Europe’s largest shopping center owner Unibail-Rodamco-Westfield has unveiled a € 9 billion plan to consolidate its balance sheet, including a € 3.5 billion capital increase proposal, a clear sign of how the Covid-19 pandemic has turned the commercial real estate industry upside down.
The French company, which owns 89 high-end shopping centers in 12 countries such as Westfield London and the Carrousel du Louvre in Paris, has also announced plans to sell € 4 billion in assets – both retail and retail. offices – by the end of next year. . In order to save more cash, Unibail will also reduce its capital expenditure and limit cash dividends for the next two years by decreasing the payout or paying in shares.
The moves aim to reduce the company’s € 26 billion debt, much of which was incurred in 2018 when it bought Australian shopping center operator Westfield for $ 24.7 billion to create this which was at the time the second largest owner of shopping centers in the world by market value.
Unibail’s attempts to reduce its leverage highlight broader challenges for owners of commercial buildings, and especially owners of shopping centers, whose rental income has plummeted due to the coronavirus.
In the group’s key markets in the UK, US and Europe, many retailers have been unable or unwilling to pay rent after being forced to close by Covid-19 lockdowns. This has exacerbated the situation for retail business owners, who in some cases was precarious before the current crisis, and strained their commitments with lenders.
Unibail must obtain the approval of its shareholders before the proposed sale of shares. If she gets their backing, she will sell shares worth around two-thirds of her market cap before the announcement, potentially diluting existing shareholders.
Given the uncertainty surrounding the economic recovery amid the coronavirus pandemic, Unibail wanted to ensure that it avoided any downgrades in its credit rating and maintained access to debt markets, the chief executive said. Christophe Cuvillier in an interview.
“We have had discussions with our shareholders for years on how to manage debt after the Westfield deal, and we believe this holistic plan will address their concerns about the balance sheet,” he said. “It is the right decision to take decisive and proactive action now, rather than wait and have an overhang of uncertainty.”
“I am convinced that the market will receive this positively,” he added.
Unibail stock fell nearly 8% at noon in Paris, adding to an already dramatic 70% drop in stock value this year.
In the UK, the owner of the Intu shopping center collapsed in administration in June after breaking agreements with his lenders.
Rival mall owner Hammerson launched a rights issue in August to strengthen its own balance sheet and reduce its loan-to-value ratio. Hammerson’s share price has fallen sharply during this year from £ 1.41 to 22 pence today.
“I would not put [Unibail] in the same category as Intu and Hammerson – they’re much more diverse, ”said Marie-Aude Vialle, analyst at S&P Global Ratings. “UK centers have been badly affected, but this only represents 7% of the portfolio; Continental Europe works better. ”
Unibail’s goal was to get out of debt, but trying to drive down the company’s loan-to-value ratio was a challenge when mall valuations were dropping rapidly, she said. The value of Unibail’s portfolio fell 5% in the first half of the year, and Ms. Vialle expects it to drop a further 7% by the end of 2020.
“We fear that they will have trouble making the transfers. . . but they have fairly large malls and are well located. They should be the type of asset that should attract people in the long run. “
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