Westfield owner URW to offload US malls from 2022

Unibail-Rodamco-Westfield has set out plans for a major US real estate sell-off from 2022, when investor appetite in the market is expected to recover. The landlord is also aiming to complete the remaining €3.2bn (£2.8bn) of its €4bn European property disposal strategy before the end of 2022. Chief executive Jean-Marie Tritant said: “We are implementing a programme to significantly reduce our financial exposure to the US when the investment market reopens, which should happen with the US economy rebound in 2022. “Our continued access to credit markets and ample liquidity will allow us to complete our deleveraging objectives in an effective and orderly way.” URW estimates that with a 100% disposal of its US portfolio, its pro forma loan-to-value ratio could improve to 37% if sold at a 50% discount to December 2020 book values, falling to 21.7% if sold with zero discount. Its LTV currently stands at 44.7%. Tritant stepped into the chief executive role last month, after activist investors won shareholder approval for a strategy that pushed for divesting the US portfolio in a “timely manner”, alongside a greater focus on its European shopping centres. As part of its deleveraging strategy, URW has also nearly halved its development pipeline to €4.4bn of projects in 2020, from €8.3bn in the previous year. The 1.7m sq ft Westfield Milano project in Milan, Italy, is among the schemes that has been removed. Capex will be restricted to €2bn for the next two years, while dividends have been suspended for its 2020, 2021 and 2022 fiscal years. Portfolio value The news comes as URW’s two UK shopping centres – Westfield London and Westfield Stratford City – posted a 32.8% (€1.5bn) valuation decline during 2020, with total value standing at nearly €3bn including transfer taxes. URW’s appraisers reduced the like-for-like gross market value of its UK shopping centres by 26.3% during the year, in light of concerns around the pandemic’s impact on the retail market. Of this, 20.2% was driven by the yield impact and 6% by rent impact. The gross market value of the group’s portfolio fell by 13.8% to €56.3bn in 2020, with €6bn wiped off its value on a like-for-like basis (-11.2%). To reduce costs, the group also restructured its UK and US businesses and downsized its development teams. These generated €80m in gross administrative savings during the year. Total EPRA NTA per share fell by 27.9% year-on-year to €128.1 per share. Rental income The UK shopping centres experienced the worst decline in net rental income, which plunged by nearly half (49.3%) to £76.2m on a like-for-like basis. Out of their 785 stores, 62 were affected by insolvency processes, including Clarks, Wahaca, Caffe Nero and Moss Bros. At the end of the year, 20 UK stores remained empty as a direct outcome of retailer CVAs and collapses. The vacancy rate at the UK centres rose to 9.7% at the end of 2020, from 7.7% in the previous year. Like-for-like net rental income across the landlord’s overall shopping centre portfolio fell by 24% year-on-year to £1.4bn. Its offices business posted a 0.1% like-for-like improvement on the previous year. When factoring in disposals, total net rental income was down by 16.9%. In the UK, the landlord received 79% of rents owed for the full year. Similarly, 80% of payments for the year were received across the group portfolio, including rent relief granted to struggling retailers. Excluding this amount, the collection rate stood at 88%. Brands ‘still choosing’ URW While the landlord expects the first half of 2021 to remain challenging, it was upbeat that H2 holds “good prospects for a solid recovery” as the vaccine is rolled out and restrictions lifted. “The group firmly believes that people will again seek out the mix of top brands and great experiences offered by URW’s flagship destinations when they are able to,” said the landlord. Tritant pointed to “clear pent-up consumer demand for high-quality shopping locations”, with brands “choosing URW locations ahead of a market rebound”. He said: “The retail landscape is changing and our centres are proving to be attractive for high-potential sectors such as innovative automotive, digitally native vertical brands and entertainment.”   To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette