Europe's Largest Mall Operator to Sell US Assets

Unibail-Rodamco-Westfield, Europe’s largest mall operator, is planning to exit the US market and sell its portfolio of US mall properties by the end of 2023, according to a report in The Wall Street Journal.

The move comes four years after Paris-based Unibail-Rodamco SE acquired Westfield Corp.’s mall properties for $15.7 billion. The portfolio includes some of the largest and highest-profile mall properties in the US, including the mall at the World Trade Center in New York.

Unibail valued its US portfolio at $13.2 billion at the end of last year. Without disclosing the sale price they’re aiming for, company executives told WSJ they believe Unibail can hit its “deleveraging target” even if the portfolio sells at a 30% discount off 2021 valuations.

In a presentation to investors, CEO Jean-Marie Tritant expressed confidence that the company will be able to sell the US mall portfolio within its aggressive two-year timetable due to the quality of the assets and the strength of the recovery, which Tritant said is driving occupancy and long-term rental lease growth.

Tritant said sales in the company’s US malls have recovered quicker than their European counterparts due to longer-lasting Covid restrictions in Europe. Indeed, a recent analysis from the National Association of Realtors research economist Brandon Hardin shows US retail vacancies declining, which is putting upward pressure on rents.

Retail vacancies in the first quarter of 2022 have dropped to 4.5%, even lower than the closing rate of 4.7% at the end of 2021.

However, analysts suggested that Unibail is overestimating the value of the assets and will have a hard time unloading them after telegraphing its intention to divest its US holdings.

“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,” Rob Virdee, senior analyst at Green Street, told the WSJ.

The decision to sell Unibail’s US malls is the result of a leadership struggle that resulted in Tritant becoming CEO in January 2021. Tritant and his allies had pledged to reduce the company’s debt by selling the US assets, shifting the focus of Unibail’s investment strategy back to Europe.

In addition to the Westfield World Trade Center in New York, the properties acquired by Unibail-Rodamco in December 2017 included Century City in Los Angeles and the Garden State Plaza in Paramus, NJ, which started as a small outdoor mall anchored by Macys and Gimbels stores in 1959.

Unibail’s US portfolio now includes two dozen malls, most of which are Class A properties.