Unibail-Rodamco-Westfield sells majority stake in five large French shopping malls
International commercial real estate developer Unibail-Rodamco-Westfield (URW) is going through a streamlining phase. In parallel with the publication of its annual results, URW announced the creation of a joint-venture company with French insurance group Crédit Agricole Assurances and asset management specialist La Française, to manage five of URW’s leading shopping malls in France. The new investor consortium will hold a 54.2% stake in the Aéroville (Roissy), So Ouest (Levallois-Perret), Rennes Alma, Toison d'Or (Dijon) and Confluence (Lyon) shopping malls. URW will hold the remaining 45.8%, and will continue to manage the five shopping malls.
The operation is expected to be finalised by mid-2020. By selling a majority stake in these five shopping malls (with a total retail area of 320,800 square meters and an annual footfall of 42.5 million) to the new joint-venture company, URW has generated a revenue of €1.5 billion. The operation is part of URW's current asset divestment strategy.
The group is in the midst of a streamlining phase, targeting €6 billion in total sales, to balance its assets after the major operation carried out in 2018 to incorporate Westfield, a leading shopping mall developer and operator in the USA and the UK. “We are progressing (...) in terms of asset divestment,” said Michel Dessolain, URW’s Chief Operating Officer in Europe, during a phone conference for the presentation of the group’s 2019 financial results.
The 2019 results have actually been better than expected. Recurring profits, a benchmark indicator for the real estate sector, grew 9.3% to reach €1.76 billion, exceeding analysts’ expectations, and revenue grew by more than 15%, to €2.49 billion. However, the group is prudent about 2020. URW’s most significant performance indicator, adjusted earnings per share, are expected to drop to between €12.10 and €12.30, after already losing 4.3% last year, down to €12.37.
The merger with Westfield, which largely contributed to the group’s profits rise last year, added a further €20 billion or so to URW's assets. The group is the only real estate corporation within France’s CAC 40 stock market index, and owns the Forum des Halles mall in Paris. However, the Westfield operation wasn’t received favourably on the stock market, where URW’s share price lost a third of its value in the last two years, causing the group to embark on a major divestment policy, with a resulting loss of rental income.
Bleak UK outlook
Following the Westfield acquisition, URW stepped up the pace of its divestments, now totalling nearly €5 billion, which in theory should be compensated by the group’s investment programme, which was set to include both new openings and extensions to current malls. However, URW seems to have trimmed down the programme. A year ago, it envisaged to invest over €11 billion, but now the figure has been reduced to €8.3 billion.
“A certain number of projects (...) were met with administrative difficulties,” admitted Dessolain, notably referring to the Val Tolosa project in the Toulouse area, which has faced local opposition and a spate of court rulings.
Above all, “other projects did not meet the profitability criteria set by the group, and [were] therefore removed from the development pipeline,” said Dessolain, who also indicated that some of them would be extensively revised. With regards to this, he mentioned a project, without identifying it, that is currently suspended, but which might be revamped with only a “very small” commercial section.
Like the industry as a whole, URW is coming to grips with the troubled situation of brick-and-mortar retail, threatened by a burgeoning online sector. However, the group emphasised that footfall in its shopping malls is by and large on the rise.
URW has deployed a busy promotional programme for its malls, and the group’s performance is actually quite positive in the majority of the countries where it operates, such as France, central Europe and Spain.
Although “in the UK, [last] year was more of a mixed one,” said Dessolain. URW set foot in the country with the acquisition of Westfield, but the group's UK rental income has fallen drastically, at a time when British department stores as a whole are going through a bleak period. “We are making robust efforts, which are beginning to bear fruit,” said Dessolain.
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