Issue 2018 July 10th

The newly-combined Unibail-Rodamco-Westfield plans to sell off non-core properties to help reduce debt incurred in the recent $15 billion acquisition of Westfield by Unibail-Rodamco.

The Paris-based company now has 102 shopping malls, 13 office properties and 10 convention centres, valued at a combined €62 billion across Europe and the US.

The company will sell off slightly more than $3.5 billion worth of retail and office assets from the Unibail-Rodamco portfolio, said CEO Christophe Cuvillier.

Then, in the autumn, the company will assess which of its 35 Westfield malls could be sold.

“Some of those can be improved and turned into flagship assets, some can be extended, and some will be sold,” he said.

Sales remain strong at the higher-end malls, which account for much of the Unibail-Rodamco-Westfield portfolio, Cuvillier said. About 85% of Westfield’s assets — including Century City, in Los Angeles, and Westfield London — are flagship malls, and the rest are smaller regional assets, he told US media.

At the time of the acquisition, the group said that around 88% of its portfolio is in retail, 7% in offices and 6% in convention & exhibition venues. Unibail-Rodamco-Westfield owns and operates 102 shopping centres in 13 countries, of which 56 are flagships in key cities in Europe and in the United States. Its centres welcome 1.2 billion visits per year.

Unibail-Rodamco-Westfield boasts a development pipeline of €13 billion. Some of the current development projects include: Valley Fair, Santa Clara, United States; Mall of the Netherlands, The Hague, The Netherlands; Triangle, Paris, France; Überseequartier, Hamburg, Germany; Westfield Milan, Milan, Italy; Croydon, London, United Kingdom [joint venture with Hammerson].

RPA Perspective Because the two merging halves of Unibail-Rodamco-Westfield had already focused pre-merger on divesting smaller malls, the portfolio they brought together does not require massive surgery.

Westfield, having arrived in the UK, quickly determined that the two London mega-malls were what it was good at, not the smaller centres in the likes of Derby and Wakefield. It realigned and, while expansion in Europe has been painfully slow, its proposed projects going forwards are similarly huge malls in Milan and Croydon, south London.

Similarly Unibail-Rodamco, under its previous management, set out early to divest its smaller and medium-sized malls in order to concentrate on its larger and most prestigious projects. The result is that while there may be some tactical asset sales, there will be no mass sell-off of centres of the type normally expected when two businesses come together.

All this would make the wider impact of the deal rather underwhelming were it not for the fact that a number of rivals are clearly considering their response and mergers and acquisitions seem highly likely.

While Klepierre did not pursue a purchase of Hammerson, and the latter then withdrew from its tie-up with intu, the number of mid-sized shopping centre groups across Europe suggests that mergers are inevitable, especially among those who feel threatened by the scale of the Unibail-Rodamco-Westfield deal.

It makes for interesting times.