Westfield Malls’ European owner says it is done with the US
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3 min read . Updated: 05 Apr 2022, 06:45 PM IST - Unibail-Rodamco-Westfield faces potentially steep losses as it aims to unload its American mall portfolio by next year
Europe’s largest mall operator Unibail-Rodamco-Westfield SE is closing shop in the U.S., bracing for a potentially sizable loss after it paid about $14 billion four years ago for some of the country’s top-performing malls.
Unibail wants to shed most of its U.S. properties by the end of 2023, Chief Executive Jean-Marie Tritant told investors last week, a timeline that some analysts described as aggressive given the current low appetite for mall deals.
Unibail valued its American portfolio at €12 billion, equivalent to $13.2 billion, at the end of last year. Executives believe the company can hit its deleveraging target even if the U.S. portfolio sells at a 30% discount of 2021 valuations, although they haven’t specifically said how much they believe they can get for the properties.
Green Street, a commercial real-estate analytics firm, estimates the company’s U.S. assets are worth closer to €10.5 billion. Unibail likely will have a hard time finding buyers by next year and almost certainly won’t get what it paid for its U.S. portfolio, said Rob Virdee, senior analyst at Green Street.
“Who is the buyer in the U.S.?" Mr. Virdee said. “If the bidder knows you’re on the run and you have to make a sale, they’re not going to offer you a good price."
In last week’s presentation to investors, Mr. Tritant said he is confident the company will be able to sell its portfolio “thanks to the quality of our U.S. assets…and the overall strength of the recovery, which is driving occupancy and long-term lease rental growth."
Unibail’s exit from the U.S. after only four years shows that executives have concluded that even high-quality, marquee American malls aren’t worth holding on to as the Paris-based company works to slash its debt and to refocus on its flagship properties in Europe.
Unibail’s current leadership, including Chairman Léon Bressler, took control of the company in 2020 after waging an activist campaign against the former management’s plans for a dilutive-rights issue worth €3.5 billion. The activists advocated instead for a sale of Unibail’s U.S. malls to reduce its debt.
“Our investment should be in Europe," said Mr. Tritant, who took the helm as CEO in January 2021.
Unibail bought Westfield Corp. in 2018 in one of the largest U.S. mall transactions ever, netting several high-profile shopping centers, including the Westfield World Trade Center in Manhattan, Century City in Los Angeles and the Garden State Plaza in northern New Jersey. The company took on significant debt for the acquisition and soon after began selling off properties.
Unibail allowed lenders to take back five underperforming regional malls in the U.S. last year. Last month, the company sold a 34-acre Los Angeles site that previously housed the Promenade Mall and had recently secured city approvals for mixed-use development to a group of private investors for $150 million.
The company’s American portfolio now includes two-dozen, mostly Class A malls. Higher-tier malls have performed best in recent years but are still grappling with the repercussions of e-commerce and Covid-19.
Mr. Tritant said sales at Unibail’s American malls have recovered quicker than properties in Europe, due to the more rapid lifting of public-health restrictions in the U.S. He predicted the exit of many international retailers from Russia due to the war in Ukraine will benefit American stores.
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“The U.S. market will be seen as a safe haven," he said.
Still, Mr. Tritant and the rest of Unibail’s management view the disposal of U.S. properties, and some European assets, as critical to the company’s growth.
Once the company cuts its debt, it plans to diversify its revenue streams with more advertising and brand partnerships as well as residential development within Europe. The strategy unveiled last week predicts a return to 2019 earnings before interest taxes, depreciation and amortization by 2024.
“One could make the argument—things are getting better in the U.S., so why are you getting out of this?" Mr. Virdee said. “When you have too much debt and the market turns, you have to sell some of your good assets."
This story has been published from a wire agency feed without modifications to the text
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