Good morning, and, thank you for making yourselves available. While we believe that we've been able to take the required steps to deal with this phase of COVID-19, it is not yet over, and the pandemic has accelerated long-standing trends. We now need to make sure that we take the steps required to best position the firm for the future. What we're announcing today is a comprehensive, large-scale, EUR 9-plus billion plan, the RESET Plan. This plan is designed to strengthen our capital structure in the long term, secure uninterrupted access to the debt markets, and best position the group to adapt to a fast-changing environment. We will also today provide an update on our performance since H1 2020 in terms of footfall, tenant sales, and rent collection. As outlined in our H1 presentation, since the crisis hit the retail sector, we've moved fast to mitigate its impact.
We have focused on tenant negotiations in a pragmatic and positive dialogue for all, while making solid progress with rent collection, which is improving month after month. Footfall and tenant sales trends are encouraging, with French August sales, for instance, almost back to last year's level. However, we live in uncertain times and in a fast-changing environment. This is why it's essential to move fast and to remain ahead, and this is what our RESET Plan will do. Before describing the key pillars of this plan, I'd like to give you a bit of background. We have consistently delivered on strategic and capital allocation priorities through our flagship destination strategy, disposals, EUR 4.8 billion since June 2018, and our relentless focus on operational performance.
In addition, throughout this unprecedented crisis, the entire URW team has worked incredibly hard to mitigate its impact on our group, but we believe we now need to take more action. This is the rationale behind the RESET Plan we're announcing today, which represents more than EUR 9 billion of deleveraging and cash savings initiatives. A fully underwritten EUR 3.5 billion capital raise to be used to immediately reduce leverage, limiting cash dividends through scrips and/or a lower payout ratio, resulting in EUR 1 billion cash savings over the next two years, a further EUR 800 million reduction in development and non-essential operating CapEx, and EUR 4 billion of disposals expected to be completed by year-end 2021, of which EUR 1 billion is making good progress. This plan will enable the group to preserve its strong investment-grade credit rating with a rating of A-minus Baa1, and maintain a sustainable capital structure.
More broadly, all these actions together will strengthen our balance sheet to execute our long-term strategy. The supervisory board of URW has yesterday authorized a EUR 3.5 billion capital increase, which, in conjunction with the other strategic initiatives, is designed to bolster the financial profile of the group and best position URW for the future while strengthening our balance sheet, maintaining a strong investment-grade credit rating, and ensuring unimpeded access to credit markets. The proceeds of the rights issue would be used to immediately reduce leverage. Upon approval of the capital increase by the EGM of URW SE, final terms and conditions, including the subscription, subscription price, are expected to be determined and announced in Q4 2020, and the transaction is expected to close by year-end. As part of this presentation today, we would like to discuss two main topics.
First, I'll now provide an update on how the COVID-19 pandemic has impacted our business on the mitigating measures we've put in place and some encouraging trends we're seeing. Then, together with Jaap Tonckens, I'll describe the five strategic priorities which form our EUR 9 billion RESET Plan, including the expected impact of the EUR 3.5 billion proposed capital raise. As mentioned during our H1 results, we have taken a proactive approach to mitigate the impact of the pandemic. During the lockdown, we had to close shopping centers in most markets, and we immediately shifted our focus to preserving liquidity and supporting our communities and our tenants. We deferred April rents, and in most regions, May rents, in order to help the retailers. We reduced our pipeline by EUR 1.6 billion. We canceled the EUR 748 million final dividend with respect to 2019.
We raised EUR 1.4 billion in senior bonds and sold a majority interest in five shopping centers in France, generating EUR 1.5 billion in net proceeds. Then, as confinement measures were gradually lifted in Europe and the U.S., we safely reopened our shopping centers, engaged in negotiation with the retailers, and raised an additional EUR 750 million of bonds, highlighting the support we continue to enjoy in debt markets. Challenges certainly remain, but we see clear signals that the recovery is on the way. 96% of our shopping centers have reopened. Footfall recovery in Continental Europe is encouraging, and tenant sales are improving. Tenant negotiations are well on track, with 61% of negotiations now closed, and we're making solid progress with rent collection recovery month after month.
We have reopened all our shopping centers globally, with the exception of the indoor operations of five centers in Los Angeles County, which continue to be suspended. As you know, the situation in the U.S. has been uneven, with states only gradually lifting restrictions and New York State and California, the last ones to do so. Overall, our weighted average closure period was seventy-four days, little more than two months, and there are still some specific local restrictions for cinemas, gyms, and restaurants. This slide is very interesting to understand what's happening in terms of recovery. It shows the impact of the lockdown on mobility in major cities. We've compared cities with Paris, which is itself back at more than 80% of the pre-pandemic levels.
As you can see, the way the economy and people are going back to normal varies greatly from city to city between Continental Europe, the U.K., and the U.S., and is a function of how the crisis has been handled. This doesn't mean that recovery won't happen in other places, just that it hasn't happened yet as much as it has in Paris, for example, and that is very important now to get people back to their offices. We can see the direct impact of this in our August sales data as well, which I'll cover in a few slides. The footfall recovery is very encouraging, with most Continental European regions now trending in the range of 80%-90% of last year's footfall.
While the U.K. is in the 60%-70% range, it shows good week-on-week development as people are now progressively returning to offices following the lockdown and the summer holidays. We remain prudent, however, as COVID restrictions might be reinstated here and there in case of a new surge in the virus. Footfall in the US, although progressing, is still lagging behind Europe because of the restrictions in place and lower mobility, as shown in the previous slide. In terms of sales performance, tenant sales in continental Europe were -26% in June, -16% in July, and -12% in August, showing a more rapid recovery than footfall as most remaining restrictions were lifted and higher conversion rates and average baskets were recorded.
U.K. figures are progressing, but from a lower base, as centers reopened later, and you see London is late compared to other European capital cities. These upwards sloping trends are really encouraging. In France, which represents 27% of our retail portfolio, the preliminary August figures show tenant sales are at 95% of August 2019 levels, a strong improvement from June and July. Particularly noteworthy was that, forty-four percent of our French stores reported August sales above 2019 levels, and excluding F&B and entertainment, which are still lagging, August sales in France are at 98.5% of 2019. Tenant negotiations, which, started after the re-opening of our centers, are making solid progress. As previously indicated, there's no one-size-fits-all approach, and negotiations are on a case-by-case basis, based on two very simple principles: fairness and sharing the burden.
Importantly, they are not about permanently changing lease structures or turning to variable rents only. In return, we are standing for concessions which range from extending the firm period of the leases to increasing the sales-based rents percentage, waiving co-tenancy clauses in the U.S., or signing leases for new stores. As of September 14, negotiations are more than 61% through the process, up from 25% as at July 24. In terms of leasing, we signed 118 leases on standing assets in July and August in Europe, with an MGR uplift of +4.1%, which is driven by good uplifts in Spain, Central Europe, and Austria. This is, of course, only a snapshot, not likely to be representative for the year as a whole, but it's all the same, an encouraging sign. Similarly, the rent collection continues to progress.
Q2 rent collection for the group stands at 46%. Only 7% of rent relief has been registered at this date, with a further 36% still under negotiation. The July collection rate stands at 72%, up from 50% as at July 24, and driven by continental Europe at 81%, and August stands at 70%, with Europe also at 81%. Collection is partly driven by tenant negotiations, as some tenants await the outcome of negotiations to release rent payments. However, potential rent relief is always linked to the payment in full of the outstanding amounts agreed upon. In certain cases where no agreement has been reached, the group has drawn on security deposits or initiated legal actions to enforce lease agreements. Now, let's move to the strategic initiatives which form part of our EUR 9+ billion reset plan.
This RESET Plan consists of five strategic initiatives, which total the deleveraging and savings in excess of EUR 9 billion. Restore our financial strength through the proposed capital raise and cash dividend savings. Execute on asset disposals, representing EUR 4 billion by year-end 2021. Streamline operations and footprint. Embrace a changing environment, and thrive by leveraging our platform to grow revenues. Jaap will now give details on the first three steps of our plan.
Thanks, Christophe. I will start with the first pillar, Restore, the restoration of financial strength. We've said this before, and we continue to be very hard at work to actually do so. The clear priority that we have is to reduce the leverage of the group, as indicated by Christophe. We firmly believe that the RESET Plan will allow us to do so by strengthening the balance sheet and put the foundation here to enable us to execute on the long-term strategy. So the key pillars, the fully underwritten EUR 3.5 billion capital raise to be used immediately to reduce leverage, limiting cash dividends through scrip and/or lower payout ratios, resulting in EUR 1 billion of cash savings over the next two years.
A further EUR 800 million reduction in development and non-essential operating CapEx, and EUR 4 billion of disposals expected to be completed by year-end 2021. We have engaged with the rating agencies to review the reset plan to ensure it would meet our objectives of maintaining a robust investment grade rating. As you might have seen, the agencies, yes, they confirmed that this will plan enable us to do so. The ratings stable at S&P at an A-minus, continuing with negative outlook, and Baa1 at Moody's, which is one notch down, but with a stable outlook. As a reminder, as of June 30, we had EUR 12.7 billion of cash on hand and undrawn credit lines, which was, obviously, one of the reasons that we're doing this is not for liquidity.
It's really designed to ensure continued access to the debt markets and to keep our cost of debt low with an LTV between 30% and 40% and net debt to EBITDA below 9 times. The latter objective we aim to achieve by the end of 2021. We've run sensitivities on the potential valuation movements of the portfolio, as well as our EBITDA, and these simulations show that even if valuations were to decline by much more than we anticipate, for example, a 25% drop in GMV, we would still have a lot of headroom before reaching our IFRS LTV covenant level of 60%, assuming the EUR 33.5 billion of capital raise and EUR 4 billion of disposals.
We've even run the scenario where we would issue the EUR 3.5 billion, and to help people understand the sensitivity, considering the EUR 1 billion of disposals that are well underway. In that particular case, a 25% decline would bring the LTV to circa 46%, above where we want it to be. But in these kind of scenarios, we believe we can live with that. The key element for us is to lay the foundation here, to be able to withstand valuation declines and continue to execute on the strategy. As to the EBITDA sensitivity, we could see this decline by 15% and still be below our 9x target. If cash flow were to decline by 20%, it would still be below where we were at December 2019.
We have a well spread debt maturity profile with attractive financing terms. Our liquidity position, pro forma for the capital raise, would have been EUR 16.2 billion as of June thirty, compared to the EUR 15 billion maturities from the second half of 2020 through to 2025. So again, as I said, the capital raise here is not for liquidity, but to reduce debt and strengthen the capital structure for the long term. You know, we've said this before, and we have the liquidity to repay maturing debt, but if we were to have to use the undrawn lines to refinance debt, and we can, it would still be debt, albeit short-term bank debt. And this is why maintaining our uninterrupted access to the credit markets on attractive terms is so very important. Now, as to the execution part, the disposal plan.
They have always been, and they continue to be a critical component of our strategy. As indicated during our H1 results, the objective is to execute four billion of disposals, which we expect we are going to be able to achieve by the end of two thousand and twenty-one. The program would run across all asset classes at 50% non-retail assets, and we have identified a larger pool for a total of six billion of assets that have been earmarked for sale, giving us flexibility in the choice and timing of the asset sales. We have confidence in our capacity to achieve this target, and we continue to be in discussions and making good progress with potential buyers on approximately one billion of assets. We have a strong track record in portfolio optimization.
We sold EUR 4.8 billion since June 2018 at an average 4.8% premium, including the five French retail assets in the midst of the COVID-19 crisis. And we're putting all of our expertise and knowledge to work in this aggressive disposal plan. It will also include the sale of joint venture stakes in liquid and mature assets to achieve our goal. And as I said during the half, we will be pragmatic in order to accomplish our objectives. When it comes to streamline, we've already announced in our H1 results the measures on the left-hand side of the slide. But going forward, we're stepping up our assets to streamline our operations, optimize the footprints, to better allow the use and the best use of our resources.
We'll do so through a further eight hundred million CapEx reduction, including six hundred million of development CapEx and approximately two hundred million of non-essential operating CapEx. We will also not start on large scale, non-committed projects, and our reduced pipeline will focus on our standing assets while prioritizing capital allocation to ensure that we maintain their high quality and positioning, and we're going to also continue to work actively to be able to reduce the regional footprint in the U.S. in the near term. We will also increase our focus on cost savings and through further simplification of our structures and gross admin expense savings on top of the ones we have already accomplished. We continue to perform an in-depth analysis of our development pipeline, and have decreased it by a further six hundred million since our H1 publication in July.
So since the full year ended on December 2019, we've reduced the total by about EUR 2.2 billion. Now, after we take into account the EUR 2.2 billion invested to date, the overall pipeline to be funded is now EUR 3.4 billion, of which EUR 600 million is expected to be spent over the next 12 months. So that, as at, you know, H1 2021, we expect EUR 2.9 billion left to be spent, of which today only 34% is committed. With that, let me hand it back to Christophe.
Thanks, Jaap. I should have said that you of course on the East Coast in the United States, it's 3:15 A.M. in the morning for you, or 3:20 A.M. now, so thanks for being with us. I'll now go through the embrace section of our plan. You know, the retail environment is changing fast. COVID-19 has accelerated trends that were, for most, already present before the onset of this pandemic. URW, like our peers and retailers, is not unaffected by those structural changes. The internet penetration has further accelerated as people were dependent on online retail during the lockdowns, but this is expected to stabilize post-COVID, as illustrated by the chart, which is showing the internet penetration in the U.K. It's now confirmed that online sales are progressively coming back towards more normal levels, albeit probably higher than pre-COVID, as physical stores reopen.
August data, to be released this Friday, will certainly confirm this. The physical presence will, however, remain essential to brands, and the number of stores per brand will need to be reduced for retailers to focus on the best locations. In addition to online, stores are definitely part of the future of retail. They have proven to have an irreplaceable value for brands and retailers. They bring customer experience, brand awareness, differentiation, and profitability. Yes, there are store closures, particularly in the U.S., but retailers continue to open stores in Europe and in the U.S., and clearly reiterate the necessity of this physical presence. Brands need physical stores. LEGO's recent announcement of their intention to open 120 stores, new stores, of which 80 in China, where online penetration is the highest in the world, perfectly illustrates this point, I think.
As per a GlobalData study published yesterday and referenced in Exane's newsletter of yesterday, close to 90% of retailers said stores would be just as important or more important to them in the future, and stores are important for consumers, too. 80% say they have missed the interaction of physical stores during the lockdown. Our portfolio, consisting of the majority of flagship destinations, is of unique quality. Our assets benefit from the highest footfall levels, with six out of the top 10 and 19 out of the top 30 assets in Europe. Our assets are mostly urban. Two-thirds of these assets are connected to metro and tram lines. Third-party experts, not us, acknowledge the quality of our portfolio with an average ranking of A+, and 95% of URW's gross asset value rated A or above, more than any of our peers.
This, in turn, leads to stronger performance. We're convinced that in this context of connected retail, the quality of our assets will position the group as a long-term winner, and that we have the right strategy of concentration, differentiation, and innovation. All of this enables the group to benefit from the accelerated retail polarization, with the best centers getting even better as consumer and retailer confidence recover post-COVID. Our projects have been gradually rebalanced and adapted to the changing environment. Indeed, in all major cities, people are looking for vibrant places, combining shopping, leisure, hotels, offices, with both public bodies promoting mixed-use projects and investors chasing this trend. This leads to a lower reliance on retail, which today represents around 30% of our total pipeline in terms of square meters.
We have a strong track record in delivering non-retail assets, as illustrated, for instance, by Westfield Stratford City, by the new residential tower at Westfield UTC in San Diego, and offices above retail assets at So Ouest in France, for instance. URW benefits from strong skills and expertise and has experience attracting third-party capital to achieve its objectives. The last pillar of our RESET Plan, Thrive, consists in leveraging URW's powerful platform to be able to grow revenue streams, including in a challenged environment. Our objective is threefold: bolster the attractiveness and legitimacy of our flagship destinations to extend their audience, reinforce URW's value proposition, and develop new revenues to better and further monetize this audience, and develop a new asset life strategy, where possible, to generate potential additional revenues.
To increase the audience of our flagships, we will continue to renew our retail mixed value proposition to offset the decline of some retail categories and bolster new, growing, and emerging ones, such as sports and athleisure, health and wellbeing, entertainment, DNVBs, et cetera. URW really has the power to become a kingmaker for fast-growing brands by connecting them to the best audience in the best locations. Our flagships will evolve as well to mixed use as we extend their offerings to new tenant categories, partnering with the institutional capital to do so.
We will also look to better capitalize on the global Westfield brand to increase our reach and the frequency of contact with customers. To better monetize the value of our increased audience, we plan to provide retailers with an increased offering in digital and omni-channel services, such as click and collect and home delivery, which should help sustain rental revenues. We also anticipate new rental revenues from emerging tenants, including DNVBs, through the use of new formats, such as white boxes or pop-ups. We will also look to generate new non-rental revenue streams with brands for which a better qualified audience of one point two billion visits a year has a real value. This will be done, for instance, through services provided to brands in all flagships, as well as through partnerships with media agencies and logistics specialists.
These new revenue streams are expected to reach EUR 150 million by 2025. And finally, as a long-term focus, we consider to expand asset-light revenues through offering URW's asset management expertise to investors through third-party management contracts, and a future option could also be to franchise the Westfield brand and know-how to leading centers in non-competing countries or catchment areas to generate additional fee revenues. But although we already had interest from operators in some countries, this is not for today. In conclusion, we believe our EUR 9+ billion RESET Plan, fully supported by URW's senior management team and supervisory board, will best position URW for the future, both financially and strategically. There are three points I'd like to leave you with. One, deleveraging is the top priority, and we're taking decisive action to deliver on this.
Two, with this plan, we will have generated more headroom to maintain our strong investment grade rating, even if valuations fall. And three, we are convinced URW will be best positioned for the future as the best partners for brands and retailers, thanks to our portfolio of must-have flagship destinations with additional potential revenue streams going forward. Thank you for your attention, and now let me open up the Q&A session. Thank you.
Good morning, ladies and gentlemen. If you wish to ask a question, please press zero one on your telephone keypad. Our first question comes from Bart Gysens from Morgan Stanley.
Hi, good morning, gentlemen. Can you hear me?
Yes, we can.
Great. Look, the reset plan seems to hinge or a significant part of your reset plan is your ability to sell assets. You've sold EUR 4.3 billion of assets in June 2018, or EUR 4.8 billion, if you include the fact that you've been allowed to shift EUR 500 million of debt off balance sheet. Now, a big chunk of that was offices, in an environment when office fundamentals were better than they are today. So my question is: What gives you the confidence that you can sell almost as much over the next 12 months as you have done over the last two years, which comprise mainly offices? What are you going to do differently over the next 12 months that you haven't tried over the last 24 months? Thank you.
Thanks, Bart. Thank you for outlining the fact that we've been successful to dispose EUR 4.8 billion. You count EUR 4.3 billion, but we count the net disposal proceeds, as you know, which are EUR 4.8 billion in the last two years. We have sold, you said the bigger chunk was offices. Actually, it was half retail, half offices, and going forward, the EUR 4 billion that we have full confidence in selling will be also half retail and half offices and others. So I think it's the balance in the past will be more or less the same balance in the future. Second, and we've outlined this in the presentation, these EUR 4 billion regard only European assets.
They are out of a pool of identified EUR 6 billion of assets, so, our hit rate should be four out of six, which give us, there again, confidence that we can reach this, this target. You know, and we've announced that, and there are no news today on this, but there are EUR 1 billion which are in advanced negotiations, so we're pretty confident that we'll achieve this, this, first part of the EUR 4 billion plan. And last but not least, we are having several discussions on some other assets. There again, before it's done, it's not done, as I am used to say, but we have full confidence in the capacity of our team to achieve this EUR 4 billion.
And there again, you know, until it's done, it's not done, but the teams are very hard at work, as you imagine. I think one very important point to mention as well, is that the average quality of what we're going to plan to dispose is of higher quality of what we've disposed in the past. I think Unibail-Rodamco-Westfield has more than any other player, streamlined with a very aggressive way, its portfolio. So the average quality of what we will be selling is of much higher quality, and there again, that gives us confidence.
I'd like to add a final point. You've probably noticed in this part, the execution of disposals, the E of the RESET Plan, that we are considering selling JV stakes in some flagship assets, which we have not really done in the past, which would be no news for the real estate sector. You know, for example, that our best asset in Spain is owned in a fifty-fifty JV, that our two London assets are in fifty-fifty JVs. So we would be considering disposing that as well. The objective is to achieve this EUR 4 billion, and we are very confident. Yeah, do you want to add something?
Sorry, can I just ask one more observation? I think it goes in line as to with what you were saying. We have, through the aggressive disposal program, Bart, we have already cleaned out the portfolio. And when we're saying that we're selling, you know, high quality assets, it's just basically the next layer, if you will, in the, in the portfolio. What we are selling, what we have left to sell, and that's, I think, the most important thing, because we've upgraded portfolio quality so significantly, what we have left to sell is much higher than what we understand is trying to be sold at this point in, in time. And as we said, we're gonna be pragmatic about...
about achieving the objective, and if that means that it's not gonna be, you know, at a premium to book, you know, you'll get what I'm saying.
Great. Thank you very much.
Thanks, Bob.
Our next question comes from Jonathan Kownator from Goldman Sachs.
Good morning, thank you for the presentation. Three questions, if I may. The first one on dividend policy. Can you help us understand, you're saying you're gonna save EUR 1 billion, but is it EUR 1 billion versus your payments in dividends? And you also mentioned the scrip, and some investors asked questions around whether this was effectively a backdoor to raising more equity than EUR 3.5 billion through the scrip dividend. So if you can give us a bit of perhaps clarity on that, that would be helpful. The second question is on U.S. regional malls. Can you please clarify a bit what you mean by reduce the mall footprint there? And the last question is a bit more, I would say, fundamental.
There's been questions around how you could effectively improve the visibility of the rental streams going forward, and obviously, peers such as Hammerson have are trying some new measures. Can you help us understand how you can provide perhaps a bit more clarity? I know it's difficult in this environment, on rental visibility and whether you considered, you know, similar type of measures? Thank you.
The dividend policy, I'll let Jaap maybe elaborate, but the dividend policy obviously will be explained or set during the EGM, so more news on this later. I think the way to save 1 billion EUR is through either scrip and/or reduction of the amount of dividend. When I say reduction, it's compared to previous levels, obviously, which will enable us to save 1 billion EUR. You know, the scrip dividend, you can't force investors to accept the scrip dividend, but there are ways to incentivize investors for scrip dividend. Jaap, do you want to add something on this?
Sure. I think that what we need to think through is that the baseline, the reset of the dividends that we did for with respect to 2020, should be seen kind of as your baseline. And what we're expecting that if you were to assume that the board were to declare another EUR 750 million, if right? At that point, we would look to raise either scrip, so that is indeed it would be an increase, if you will. That is not part of this stage, but it could also be through less cash out the door. The objective is to save EUR 1 billion of cash from going out the door over the next two years. You want to have me take the regional mall, Christophe?
Do you want me to take the regional malls? Yeah, the regional malls, I mean, this is. It's not in the execute section of the plan, but in the streamline section of the plan, so we're not counting on disposals of regional malls in the U.S. in the EUR 4 billion of disposals. This is point one. Point two, we had announced in December 2017, when we presented the Westfield transaction, that we would be planning to reduce the regional footprint in the U.S. We've already actually disposed two assets, one in July 2018, and one more recently, in I think in July this year. So we will be looking into more of this.
This is also meant to first concentrate more of the energy of the U.S. teams on our flagships. And, you know, apart from these regional malls, which only account, you know, kind of 3% of our GMV, but to concentrate the U.S. team on our flagships, which have got potential. We're opening new stores of new retailers in these flagships. And as the market is difficult in the U.S. for regional malls, as you can imagine, this is an ongoing process. We are having several discussions with potential investors, and we'll be updating the market further. So it's not part of the EUR 4 billion, but it's part of the streamlining in order to further concentrate the teams on the flagships in the US.
I think to supplement this, Christophe, we have now studied, obviously, the ability to actually do this. It was complex, and we are gonna accomplish the disposal of the regional malls. Some of them will be on an individual basis, some it could be either a portfolio sale and/or a spinoff. Let's be very clear about it. The regional malls are gonna go.
As for your last question, Jonathan, and I will not comment on Hammerson's strategy. I will just say that our portfolio, our strategy, our regional footprint, our regional diversification sets us really apart from Hammerson. And why not? Because some people might have the question of Intu. Honestly, I have a hard time understanding why we can even be compared to Intu or Hammerson, which are very different animals. No judgment here. They're just very, very different from who we are. And I don't see any reason why, while we're achieving MGR uplifts on relettings and renewals, and we've achieved this since July and August, why on earth would I reset the rents to a lower level when I'm achieving in excess of the previous rents? It's not happening for every lease. It's not happening in every shopping center.
It might not happen in every market, but overall, there is absolutely no reason when you own flagships assets such as Les Quatre Temps, such as La Maquinista, such as CentrO in Germany, such as Mall of Scandinavia, to do a global reset of leases. It makes no sense, and I hope and I trust that the leasing teams will prove to you and to your, your colleagues, that we, at Unibail-Rodamco-Westfield, can achieve MGR uplifts, and therefore, have no reason to lower the rents. It would make no sense, absolutely no sense. Now, it's not easy, and it's negotiation by negotiations, and, yes, there might be sacrifices here and there. We might accept a lower rent from this tenant to keep it in place until we find a replacement, but overall, I think the MGR uplifts speak for themselves.
Very, very different quality of portfolio, very different, probably quality of teams, I may say.
Thanks, very clear. Just going back on the dividend, because that wasn't entirely clear. So let's say you were paying EUR 1.5 billion in dividend before the two thousand and nineteen, where you paid EUR 750 million. So help us understand again, you know, the EUR 1 billion saving. Is this the EUR 1.5 billion that you were paying previously, or should we think about the EUR 750 million times two minus EUR 1 billion? Again, I'm sorry. I'm just a bit unclear.
That's correct.
But I'm sure it's a simple
That's
explanation.
That is correct, Jonathan. As I said, the EUR 750 million, the reset on that for 2019 with respect to 2019, and we're calculating the EUR 1 billion off of the 750 per year.
So to make it simple
Okay, so
Yep, if you allow me to
One and a half minus one.
No, it's two times seven hundred and fifty
No.
Minus two times five hundred.
Yeah.
As a rule of thumb, I mean, there again, the dividend policy is not set. You know that we've got minimum distribution requirements. We also had a pretty high payout ratio, much higher than some of our peers. So if you take the 2019 basis, which was down to EUR 750 million, and you take the option of a scrip dividend with a 67%, two-thirds hit rate, that's EUR 500 million. That's for the 2020 dividend paid in 2021, and the 2021 dividend paid in 2022. There again, it's a kind of, you know, rough, ballpark calculation, because the dividend policy is not set yet.
That calculation, that easy calculation, 750 and two-thirds of scrip, means EUR 500 million of cash saved, times two years, that's EUR 1 billion. I hope it's clearer.
Okay, that's clear. So in effect, we can think about it potentially as three and a half plus one?
Yes.
Okay, very clear.
I think that's the other thing that we need to think about in the reset plan, Jonathan. If you count the EUR 3.5 billion, plus the EUR 1 billion, which is the savings, but plus the reduction of CapEx by EUR 800 million, and then, you know, with the execution of the disposals, of which the EUR 1 billion is well advanced, if you just look at those steps, we already got EUR 6.3 billion, which, we're very, very comfortable and almost within our control. Almost fully, I should say.
All right. Thank you. Thank you very much.
Let me add, Jonathan, but it's obvious that the EUR 1 billion potential scrip dividend that we would do would not be exactly the same price as the EUR 3.5 billion equity raise, obviously. That's a given.
Sure.
Uh-huh.
Just from a technicality perspective, you mentioned, obviously, scrip, and obviously scrip is a choice from the investors, which you can entice, as we were discussing. But do you have any way to force this? Or, like, can you say the dividend is only gonna be in shares, or do you have to go through a scrip mechanism?
You can't force it, you can incentivize it, like we did, if, I don't know if you remember, I think it was in 2013, I think, where there was a tax on dividends, right? And we offered the option to shareholders to have the non-cash dividend paid in shares, and there was a slight discount in order for it to be an incentive for shareholders. So this is usually the mechanism used by companies when they want a scrip dividend to be offered to their investors. In the end, it's the investor's choice as well, but this is what we will be targeting.
All right, thank you very much.
The other thing is, obviously, to ensure that we achieve the savings, you know, there's other levers, right, in terms of the absolute demands, and we'll make that determination closer to the time.
Okay.
Our next question comes from Rob Virdee from Green Street Advisors.
Morning, gents. Couple of questions. First of all, why the change of heart on the need to raise capital over the past two months? And how did you arrive at that EUR 3.5 billion figure, and I'll ask my second question after that.
Thanks for your question. I think we have two things. First, this is part of a nine billion-plus plan, so the equity raise is one element of this plan. I think we've already been very clear that deleveraging was our priority. I think we've had several discussions over the last month with investors who were telling us that they would consider deleveraging as a necessity for Unibail-Rodamco-Westfield, which is what we're doing. I think this is also an active prudent management. I mean, although we're showing signs of recovery, especially in continental Europe, situation in the U.S. is still pretty difficult, as you know. I think the charts on mobility speak for themselves. I don't know if you have seen these.
It's on an app called Citymapper, which I advertise here, because it's actually quite handy to see in various world cities who's, you know, moving and who's not moving. Actually, meaning who's going shopping, going to the office, and who's not. So the U.S. is still lagging behind, and we have to be very prudent in view of what could be a new surge in the virus and so on. You know, there are some restrictions, measures being put in place here and there. So although the recovery is on the way, we have to stay prudent. One thing which is absolutely essential when you have a debt of EUR 24 billion, which means roughly EUR 3 billion to refinance every year, is that we want to ensure permanent access to the debt markets. And we have engaged with with...
Hence, retain a very strong investment-grade rating, and we have engaged in discussions with the rating agencies. Fabrice Mouchel is in the room here in Paris, and if you have further question on this, he'll be happy to answer. This is, you know, to ensure this strong investment-grade credit rating, a stable outlook with Moody's, downgraded but stable outlook, which is very important. S&P maintaining its A-minus with negative outlook, but the negative outlook is more linked to the sector than to our own metrics, because there again, it's probably much more solid than it was before the announcement. All in all, this holistic plan, with a EUR 3.5 billion, is designed to strengthen our balance sheets, to maintain unimpeded access to the debt markets, and to gain the flexibility to execute on our long-term strategy.
This is how it was designed, and of course, we've had ample discussions with various stakeholders during the holidays, and this is why during the holidays, well, it's not really holidays, of course, but during August, I would say during the summer, and this is why we come out today with this plan, which I think meets these three objectives.
I think, Christophe, there's one more element. Of course, the preferred way for us to delever is to execute the strategy in terms of disposals, but you'll appreciate it takes time, and we wanted to be proactive on this particular step.
Okay. Now on to the disposals then. I appreciate what you said earlier about your confidence in getting them away, but most market participants we speak to generally want to sell their shopping centers, not buy more. How many people are you speaking with who have the capacity to write such big checks? Is it two or three, or seven or eight? On that, I see your debt-to-EBITDA target of nine times. What cap rate are you penciling in, and what quality of assets to sell to get to that?
One point I want to make is that, you know, yes, there are probably more sellers than buyers of shopping centers today, but what we are selling, I said it before today, but it's very important, what we're selling is not of the same quality of what other people might be selling. There, again, I'm not judging, it's just a fact. I mentioned the fact that we'd be considering selling JV stakes in flagship assets. I don't know of too many people doing that in key markets, which are showing very strong signs of recovery. We are having discussions with people interested. You know, these assets don't come on the market very often. Usually, they never come on the market, and this is what gives us confidence.
I think we're able to execute as well in a market which was not easy. Certainly, the deal was signed pre-COVID, but was closed post-COVID on the JV that we set up for the five French retail assets with the two institutional French investors. This is also a sign of our capacity of our teams, which they again are hard at work. I can tell you. Capacity of our teams to find clever solutions and to find the right investors in each market. It's not an all-out, you know, a call for interest. It's being able to spot the right investors in each market, they are not the same to this kind of asset or that kind of asset.
And there again, half of this is non-retail, so should not be concerned by major sentiment on the retail. But we're also confident on our capacity to sell the EUR 2 billion of retail assets in this program. Jaap, you're in charge of this team, so what are you seeing?
Well, we obviously are in dialogue. We know there's dedicated capital to the sector. I think the other important thing is in terms of we're not trying to dump wholesale assets, right? The concept that Christophe mentioned in terms of JV stakes is exactly in line with what we've observed, right, over the last couple of years, whereby investors still want to commit capital to retail, provided that the partner continues to have skin in the game and is also excellent at his game. And people may have different perspectives with respect to the business, but I think that the URW teams are recognized within the industry as being outstanding at what they do. And I think retail investors, or should I say, investors in retail, are cognizant of it.
We've had that conversation with our partners in the five French assets. They were delighted by what they have been seeing in terms of trends, portfolio sales data. So the teams here have enormous credibility with investors in direct stakes in retail, and I think that's a very important component about the strategy.
Okay, and sorry, on the target net debt, EBITDA of nine times, what cap rate are you penciling in to get that in your disposals?
It's basically a variable, right? Because you can see both where your EBITDA goes, right? That's another part which is obviously a moving part, which we're trying to nail down. We're working on nailing down, let's put it that way. And the cap, we have made certain assumptions on the ability to actually dispose of these assets at various price levels.
Okay.
As for the offices-
This goes back to, well, we put pressure on ourselves by saying by the end of 2021, it's a reflection of confidence. But also, I have very little interest in flagging up front, you know, as some of have done in the industry as to what the price will be. There's going to be transactions which are gonna be... That are forced, right? I think that's a, that's an in- that's gonna be an interesting element to observe, and I think that's where the quality differential will become very apparent.
And as for offices, since half of disposals are non-retail assets, I mean, we usually don't do not, well, we never comment market rumors. But there are a certain number of transactions which are talked upon in the market, from us and from other people, which show that the office market in Paris is holding very well. So that will give you an indication of what we could be targeting for this part of the disposals.
Thank you very much, guys.
Thank you.
Our next question comes from Rob Jones from Exane BNP Paribas.
Yeah, good morning, gentlemen. My question has largely been asked in one form or or another, but maybe if we can touch on disposals again. So I completely understand that the rationale for coming out now to to raise equity and announce a announce the kind of reset program, you know, an element of that clearly is on the back of discussions with rating agencies and and desire and need to to maintain existing credit rating, have access to the debt markets, et cetera, et cetera. Completely understand that. Obviously, in an ideal world, you know, you've got you've got execution risk on the disposals, albeit you don't have execution risk on the capital raise, because it's fully underwritten.
So when purely looking at the disposals element, if, for whatever reason, you are not able to complete EUR 4 billion disposals by the end of next year, does that then put pressure again or potential pressure again on your rating? And if so, which other levers can you pull to get to that EUR 9 billion total quantum? Is it the case of having lower levels of dividend distribution for more than two years? Is it more cuts in CapEx, or is there a risk of a second equity raise, or is it a case of, say, selling the EUR 4 billion of assets over a three-year time period rather than 18-month time period? And you know, are the rating agencies comfortable with that?
Rob, I think this is a holistic plan of more than EUR 9 billion. We are confident in our capacity to execute this. We're confident in the fact that this is the plan, and you can't predict what the market will be in two years, I can't either, but I can express my confidence in our teams to execute this strategy. This is what I can say today. It's been carefully calibrated and discussed at length, as you can imagine, with our supervisory board, and we jointly consider that this is the right quantum. You know, and what we wanted to do, because we've been asked the questions, why now and not in a year-and-a-half time, if you have not been able to execute your disposals?
Fair enough, I don't know what the market will be, but it's prudent management, once again, to anticipate and to make sure that we retain this access to the debt markets in excellent conditions, which I think this plan is set for. I think the rating agency is confirming A-minus for one and Baa1 for the other, with stable outlook, is there to prove that this is considered as the right quantum. Now, we have to execute on the disposals, but as we have all said, Jaap and myself, we have confidence in our capacity to do that. Let's not speculate in the future. Let's execute on this holistic plan with discipline and expertise, I would say.
Thanks, Christophe. That's very clear. Just one final quick question. You'll be pleased to know not about actuarials or disposals, but thinking about rent collection updates, and obviously that's progressing pretty well, actually, against your plan on getting everything done in the next few months. But, you know, on the leasing side, obviously, for new leases, we've seen a positive MGR uplift, I think, for, as you said, during your presentation. I presume the discussions with tenants who are overdue rent hasn't necessarily been as positive. But can you give either a figure for the average concession you are having to give? Does it take the form of a number of months rent-free period with an extension for life of the lease?
I appreciate these are very, sensitive figures because obviously you haven't finished your discussions with tenants, but any sort of kind of color you can give there would be really appreciated. Thank you.
Sure. As I said, Rob, the discussions we had, or rather, the leases that we signed in July and August are showing encouraging signs of recovery, but it's only a snapshot. Usually, in a quarter, I mean, it was like this in my first job at L'Oréal, when we always finished the month at the last days of the month. It's a bit the same in leasing, where the last two weeks of each quarter are the most intense ones, and this is why it's not representative. It's an indication that things are recovering, but it's not indication of what it will be at the end of the quarter, nor at the end of the year.
We'll be updating on this, on these figures, of course, when we publish our Q3 figures, which publication will be a bit more extensive than usual for obvious reasons, before the AGM and the vote on this equity raise. As for the negotiations, first, thank you for outlining the fact that rent recovery is progressing. It is progressing. I think this was an area of concern for the market at our H1 presentation. I think 81% in continental Europe is a pretty good achievement. It's a bit behind in the U.K. and the U.S.
You probably read, and I think you reported in your newsletter this morning, which I've had time to read before this presentation, that the U.K. government, unfortunately, has prolonged the moratorium on the capacity for landlords to enforce the rent payment. I think personally, this, this is a mistake. Protecting the small tenants is probably a good idea. Protecting the large tenants, which are not playing a fair game, is totally wrong. And there are retailers, which I will not give the names of today, some people have done that in Germany, for example, naming a very famous sports brand at the time, which was not paying their rents and saying how a shame this was, and they finally paid their rents.
I think in the U.K., some people might need to start the name and shame game because it's not acceptable that strong, healthy retailers, some of which were allowed to stay open during the lockdown, are not paying, not only their Q2 rents, but also their Q3 rents. This is not acceptable, but unfortunately, the U.K. government is not giving us the possibility to enforce the payment of these rents. This is why one of the reasons why the U.K. is slightly lagging behind. But this is also, I think, an achievement by the teams, that the rent collection in the U.K. is actually progressing as well. Negotiations, we will not be talking of.
I mean, I mentioned the two principles, which is being fair, i.e., case- by- case, not considering the same thing for people who could stay open and people who had to close, maybe for the average closure number of days closed or maybe more. You know that restaurants or entertainment concepts have been forced to close. Some shopping centers have remained closed longer, so depending on the footprint of each retailer, we will be having one-on-one, case-by-case discussions with retailers. What I'm saying as well is that at 61% complete, some people might say that we've done the easy part, and now we're facing a cliff with the difficult part. It's not the case.
We have settled a number of very tough discussions with very big retailers, and it's been done in a fair way on both sides and an equitable way on both sides. So I'm pretty satisfied with the outcome of this. There are some tough discussions ahead, of course, but the teams will be dealing with it. I think, you know, it's a very long process. Would I wish that it would be 100% complete? Of course. But what I know it is that it was 25% complete when we presented our results. It's now at 61%, and I think it's progressing on a day-by-day basis. I'm personally involved in a certain number of negotiations.
I won't tell you which, but in a certain number of negotiations with large retailers for some, and with small retailers for others. I mean, this is the price to pay when you've been on this market for a long time, either as a landlord or for 11 years before, as a retailer. Michel Dessolain, our Chief Operating Officer Europe, is on this every day with his teams, involved himself, and Jean-Marie Tritant in the U.S. as well. This is also the way we do business at Unibail-Rodamco-Westfield. We take our jackets off, we roll up our sleeves. We still keep a tie from time to time, yep, but this is what we do on a daily basis. It's so important, and it's progressing well. Not easy, but progressing well.
Thanks, Christophe. That's very clear, and glad to hear you're an avid reader of the Exane Daily, and we look forward to continue keeping our sleeves rolled up and providing you with some investor feedback in the coming days. Cheers.
I have to say, I was worried, Rob, because you do the trick of putting the name of the person who reads when you are asking questions. What do you think about this, Christophe, and so on. I thought it was really personal, but then, you know, Sam told me, he had, "What do you think about this, Sam?" And Jaap, "What do you think about this, Jaap?" So, so I won't answer every day, but I'm reading that every day, and you notice that I also referenced the GlobalData study that you published yesterday, which is, I think, very interesting, and interesting as well to see, to read for everyone.
I'm ready to send it to whoever wants it, but to read that stores are important doesn't mean that internet is not progressing, but I think the future of the world is omni-channel retail, omni-channel consumers. We actually opened a couple of Amazon stores in the U.S. in the last two or three weeks, and if Amazon, as you've already heard me say, but if Amazon is opening stores, it means that stores have some value, even for the largest internet retailer in the world. This gives me confidence in our portfolio.
Absolutely. Thank you very much.
Thank you.
Thank you.
Our next question comes from Florent Laroche-Joubert from Oddo.
Bonjour, Florent.
Exhibition business. So is it possible maybe to have a new update on the expected activity for H2? And maybe also a question on a more long-term. So what do you want, do you want to put this convention and exhibition business in a present or future disposal plan or maybe in your long-term strategy?
Florent, we missed your, the first part of your question. I don't know, the sound was not right. Can you repeat your first question, please, Florent?
Yes. My first, the first part of my question was to know, is it possible to have an update on your expected activity in H2 for your convention and exhibition business?
All right, thanks. Things are moving every day on the convention exhibition business. You know that we've been adapting week after week because the restrictions have been changing. You know, first it was not more than 10,000, then 5,000, then 1,000, and so on, until most shows were canceled until the first of September. Shows were allowed to resume as from September 1 in Paris, so we are holding congresses, we are holding shows. We are limited to the 5,000 capacity at any given time in any given exhibition hall. So we can have more people throughout the day, but it's 5,000 per hall, and so on.
We are actually in current negotiations, discussions and negotiations, because it's very important for show organizers, which are also pretty much hit, of course, by the restrictions, to make sure that, for example, for international shows, you have international visitors, and therefore things are changing every day. We will be updating on the Q3 on this activity. Not now, not today, but the good news is shows are happening again. Congresses, including international congresses, are happening again, but the activity is slower than we would wish. That's for sure. We have a lot of shows that are moving from 2020 or have moved from 2020 to 2021.
So at this stage, and you cannot tell me, unfortunately, I wish you could, but I cannot tell you either, what the restrictions will be, going forward. Will they be totally lifted by year-end or not? I don't know. But at this stage, we have more shows planned for 2021 than a normal year would be. So, this gives us, at this stage, there again, and everything else being equal, a strong confidence that 2021 will be the beginning of the recovery, after the reopening of the activity, the gradual reopening in, H2 2020.
Okay, so more news on this later, partially on Q3, and then at the full year results, where we'll be updating on the year, of course, for convention exhibition, but also on the program for 2021, when we know a little more about restrictions. As for, is it a long-term hold in our portfolio? The answer is, it depends. Is it a strategic central activity for URW that we're planning to expand everywhere in the world? No. If that would be, we'd have done it. Is it a very interesting business and a profitable business? The answer is yes. So future will tell, okay? I'm not, I'm not commenting more on this.
Okay. So thank you very much.
Thank you, Florent.
Our next question comes from Paul May from Barclays.
Hi, guys. Just stepping in for Sander, who's conveniently on holiday this week. A number of questions, and if you want to take them one at a time. Just wanted to check, is the EUR 3.5 billion a gross figure? And can you give any indication on the net raise or the fees that would be being charged, or investors would be being charged for this?
Jaap, do you want to say something or not? Or just say standard fees.
It's market conform underwriting terms, and we've had, of course, good discussions with our banks on terms and fees. But it is a gross number.
Okay, cool. And appreciate you gave a range on sort of potential valuation declines. Just wondered if you give any indication on what you're modeling. Appreciate that might be difficult, so maybe ask slightly different ways: Do you see the decline still as a cyclical impact, or are you now factoring a structural rebasing in values?
I think the difficulty with the question is now we're gonna be asked to project into the future as to where things will be. I know there's perspectives in terms of what will happen, and so I think what we have looked at is sensitivities that would show us where we would end up if this were it, and the values, you know, we're not to recover for that matter. We're not gonna be dependent on assuming a significant rebounds in values to make sure that we stay within these ratios. We've looked at sensitivities, and we will have to deal with it. Do we believe that we're gonna end up at the levels that are on the page in terms of, especially on the far right?
No, we don't think that the quality of the assets warrants that. And in initial discussions that we've had with our appraisers, just to understand how they're looking at this, they don't think so either. And I think this is the one element, and I know it's a familiar complaint, but the, the, not all shopping centers are the same. And I think the quality differential here, which will demonstrate or have to demonstrate by virtue of the, how well the rents continue to come in, is gonna be a critical, critical element in determining the, the valuations. And if you think about the delta with government bond yields, right? As long as we can prove that the rents are stable, as what Christophe indicated, the MGR uplifts are a snapshot and not representative.
But if that were to go on, then you can see why there would be a reason for the appraisers to say, "You know, there may not be necessarily this type of a swing that some are speculating on.
Sort of linked to that, and I suppose the values do reflect an element of like-for-like rental growth, which has been slowing quite a bit, as you highlighted through the MGRs as well. Just wondering if you believe the valuers or your conversations with the appraisers that they will finally start to reflect the more difficult times in their expected like-for-like CAGRs? Or do you think that they will be unaffected? Again, it sort of partly comes back to that cyclical or structural rebasing view.
And I have to say, I can understand why, you know, there is speculation. The appraisers appraise the assets in accordance with the guidelines for the Royal Institution of Chartered Surveyors. They have their views on it. We don't take a particular view. It is what it is, and the market will ultimately set the price. There is likely going to be some forced sales, as I mentioned. Will those impact the URW valuations? Not sure. If I just think about the regions, I think in Europe it's much more stable than it is in the U.K. And in the U.S., I think we'll see some further valuation declines. Those will continue, let's put it this way, for some.
I can't speculate on the amount, we simply don't know, but the appraisers take their view in accordance with their professional outlook, and that's what it is. It's not like we provide them with our budget and our outlook, and they determine their own views on this.
No, no, I fully appreciate that. I just, just wondered if they, if you felt any indication that they might be changing that view, but, that's, that's understood. Just then talking about that outlook, and, you know, you kindly highlight, obviously, the U.K. online sales rapidly accelerated and then have obviously decelerated back to more, more normal-ish levels, still higher than they were previously. But arguably, is the impact for you not more focused on what's gonna happen in continental Europe, which was still on a transition of quite material year-on-year growth in online sales? It was hitting sort of tipping points when retailers were starting to reassess their online channels. Obviously, they've been forced to, in a very fast way, to significantly reassess those things.
We're certainly hearing from logistics companies that the incoming from retailers is significantly large in terms of looking at their logistics platforms to satisfy that online growth. I just wondered if you've seen any impact or expect to see any impact from that Continental European online sales growth, or do you still see yourselves as being relatively immune to that impact and that growth?
Paul, there will be obviously a rise in internet penetration in Europe. There was an article in the French press. I can have them translated if you want, but it's exactly the same thing in the U.K., I think, showing that the main beneficiaries of the rise in the internet penetration were the brands having physical stores, more so than the pure players such as Amazon and so on. Actually, there's an article. I'll send it to you if you want, saying, "Amazon, the big loser of the lockdown." So I have nothing against Amazon, and because they're opening stores and because they're obviously fulfilling an important consumer need and doing it very well. What I noticed is that...
And I would, you know, I joined L'Oréal, sorry, I left L'Oréal in 2010 . Sorry, no, in 2000 to embrace the click-and-mortar challenge of French retailers. So, I'm not gonna be the one denying that the future of the world is click-and-mortar. I've been 20 years now in this, and it's happening. This is very important to understand. First of all, the world will be click-and-mortar. The customers will be omni-channel. That means that DNVBs will open stores, including the largest DNVB, which is Amazon. And of course, most, if not all retailers, will open internet sites.
Actually, it's very interesting to see that some very large U.K. retailer that has no internet site suffered a lot when their store was closed in the U.K., but has recovered greatly since the stores have reopened. I mean, it's normal. So we welcome the fact that retailers are investing on the internet sales, because it helps them sell when their stores are closed. Now, of course, what we advocate as well is more selectivity. I'm convinced that some retailers have got way too many stores, have opened way too many stores, which are cannibalizing each other in one given city or one given catchment area. So selectivity is good news for Unibail-Rodamco-Westfield, because of the quality of the portfolio we have, which is superior.
It's not us, as I mentioned very humbly in my presentation, but it's, I mean, Green Street Advisors, to name them, that the different portfolios of the different REITs throughout the world. We have a superior quality of portfolio. We have more flagships, in proportion at least, than anybody else, and so we welcome this selectivity.
We highlighted during a couple of meetings in the roadshows at half year, but I'm gonna repeat that to the world, that there were a certain number of bankruptcies, for example, in the fashion segment in France, and retailers concerned have declared that they would close and are executing their plans to close 45% of their store count, -45% in number of stores. For Unibail-Rodamco-Westfield's French portfolio, the number of closures is zero. They are keeping all their stores in our portfolio because they value all their stores in our portfolio. Now, I'm not saying this will happen in every market for every retailer. We do experience some store closures and so on, but we have a much higher capacity than any other to resist.
Last, which is very important as well, because you might have a more Anglo-Saxon vision, and this is no criticism, this is probably because you're based in an Anglo-Saxon country. But I repeat again, that the structure of the shopping centers in continental Europe is very different from the one in the U.K. and the U.S., because they're anchored by food retailers, by large food retailers, which have got their own challenges, but which ensure strong footfall, low average basket, very repeated purchases and visits, and this is a guarantee, I would say, of high footfall in our centers in Europe.
These retailers are growing their internet operations and have grown their internet operations, but I'm convinced that this is also a pretty, I would say, a kind of a safety net compared to some other markets. And finally, I think it's very important to notice that a lot of internet operations go through stores, whether it's click and collect, whether it's returns, and you know that in some industries, the return rate is about 50%, and more than 50% of these returns are returned to store because you trust a store, you might not trust the mail, I would say, especially in some countries.
But so, you know, the stores have got a role which goes far beyond the strict turnover that is registered through physical sales in the a nd there, again, click and collect in an accessible store is easier than in an inaccessible store, and our stores are more accessible because our shopping centers are more connected, either to highway nodes in some countries or to public transport, as we have demonstrated. This is a long answer, and this doesn't mean that I'm not aware that internet penetration will grow, but we're a very selective operator, a very small number of shopping centers, and therefore, we are pretty confident that selectivity plays in our favor instead of against.
I mean, to be honest, we generally agree on the omnichannel approach. It's just arguably there is going to be a sales transition to online that's going to impact in-store margins, that's going to impact arguably the rents that those stores can pay in order to stay open. You know, yours will continue to be occupied. You know, I don't think there's any question materially around that. It's just a question of the rent level once we get a material growth in online sales coming through. Then the risk potentially for yourselves is that your assets are priced arguably relative to others to perfection, in terms of rent growth expectations.
If those rent growth expectations are no longer there, and I'm not saying you go obsolete, I'm not saying you go vacant, then there could be a little bit more of a risk potentially around that. But so the time will tell as we move forward. I suppose just to conclude, the thing I'm struggling with is you know, you highlight operations are getting better, cash collection is getting better, your assets are the best in the market, they'll continue to be occupied, they'll continue to pay the rents, you'll continue to collect the rents. Arguably, everything is going very, very well. Why are you concerned about leverage levels? And why are you undertaking the rights issue, given all your comments? Just trying to reconcile the two sides of the equation.
So, I don't think, I don't think you heard us say that things were going very, very well and everything was fine. No. Things are improving. Teams are at work. There are some very positive signs here, some positive signs there, and still a lot of uncertainties around, including in the world economy in general, and linked to the pandemic in particular. So, I think we're having a prudent view. We are, you know, we are 100% free float, as you know. We're listening to our shareholders. Shareholders have expressed concern about our leverage. This is what we're tackling. I think, you know, prudent management means don't let the future dictate what you need to do. Do it now. The...
If you have a window of opportunity, it's probably better to do it now than not being able to do it later. That does not mean we're not confident in our capacity to execute the disposals. I think Jaap and I have been very clear on this, and I know we need to prove to the market that we can do it, but what we can do today is express our confidence. But this is globally a holistic plan to make sure we secure access to that. There, again, had we been downgraded with a negative outlook, you never know where this can lead you.
You know, we want to make sure that we keep control, and this, I think, is what this plan is about, to ensure that we strengthen the balance sheet, that we keep access to the debt market, even if markets were to deteriorate, and that we regain the flexibility to execute on our long-term strategy. This is what it's about.
Thank you very much. Good luck. Cheers, guys.
Thank you.
The next question comes from Andrew Gill from Jefferies.
Hi, good morning. Thank you. Just on the July and August leases, were the lease terms, including incentives, broadly in line with pre-COVID terms? And did any of them include clauses around omnichannel revenue? And then just on the shopping center values, do you expect the shopping center portfolio valuation going forward to still have any of the material uncertainty clauses? And would that cause any complications around the sales proceeds? Thank you.
So, I would say that globally the lease terms are the ones which are consistent with the pre-COVID world. I mean, there might be discussions here and there. There might be retailers with which we're signing which are in a more difficult situation, so on, but there's no general rule. And as I said, this is, you know, only two months out of twelve, so we can't draw final conclusions, just express some confidence that business is back, and that the leasing teams are back, and you need two to sign a lease, and this is what's happening. Okay, and we're still also discussing, of course, you know, we. The interesting thing is that we're doing pretty-...
First, negotiating the rent collection and potential rent relief due to the closure period and negotiating leases, new leases. Part of the negotiations, part of the concessions that we're getting against potential rent relief, is also signing new stores. I can tell you, it's not just to get rent relief that people are signing ten-year leases. It's because they have confidence in our capacity to operate our shopping centers, to draw people into these shopping centers for them, their stores to be successful and to be profitable, taking into account their own projections of online sales. Do these rents generally include an online provision? The answer is no. Generally, there's no online provision. There are discussions, but we haven't cracked it yet, I have to confess.
There are here and there things o f course, click and collect is part of the, the turnover of the store, and so on. But overall, there is no capture at this stage of the halo effect. I've heard that some people were discussing. It'll be very interesting to see what they're having. It's very, very, very difficult to calculate, and it depends on each retailer, each activity, and each store. Because as you know, each store doesn't play the same role, doesn't have the same impact, depending on the size, location, et cetera, on the famous halo effect on the internet. As for your second question, maybe Jaap, you want to elaborate on that?
Sure. There's obviously no final determination yet because the typical valuations will be done at year-end. The discussions that we have with appraisers, I think if you recall, the U.K., I believe they're starting to remove the material uncertainty clause. So, I think there's more clarity that's coming through as the negotiations with the retailers conclude and the appraisers look at the rents. The one question I think that people will have and continue to have some questions on is cap rates, and that will be set. But they've told us they will take into consideration the circumstances under which assets are being sold.
So if you have a forced sale, right, by a creditor of an asset, that's a different one than if you have a, you know, two willing parties transact without the pressure of owning something that people don't want to own. So again, no certain answer on that one just yet. Considering the fact that it's not like we are providing, you know, the valuation reports in the data room for due diligence, I mean, the investors have always provided us with their views on value, and we've decided, or not, for that matter, to proceed or based on the price expressed.
I understand. Thank you very much.
Okay, can I mention something? I mean, to elaborate on the attractiveness of our portfolio and so on, we just received a press release from Rituals, which as you probably know is one of my favorite cosmetic brands, which is just announcing that they're opening their new flagship store in Mall of Scandinavia. They were at Mall of Scandinavia upon opening. On the top of my head, they're increasing three times the size of their store to open a 400 square meter flagship store, which is gonna be the largest Rituals store in the Nordics. So thank you, Rituals, for trusting us, but you don't only do this because you trust us. I think you do this because you trust you can be very successful.
Thank you. Thank you. Our next question comes from Marc Mozzi from Bank of America.
Yeah, good morning, gentlemen. Well done for this very comprehensive presentation. I have only two small questions from my side. The number one is, what are the remaining uncertainties that prevent you to provide us with a kind of a floor earnings level you would be able to achieve post-completion of your disposals for us to start to take on board the kind of the recurring element of cash flow generation? That would be my first question. And my number two question will be about your EGM, and what is the required quorum you will need for this rights issue to be voted? Is that two-thirds or 75%?
This one is, it is two-thirds. Okay, two-thirds of the votes.
Yeah.
For the EGM. As for the outlook, yeah, for the, you know, the long-term outlook, well done.
With respect to the for 2020, I think we are still dependent on the conclusion of negotiations, right, and the collection of rents, and we would hope that we would have something by the time that we release our Q3 numbers.
Okay. Okay, thank you.
Our next and final question comes from Stuart McLean, from Macquarie.
Good morning . A couple of questions. I might ask them individually. First one, continuing to mention ability to access debt markets as a reasoning to do the raising. Just wondering if those conversations with the debt providers had changed over the last couple of months. You had access to credit markets even during the height of COVID. So just wondering if those conversations were changing and that there was you know more hesitancy to provide debt to URW?
Let me just ask, answer that particular question. The answer to that one is no. We are, we're continuing to have access. We haven't noticed a change, although obviously when you go into the market during a crisis, pricing is elevated. But we wanna make sure that that access continues to be there, and pretty much no matter what happens.
Thank you. Second question, and this might be just difference in jurisdiction. Why wasn't pricing announced today? Why weren't dates for the EGM announced today? And why wasn't there more detail in regards to the distribution policy provided today as well? Why do we need to wait, and added uncertainty, impacting the cost of equity prior to pricing being complete?
We have an EGM that needs to be held. That EGM is gonna be held, we believe in early November, the timetable will be announced and underwriting and the exact selling price will not happen until after approval of the shareholder vote. It's the practice in continental Europe, even though the rights issue is a very, should we say, it's not my preferred way of actually doing it, but that's the corporate law here in France.
Okay, thank you. And so why wasn't a date set today, in order to reduce the timeframe, maybe between now and then? There just seems to be a lot of uncertainty still, that the market's waiting on, whether it be distribution or policies and dates.
The concept of the date will be a function of, as we said, we expect it to be announced shortly. It's a little bit of working backwards with regulators in terms of when they can get the approvals for the required documentation. That's a process that's ongoing. The dividend policy, we would look to have more visibility on that, depending on the outcome of the year, what we would see the outcome of the year to be.
Okay, thank you. And my final question i s under what conditions could the underwriters potentially remove themselves? And on that as well, under what conditions maybe would the underwriters no longer be comfortable with a EUR 3.5 billion raise as a percentage of market cap? Just trying to understand the risk to the size of the raise and the ability to execute from an underwriting point of view. What if COVID got materially worse, there was no vaccine in sight, et cetera?
Well, we have the usual MAC, you know, the MAC clause. It's an underwriting, it's a standby underwriting commitment. And I think we are confident that our banks who are providing the support, and we have received overwhelming support from the banks, it is gonna carry this. We have, assuming that the shareholders are going to approve the transaction, we have little doubt it is going to happen. It will get executed, assuming the shareholders approve it. And the usual thing that you would see, it's an exogenous factor, right? If we basically find ourselves in a complete market shutdown where everybody is basically not working, not trading, it's an exogenous fact.
Thank you for your time. That's it for me.
We received one more final question from Tim Leahy from UBS Australia.
Is it me, or is there no sound?
No, there's no sound, yeah. There's no sound.
Okay.
Morning, gentlemen, are you able to hear me now?
Yes, thank you. Hi.
Sorry, good morning, Christophe. Good morning, Jaap.
Good day.
The plan clearly is going to strengthen the financial position of the company, I think that's indisputable. But to the extent that you could, I wondered if you could comment on the earnings impact of the plan. Obviously, there's a number of different elements to it. I'm not necessarily asking you to give guidance as such, but how are you sort of thinking about what I assume will be a fairly dilutive earnings impact?
I mean, there will be obviously a dilutive impact, given the fact that we will be issuing shares. Of course, it's too early to say because we don't have the final conditions of the equity raise, which will be determined after the EGM. So, we just cannot answer this question now. Of course, if investors, if current investors subscribe to the equity raise, the dilution will be potentially zero, but they will have subscribed. So, I mean, it's too early to comment on that. I think we need to wait for the EGM to happen and the final conditions to be set to do an exact calculation. You can have various hypotheses, obviously, based on today's or yesterday's or tomorrow's stock price.
Things change on a regular basis these days with a significant volatility. But it's still moving pieces, obviously, so it's only hypotheses you can make, and I think I had to let you do that yourself for obvious reasons.
Thank you. And with regards to the expected asset sales, I think you referenced that they would be of higher quality than the average of the assets that you've sold thus far, but would you expect them to generally be earnings dilutive or earnings accretive upon sale?
If you look at our cost of debt at 1.7% as at the half, I'm afraid that we're not gonna get cap rates that are gonna beat that. It'd be great if we could, in which case it wouldn't be dilutive. But the key, right, so in principle, and that's no different from any time that we've done any disposals, I think in the, you know, almost 10 years I've done this at URW, I think only once have we been able to sell one asset below the weighted average cost of our debt. That was an individual unit in a high street in the Netherlands.
And we have none left, right?
Sure, sure.
Thank you. And then maybe just one last question, if I could. I think, is there a point where you think you might lose the benefits of scale, just reflecting back on the original or the merger with Westfield, and clearly there was an argument for increased and enhanced scale there. If you do reduce your asset base in size, does there become a point where your, I suppose, negotiating power with the tenants really reduces significantly, or are we a long, long way from that, in your mind?
I think we're a long way away. I mean, you know, it's not only a question of size, it's a question of quality, and since we've always creamed off our portfolio from the bottom, we are keeping the best ones. We were asked, actually, and not this time, but we're probably gonna be asked during the roadshow, whether we'd consider selling trophy assets in order to accelerate deleveraging and to make sure we execute our disposal plan, and the answer is no. We might enter into JVs, and as I mentioned earlier today, we have some of our best assets which are in JVs, but we will not let go, because the deleveraging exercise is not a reason to lower the average quality of our portfolio.
It's more a question of quality, and we will be retaining, of course, the best assets in each of our key countries, okay? I don't think that there is a risk of diluting the scale impact that we have today. It's actually, you know, it's actually interesting, because some of the negotiations are better on an individual basis, country by country. Some other negotiations are better on a global basis. The teams are talking to each other, obviously, on a daily basis across the Atlantic to make sure that there is consistency. Now, there are some market specifics, and there are some market-specific concessions that we are obtaining from retailers, obviously, because the markets are different.
But overall, I think this consistency and this coordination across the Atlantic is very important for the company, and there's no risk of dilution, I would say, of that one.
Okay. Thank you. That's all for me. Good luck with the plan.
Thank you. Thank you. No more questions? Okay, thank you very much, everyone. Thank you for attending. It was short notice, obviously, between the release of the press release yesterday and this morning. It was very early for our friends on the East or West Coast of the U.S., so thank you for attending and we have a couple of interesting days of roadshows ahead, so I welcome the opportunity to discuss with you individually during these roadshows. Thank you very much.