brand new destination food concepts at Emporia in Sweden and Nový Smíchov in Czech Republic. The food offering will be a mix of well-known international brands and will be complemented by more local restaurants. Ultimately, this will further enrich the unique retailer mix of these two leading malls of Prague and Malmö. A few words on Act for Good.
We reached earlier this year a major objective of our ESG roadmap two years in advance by getting our low carbon strategy validated by the Science Based Targets initiative that most of you know. This is a scientific body which, under the auspices of the United Nations, assesses whether a company's strategy is aligned with the global warming pathway by the Paris Agreement. Basically, it says whether, as a company, you contribute or not to limiting global warming to 1.5 degree. We do with the low carbon targets that you see here regarding our own direct emission, but also the emission related to our retailers and our visitors. Only three real estate companies in Europe got this SBTi certification. Only three. I think it confirms our real leadership in the fight against climate change.
As we want our malls to add value to the territories where they are located, we made sure they supported local communities during the lockdown, which they did through a variety of actions, including food and blood donations or welcome areas for victims of domestic violence. A few words on our development pipeline to finish with this section. Our flexible pipeline, which is focused solely on extensions, allow us to adjust quickly our spending. If you look at the projects that we have started, we only have EUR 144 million left to cash out by 2022. As you can see, a quite limited amount. We are able to keep on with the project that we have recently started, the main one being Gran Reno in Bologna.
Construction starting in April 2019, but works have been suspended mid-March 2020 due to the lockdown and have gradually resumed by the end of June 2020. As a result, the opening is now expected by the end of 2021. The leasing is advancing well, and 65% of the area is prelet. On this note, I leave the floor now to Jean-Michel, who is going to give you details on our half year earnings and our financial situation and explain how we have also immediately reduced our cost base with immediate effect on H1 and strengthens our balance sheet with new financing at very favorable condition. Jean-Michel?
Thank you, Jean-Marc, and good morning, everyone. Before digging into the details of the figure, let me introduce this section with a couple of comments on accounting and IFRS treatments. Rents have been invoiced in full as per the contracts, including for the period subject to administrative closure, as such, have been recognized as our revenues in the P&L. The two main IFRS standards that we applied to the unpaid rents are the following. First, IFRS 16. In the case we are granting a discount to a tenant, such impact has to be straight line over the minimum term of the lease. In H1, the impact was very limited at less than EUR 1 million. Secondly, IFRS 9, a provision for bad debt has been accounted for tenants that have entered in an insolvency proceeding, or for which we can reasonably expect such an outcome.
On this specific item, the provision has increased by EUR 11 million in H1. Moving now to the net current cash flow, having in mind the accounting principle I have just described, our net current cash flow per share reached EUR 1.37, a limited 1% decline compared to last year. This is a reflection of the mechanical impact of the COVID-19, including a subdued leasing activity, which has translated into a slightly higher vacancy, a loss in variable income. Lastly, a strong reduction in cost as a result of the action we have implemented as soon as the lockdown started. Let me go now in a bit more detail in the P&L evolution. Starting with our net rental income. Our NRI declined by 9%.
The disposals made in Portugal in April 2019, in Hungary at the end of the same year, and in France early 2020, have led to a EUR 17 million decline in our revenues. Forex in Scandinavia and Turkey weighed also on our performance, partly balanced by the first contribution of Créteil Soleil extension. Lastly, our NRI declined by 5%, excluding disposal and Forex. We don't call it exactly like-for-like because of the peculiarity of the first half. On the possible side, we kept benefiting from positive indexation for 1.3%, and reversion over H2 last year and early this year.
On the negative side, more than two-thirds of the NRI decline is coming from lower variable income, including sales-based rent as a result of the retailer sales decline in H1, -EUR 12 million, lower specialty leasing income as our malls were closed during close to two months, -EUR 5 million, and lower car park income as a result of lower footfall, another -EUR 6 million. Beside, as I told you earlier, provision on bad debt have increased by EUR 11 million, reflecting the increase in insolvencies. Lastly, the delayed leasing activity has awaited on potential reversion and triggered a slight increase in vacancy, as we can see on the next slide. Indeed, in H1, our vacancy has gone up by 80 basis points. On top of the softer leasing activity, we had an impact from the bankruptcy, notably in Scandinavia.
It's worth to highlight that so far, roughly two-thirds of the stores of retailers that entered into insolvency procedure had end up being backed by another retailer. Moving now to our cost base. As soon as the lockdown started, we have implemented very quickly a plan aiming at reducing our cost base. I think it has been quite efficient with a EUR 15 million drop in H1. This is mostly coming from lower payroll, but also administrative expenses. We were able to have a significant impact immediately on H1, and obviously, we will keep benefiting from these measures over the second half of the year. Like G&A, the cost of debt was further reduced. This represents another EUR 10 million savings. Indeed, as bonds have been refinanced at much more favorable conditions, our average cost of debt is now standing at 1.2%, compared to 1.5% last year.
Actually, this 1.2% is quite comparable to what we can see in the secondary market currently. Indeed, for a 10-year maturity euro swap, we are at - 0.2%, while our credit spread for this maturity is now standing at 1.5%, which make 1.3 to compare to the average cost of debt at 1.2%. The bottom line is that we expect our cost of debt to remain at a low level in the coming year. To conclude this part on the P&L, a quick word on tax expenses, which have been reduced by EUR 10 million. This is, first of all, the reflection of lower revenues and higher bad debt provision, which in many countries are tax deductible. This represents a EUR 7 million saving. Besides, we benefited from EUR 2 million of supportive fiscal measures in Italy and Poland.
Lastly, we also had favorable tax settlement in France and in the Netherlands for another EUR 2 million. Let's move now to the balance sheet, and starting with the portfolio valuation. For the first half, the portfolio valuation has declined by 2.8% on a like-for-like basis. This is a - 1% cash flow effect and a - 1.7% market effect. Valuers have increased discount rate as well as exit rates and take more conservative NRI assumptions for 2020 and 2021. It translated into a 10 basis points increase of our EPRA net initial yield at 5.1%. A weighted average risk-free rate of 0.4%, showing a very wide risk premium of 4.6%. By country, there were a positive reading of recent transaction in Spain, while the French one slightly weighed on the valuation of some of our assets. Moving to the next slide and to the new EPRA NAV metrics.
I'm not going to comment all the new metrics, let me just quickly highlight the differences for Klépierre between the former EPRA NAV and the new EPRA NTA. According to the new metric, we consider that we are a seller of some of our assets and therefore crystallize a part of the deferred tax and transfer tax. The new definition in the computation of deferred taxes and real estate transfer tax led to a - EUR 1.5 impact per share. Besides, as speaking from net tangible asset value, we now exclude intangibles such as for Klépierre, the fair market value of the management service companies that are externally appraised once a year. This is another EUR 1.2 per share negative impact. Overall, our EPRA NTA is standing at EUR 34.9 while our EPRA NAV reached EUR 37.5. Moving to the change in the net debt.
Over the first half, it has increased by roughly EUR 300 million as a result of the increase in receivables during the second quarter, which including VAT, reached EUR 273 million. Excluding this increase, net debt has been kept broadly stable due to limited CapEx and disposal proceeds. Overall, our loan to value is now standing at 40%. This side, we have been very active in the first half to strengthen our liquidity position. Indeed, we have accelerated our refinancing plan in order to cover our refinancing need for the next 24 months. During the first six months of the year, we have raised EUR 900 million of bonds at an average yield of 2% for an average maturity of nine years. Hence, our liquidity position is now standing at EUR 3.1 billion, excluding EUR 1.2 billion of additional revolving credit facilities backing the same amount of commercial paper.
The average maturity of the liquidity position is four years. Okay, now I hand over to Jean-Marc for the conclusion.
Thank you, Jean-Michel. What should you take away from this presentation? Regarding our earnings for the first half of 2020, after close to two months of lockdown in virtually all our countries of operations, our malls have reopened everywhere since early June. The reopening has been quite satisfactory with footfall and retailer sales ahead of initial expectations. In June, sales reached 85% of last year level, with already some countries and some segments which are already back to last year level. I think this is an encouraging start. In July, the improving trend in terms of footfall is enduring, and this might augur a possible return to close to pre-crisis level in the coming months.
Even though our collection rate has obviously been impacted by the lockdown, the recent intensification of our negotiation with retailers make us confident that we will manage to find agreements with most of them, and this will trigger a gradual improvement of the collection rate in the months to come. Projecting ourselves to the end of this year and beyond, we should remain conservative and optimistic at the same time. To be sure, considering the still limited visibility we have at this stage, notably regarding the economic environment and a potential second wave, we are not in a position to provide you with guidance for the full year earnings. We will, of course, continue to manage very carefully our financials with a close eye on spending and liquidity position, and we'll update you in due course as we get a clearer view on the pace of business recovery.
In the longer term, I remain truly convinced that retailers will continue to refocus their operations on the most productive stores and the most attractive retail destination for their customers. More importantly, we remain firmly committed to making sure our malls are run and managed in a sustainable way that contributes positively to our communities and to the environment. This concludes our presentation, and now I leave the floor for your questions.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two. You will be advised when to ask your question. Our first question comes from the line of Florent Laroche-Joubert from ODDO. Please go ahead.
Hi. Thank you very much for the presentation. Yes, this is Florent Laroche-Joubert from ODDO BHF. I would have maybe two questions. First, I understand that you are not able to give us a guidance for the full year, but maybe, could you please give us some colors about your visibility or your intention about your dividend policy, for 2020? That would be my first question. My second question would be on the valuation of your portfolio. I would like to know if it's possible to have more colors about your discussion with appraisers. In particular, I have noted that in your press release, there is a mention about material valuation uncertainty. I don't know if you can share a little bit about that. Thank you very much.
Thank you, Florent. We are mid-2020, if I remember well, and the dividend for a year is always decided at the end of the year or beginning of next year. I think it's far too early to say. We keep committed resuming the business and making sure our malls are open and strengthening our balance sheet. I think we did pretty well, and the question of the dividend will be for the beginning of next year. For valuation, I think we have been pretty transparent. We indicated that the valuers have inserted into the valuation the specific clause, which is recommended by RICS, which is a material valuation uncertainty, which basically says that they have factored in the valuations the COVID-19 known impact. The unknown impact of COVID-19 on the long term, by definition, as they are unknown, cannot be factored in the valuation.
Consequently, they state that the valuation should be closely monitored frequently. I think they have clearly indicated that they are not in a position today, like anyone else, to draw a conclusion of the COVID-19 on valuations. When they will have enough evidence, either on transaction or leasing transaction, they will probably adjust what needs to be adjusted.
Okay. Thank you very much.
The next question comes from the line of Jaap Kuin from Kempen. Please go ahead.
Yeah. Hi, good morning. A couple of questions from my side. I'd like to do them one by one, please. The first one would be on rent relief. It seems you have not done a lot of that already. I'm guessing this is a strategic decision not to hand out rent holidays or reliefs just yet. Maybe you could confirm that, and then maybe to frame your expectations about the share of rental for 2020, which is still at risk. Would you agree that 10%-20% of the whole year's rents are still at risk?
Yeah, for your question. I think once more, let's be very clear. We have EUR 221 million of rent and service charge not collected as we speak. Okay? When we look at the rents and service charges which are being charged or invoiced to the tenants when the shops were closed, okay, this is EUR 194 million. There is not a big gap. The discussion we have with our clients, retailers, is how we can settle this unprecedented situation where rents have been charged during a closing period. We are progressing pretty well on that front. Are we going to recollect 100% of the EUR 221 million? Probably not, but we are confident we will recover a significant portion of it.
In compensation, we will have negotiated lease extensions or new stores or other form of compensation because the relation we have with our tenants is not only on two months of rent, it's a 5- 10-year relation, and we are sure we will go through that episode very quickly, and we will be fully transparent to the market when we know exactly the outcome of such negotiation. We have signed 900 lease deals today, which is 10% of rent roll, and we are progressing every day. I'm sure we will close that before the end of the year, as I just said.
All right. That's helpful. Thanks. Maybe could you address Italy, because I think that has the lowest collection rate. It's at 15% of Q2. Could you share your expectations for the rent recovery for Italy? Is that because of the government regulations, payments have been lagging, do you expect this to recover in line with other countries, or do you expect a higher permanent impairment there as well?
I think there are always specificities. I don't want to make it too simple. I think when you look at where the COVID-19 has been the most terrible for populations and for the economy, it's probably the south of Europe with Spain, France, and Italy, where the lockdown has been a seriously impacted organization. Italy is also one of the countries that opened at the latest, and it's clear that resuming the payments, it's a challenge. We are confident that this will follow exactly the same pattern that we have in other countries. We can see a big gap between the north of Europe, where, as you have seen, we have collected double than the south of Europe. There are different specificities, but I think the main one is the magnitude of the crisis and the time of reopening. That has been the main impact.
For Q2, when we look at Q2, Jean-Michel is giving me the numbers. Thank you, Jean-Michel. For Q2 in Italy, we have invoiced EUR 55. EUR 23 million is due, and we have deferred EUR 31. We have also a very significant amount of rent charge for Q2, which is deferred, so more than half. Basically, they will be paid when they are due, which is, if I remember well, in September.
All right. Finally, on the collection rate, can you please confirm this doesn't include invoking of bank deposits and rent guarantees?
No. Yes, I don't know if it is no or yes, the answer. We have in hands EUR 280 million of security deposit or first demand bank guarantees, which are being provided by tenants to cover any rents arrears during the lease period. We have this in hands, but the amount of rent, the receivable, the EUR 221 million I was referring to is not net of the deposit and the bank guarantees. We have more bank guarantees and security deposit than the receivables due as of June 30.
Yeah. I guess that covers the kind of coverage of the outstanding receivable, but I guess in terms of the collection rate you've presented for Q2, that doesn't include rent that you have collected, but in fact was calling in of the deposits. Kind of the collection rate doesn't include any cash from deposits.
No. We have not started yet.
Okay, clear. Thanks.
Answering quickly to your question.
Our next question comes from the line of Sander Bunck from Barclays. Please go ahead.
Hi. Morning, team. Three questions from me, I'll do them one by one. First one, can you say anything on the Q3 rent collection progress thus far?
It's very clear. We have moved from a quarterly invoicing or payment obligation to a monthly payment obligation. For the month of July, with no deferral, because the month of July is not deferred, we have collected so far, as we speak, 68% of the month of July.
Okay. Great.
We have also collected a little bit of August and September. Even though they were not obligated to, some of the tenants have also paid August and September, but to a more limited amount.
Have all your leases switched from quarterly to monthly rents?
Sorry?
Have all your leases switched from quarterly to monthly invoicing?
For Q3, yes.
Okay.
I think we have to be pragmatic. Our tenants are getting out of a crisis, liquidity is clearly an issue for them, and paying a quarter in advance is probably not the easiest thing to do. We are very pragmatic. We have invoiced July, August, and September at once, but we have made it clear that they can pay on a monthly basis.
Okay. That makes sense.
We will adjust.
Okay. The second question I had is on kind of looking beyond what's currently happening in terms of how you are renegotiating your leases on a more sustainable basis, particularly with the variable rent element in there. I think at the moment, the contribution of variable rents within your overall rental revenue is still relatively low. I presume a lot of your clients or tenants are asking for that variable element to increase going forward. How are those kind of discussions going forward? What are you willing to accept? What are you not willing to accept with regards to variable leases? What would you be happy with?
As you can see, or as you can read, some tenants are very vocal about what they would like us to do. We can say what we are not going to do. We are not going to switch from the current lease structure with MGR plus sales-based rent to only sales-based rent. The amount of sales-based rent in 2019, on top of my head, to be checked, is roughly EUR 45 million for Klépierre. When you see in H1, the impact of sales-based rent is mainly the sales-based rent, which is paid on top of MGR. We have only a very limited number of leases that are pure SBR at Klépierre, probably less than 1/3 of the EUR 45 million, or between a third and a half of the EUR 45 million I was referring to, and that's it. We are not going to change the business model.
We are going to provide support to our retailers, probably first to the one who need it the most, and it will take different forms. We are not going to change the lease structure.
Okay. Just because the EUR 45 million, obviously, in the grand scheme of things, is still a very low number. I presume at some point you have to meet your tenant somewhere in the middle. Rather than going to 100% sales-based to a very small amount now, do you see this number increasing to, say, 10%, 15%, 20% of the rent roll? Is that even too optimistic? You think it's always going to be lower than that?
No, I don't see. Today, the business model we have with our tenants probably sometimes is misunderstood. Our lease agreement in Continental Europe, they are not very long leases. In France, they are 10 years, but every three years, the tenant, they can get out. The average duration of a lease in Klépierre, I think if I remember well, it's around six years or between six and 6.5 years. By definition, at the end of the lease, the rents have to be reviewed, renegotiated, and we are not of the view that we should implement a sales-based rent structure for only five years or six years. I don't expect the number of leases subject to sales-based rent increasing to the number you are referring to.
Once more, to be very clear, on the EUR 45 million sales-based rent we have, okay, only less than half of it is pure SBR. The rest is overage rent, i.e., sales-based rent that are triggered because performance are better than initially expected, and they trigger additional sales-based rent on top of MGR. Okay.
Okay.
I don't want to spend too much time into blurry details like this for EUR 45 million.
Understand. Okay, the very last one is on disposals. Obviously, the LTV is now closer to kind of the upper limit. I don't think you've referred to any changed disposal targets. Are you looking to up your disposal target, or what are you saying on disposals at this point in time?
I would say no change. We never gave any target, medium or long term. Okay? On disposal, we never gave any target. We are still working on a disposal program. We were used in the past to do around EUR 500 million-EUR 600 million disposal on a regular basis. Probably this year, due to the circumstances, it will be lower, but this will resume when the market reopens.
Okay, great. Thanks very much for the color.
The next question comes from the line of Rob Jones from Exane. Please go ahead.
Morning, everybody. Sander's semi stolen quite a few of my questions, but I'll go ahead with a couple of others that I had as a backup. Just firstly, obviously guidance has not been reintroduced yet. I completely understand that. What I wanted to understand is, of things that are within your control, what do you need to see to get comfortable to get to the point where you can think about reintroducing that guidance? Is it a certain percentage, for example, of tenant discussions completed or some other metric? Just secondly, on those tenant discussions, as you said, you've completed, I think, 10% so far. Obviously, Unibail-Rodamco-Westfield's commented this morning that it's completed 25% of its discussions. How confident are you that you can complete those discussions by the end of the year? Just a final question around the bank guarantees.
Obviously, you made the point that you've got just over EUR 200 million of rent receivables at the moment, bank guarantees of EUR 280 million. What I'd be interested to know is, of the rent receivable, i.e., the leases that are in arrears, what are the bank guarantees in relation to those leases? Obviously, let's say you only had 30% of your rents in arrears, you might be in a position where actually the bank guarantees in relation to those rents is only about 30% of the EUR 280 million. Maybe get a bit of color on that. Thank you.
Thank you, Rob. I listen well your name today. The first question, I think what we want to clearly say, we had an encouraging restart of operations. This is factual. Sales are 85% compared to last year. Footfall are a little bit lower, but transformation rate is better. This is factual. In any way, we are still very, I would say, cautious about what would be the development of our operation in the months to come. That's the reason why, because of the sanitary environment, the risk of further closure, we are not in a position to give a guidance. I think reasonably, the consequence of this is that by Q3, at the end of Q3, we will probably have a better view of the impact of COVID-19 on the 2020 earnings. That's what probably I can say.
When we talk about the leasing negotiation, it's by definition a lot of work to do. Either we give up everything, or either we get everything, probably this will be somewhere in the middle. It takes time. The negotiation is not only about the rent for the closing period, it is also the global relation and the new stores to open and some leasing operations which were under the execution. I am very confident that by the end of the year, we will have closed all this, and this would be behind us. I'm sure. We have no other choice than doing it. I think it's important to see, in the coming months, the rent collection for July, August, and September, which will be also very important to monitor.
Last question.
Yes, for the guarantees, we have EUR 268 million of security deposit, which we already have in our bank accounts, and guarantees, which are bank guarantees. To your specific question, does it match specifically to each and every receivable? I would say, in general, yes. If there is a receivable in our areas in the EUR 221 million we are referring to, there is a bank guarantee covering it, or a security deposit, in general terms.
Great. Thank you very much.
Before we continue, please be reminded that if you have a question, you can press star one on your keypads now. Our next question comes from the line of Bart Gysens from Morgan Stanley. Please go ahead.
Hi. Good morning. Can you hear me?
Hear you very well, Bart.
Great. Look, I appreciate that your malls have been open only relatively or have reopened only a relatively short period of time, and that tenant sales going back up to 85% of previous levels is, in itself, not a bad result. Of course, I think a lot of your tenants have very low margins. Selling 15% less than planned is probably an issue for a lot of them. It means that they're probably still loss-making. Probably things will get better, but do you have a gauge on how many or what portion of your clients are actually loss-making currently, and by how much sales need to improve for them to break even? Do you measure that at all? Do you have visibility on that?
It's all good and well to talk about collection or when you were closed, but I guess the more important issue is, what will be the ability of tenants and the willingness of tenants to pay in the future, and how many tenants are going to survive this if they don't break even for several months? Thank you.
Thank you, Bart. I think your question is very fair and very legitimate. We are not saying that there is no crisis. We are not saying we are not in challenging times. Our retailers are also in challenging times. We are just saying that the restart of operations is higher than expected, and it is 85% compared to last year. It is also fair to say that the retailers are going to take actions to protect their profit. There is not only the rent component in the P&L of retailers, but there are also the number of people per store and finally, also the cost of product they are selling. You are right. What the challenge for us is in the next weeks and months to monitor the financial situation of our retailers, and we will have to be pragmatic.
When I look at the And I think we have that in our exhibit to our financial statements. We have the list of our main tenants that represent a significant portion of our rent roll. We believe that most of them have the capacity to go through this crisis. I would be very modest and humble answering the question. We are facing something which is unprecedented, so difficult to predict the future.
Great. Thank you very much.
We have no further questions on the phone lines.
We'll take the question from the webcast. The first one is on the 900 leases that have been signed or approved. What are the impacts in terms of rents, compared to previous leases?
If we look at H1, the concessions we have done for this, which have been signed, was EUR 12 million, and the straight- lining of this is EUR 1 million H1, and the rest will be H2 and 2021 and 2022. I'm not going to comment more on what percentage of the initial rent it is. I think what we want you to understand is that we have EUR 221 million of receivables for Q2, out of which EUR 194 million are the rents for the lockdown period. That's what we are discussing with our tenants. You have a pretty good understanding of what is at stake for Klépierre, and I'm not going to comment and tell you exactly where we will end. We will see when the negotiation are finalized.
We have another question from the webcast. Which are the principle of [audio distortion] tenants during the closure period, reduction of MGR and EPS, what are the ranges?
We are doing a different type of negotiation. I would say basically, the basic of the negotiation is that if we have to abate some of the rent of the closure period, what percentage is it and what type of compensation we have. The principle of the negotiation is a rent holiday for the closure period, end period. Do we have more questions on the phone, or can we consider we are done?
We've got no further questions on the phone lines.
Okay. Very good. Thank you very much for all of you attending, and I wish you a good summer break. We all deserve it. Thank you very much.
Thank you for joining today's conference. You may now disconnect your lines.