Just four years after spending $14 billion to buy up some of America’s top regional shopping centers, big European operator Unibail-Rodamco-Westfield wants to dump them all, even if they end up taking a loss.
Duh? What in the world were they thinking?
Unibail is a French-based real estate operator that is Europe’s largest and after purchasing Westfield in 2018 owns some of the most iconic malls in America, including the Garden State Plaza in Paramus, NJ, the Westfield World Trade Center in Manhattan and Century City in Los Angeles.
But last week the company’s CEO Jean-Marie Tritant told investors he wanted to sell off the American operation by the end of next year. Analysts quoted in the Wall Street Journal story on the announcement were skeptical the company would get its investment back given the state of in-person shopping these days around the world. Unibail of course said it expects to make out just fine.
The radical change of direction does come after a crazy period in retailing as the pandemic wreaked havoc on many physical stores, although the company’s so-called “Class A” properties have held up better than most. There has also been a change of leadership at the top of Unibail since prior management did the Westfield deal and when Tritant took over the corner office 16 months ago, he said at the time, “Our investment should be in Europe,” according to the Journal story.
Still, this abrupt change of course continues the perplexing scenario that greeted the original purchase. In 2018, even before the pandemic, physical shopping was in decline as e-commerce continued to gain market share and skeptics wondered what Unibail saw that nobody else did.
Now, it seems whatever it was, it’s disappeared and they want out of American malls. Their big problem will be who still wants in. While there remain several giant shopping center operators – Simon, Brookfield and Kimco are among the largest – it’s unknown if they are interested in taking on more real estate. Likewise, private equity investors like Sycamore and others could be potential buyers, again with no clear indication they want these properties.
The biggest winners at the moment appear to be the former owners of Westfield, the Australian company now known as Scentre Limited, whose timing was impeccable. You can be pretty sure they don’t want to buy back Westfield. No backsies, I think that’s called.
The Unibail aboutface is just another example of the corporate syndrome known as “Oops, we changed our minds.” We get the new management, the change in global shopping patterns and everything else that has happened since the original purchase but still, you have to go back to the original question of what was Unibail thinking in the first place? (Not to mention, what kind of a screwy name is Unibail anyway? Isn’t that a brand of pens?)
Hey, big successful shopping centers are not going away. The return surge of shoppers to these properties as the pandemic has eased proves that people want to get out of their houses and mingle with merchandise. It’s who we are.
But boards of directors and shareholders who allow big corporations to keep changing directions – spending huge amounts on legal and consulting fees in the process – need to be held accountable for their actions…or lack therein.
Unibailing out of the corporate strategy you just initiated is just bad business.