URW has ‘a lot to do, little to gain’, warns Berenberg

Unibail-Rodamco-Westfield’s ongoing restructuring leaves the shopping centre owner with “a lot to do, [but] little to gain in the short term”, according to the team at investment bank Berenberg. London-based analyst Kai Klose said in a note published today that URW has the “right priorities maintained” following the publication of its 2020 results, in which it committed to offloading its US properties from next year as well as continuing with a €4bn (£3.5bn) disposal strategy in Europe. “We welcome URW’s intention to sell a sizeable part or even all of its shopping centres in the US as soon as local markets have recovered, as property investors’ appetite for this asset class has picked up again,” Klose wrote. “Still, it remains unclear whether any disposals will take place as investors may look for an attractive discount for the portfolio, with URW viewed as a ‘willing seller’ and the broader equity markets already appearing to have welcomed the prospect of URW narrowing its geographical footprint to Europe only.” Klose added that URW should “act carefully” to ensure that European disposals leave the business with a “solid portfolio quality” in the region: “This is important as the company has also significantly reduced the number of new shopping centre developments to maintain liquidity.” Klose and colleagues expect URW’s loan-to-value to rise to 49.3% by the end of 2022 from 44.7% at the end of 2020, but do not expect the company to break its LTV covenant of 60%. The bank has maintained a hold rating on the stock but reduced its price target to €54 from €60. As of early afternoon on 22 February, its stock was trading at €55.36. To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette