Westfield Exits US as Simon Group Doubles Down

Shopping mall giant Westfield is aiming to wind down operations in the US, three years after it was sold to French firm Unibail-Rodamco.

Weighed down by a reported 26 per cent slump in net rental income to €1.79 billion (A$2.8 billion) across 2020 as well as recurring net profit drop of 40 per cent to €1.06 billion (A$1.6 billion), the company will now downsize into a European-only operation.

Reflecting the hard-hit retail sector by the pandemic, the value of the company’s assets decreased by -13.8 per cent to €56.3 billion (A$88.1 billion) across the year mainly as a result of a like-for-like portfolio revaluation.

“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,” Unibail-Rodamco-Westfield chief executive Jean-Marie Tritant said.

“With restrictions in place across almost all of our markets we have realistic expectations for 2021 but are encouraged by the way footfall and sales bounced back strongly whenever restrictions were eased or lifted last year.”

Unibail-Rodamco, which picked up Westfield’s foreign operations for $32 billion in December of 2017, expects to begin selling its major US properties from 2022 once investment appetite returns.

Australia’s Westfield shopping centres, owned by rival retail giant Scentre Group, will not be affected by Unibail-Rodamco’s move.

Unibail-Rodamco's malls were closed for 93 days last year, and were under restrictions for all but 70 of the remainder.

Over half of the company’s premises are currently shuttered with many European nations experiencing second and third waves resulting in renewed lockdown measures.

The company’s UK operations, the Westfield London mall in Shepherd’s Bush, North London and Stratford, were hit the hardest, falling -49.3 per cent due to bankruptcies and store closures.

The company had to offer €401 million (A$627 million) of rent relief to tenants by the end of last year, although by December it had collected about 80 per cent of rent owing.

Unibail-Rodamco-Westfield said it has liquidity to last about 24 months.

Unibail-Rodamco-Westfield said it anticipates the €4 billion European asset disposal plan (with €3.2 billion remaining) will now be complete by 2022, compared to prior guidance of 2021.

The company remains committed to the two Westfield mega-malls in London, but was still weighing up what to do with a third site in the southern suburb of Croydon, which it has long planned to develop in partnership with British player Hammerson.

Unibail-Rodamco-Westfield expects to begin selling its major U.S. properties from 2022, once investment appetite returns, the mall operator said Wednesday.

In contrast, the largest mall owner in the US, Simon Property Group, remains optimistic despite experiencing a -20 per cent drop in revenue across 2020 compared to its previous years.

The group’s funds from operations narrowed from US$4.27 billion (A$5.21 billion) in 2019 to US$3.24 billion (A$4.18 billion) across 2020.

“We’re back to [being] focused on continuing to add improvements across our portfolio worldwide,” Simon Property Group chief executive David Simon said.

“We feel confident we have turned the corner, and we expect growth in earnings and cash flow in 2021.”

The company currently has more than US$8.2 billion (A$10.6 billion) of liquidity consisting of US$1.5 billion (A$1.9 billion) of cash on hand, including its share of joint venture cash, and US$6.7 billion (A$8.6 billion) of available capacity under its revolving credit facilities.

Simon Property Group also recently completed the acquisition of The Taubman Realty Group, in turn acquiring 26 regional, super-regional and outlet malls across the US and Asia.