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War Breaks Out Over Strategy At World’s Second Biggest Retail Owner

The Westfield shopping centre in Stratford, London, saw about 50% of the usual footfall when it reopened following the UK's lockdown.

Léon Bressler saved Unibail once in the early 1990s. Now he thinks the company needs saving again and thinks he knows how to do it. But this time he is an outsider, and the company’s current management doesn’t agree with him. 

Bressler, the chairman of real estate private equity firm Aermont, has teamed up with French tech billionaire Xavier Niel to launch a broadside at the management of Unibail-Rodamco-Westfield, the world’s second largest retail owner. Bressler, Aermont and Niel have called for Unibail to ditch its proposed €3.5B ($4.1B) rights issue and instead sell the company’s €14.4B ($16.9B) U.S. Westfield mall portfolio. The rights issue would allow existing investors to buy additional shares in the company, but issuing new shares dilutes the value of the current shareholders' holdings.

“We strongly believe the severely dilutive rights issue underpinning the company’s reset plan is a misguided act by a management who remains prisoner of a failed strategy that began with the acquisition of Westfield,” the consortium of Bressler, Aermont and Niel said in a statement last week. 

“URW should refocus itself as Europe’s leading prime shopping centre business, by selling its U.S. portfolio in due course and using proceeds to eliminate any debt concerns. Unshackling URW from its U.S. portfolio will generate a superior performance over the long-term, to the benefit of all stakeholders.”

Unibail is the world’s second largest retail property owner after Simon Property Group, with a shopping centre portfolio valued at €52B, with €34B in Continental Europe, €14.4B in the U.S. and €3.5B in the UK and Italy, including Westfield London and Westfield Stratford City, the UK’s two most valuable malls.

It acquired its U.S. and UK assets when it bought the non-Australian holdings of Westfield for $16B in 2018. 

Since then its share price has declined almost 85% as retail property has taken a pounding, and in September it outlined a range of measures to raise capital including a €3.5B rights issue, the largest ever undertaken by a REIT anywhere in the world. 

The consortium opposing the rights issue own a combined 4% of Unibail’s shares and argue that it is deeply dilutive for shareholders. They say it is being undertaken simply to maintain Unibail’s credit rating, and they do not believe it is a proper strategy for a company. They say the company has adequate liquidity to meet its refinancing needs over the next five years, so it doesn’t need to raise equity imminently. 

Instead, they propose the company sells off its U.S. assets when the market there has recovered, at some point in the next two to three years. That would provide capital to pay back debt and reduce gearing and allow Unibail to focus on European shopping centres, where it is a market leader, compared to the U.S., where its revenues are five times smaller than Simon Property. 

The consortium also proposes that Bressler, Niel and pharmaceutical investor Susana Gallardo are appointed to Unibail’s board. 

Aermont's Léon Bressler

Unibail came out immediately and expressed its opposition to the plan.

“[The supervisory board] expresses its strong disagreement with these proposals, which add significant uncertainty and risk in the current complex environment,” the company said in a statement.

Bressler is one of Europe’s best-regarded real estate investors and was chief executive and chairman of Unibail from 1992 to 2007.

He was a banker at Worms et Cie, the French finance house that owned Unibail, when he took over the management of the company. His background was in fashion and perfume, not property. 

Unibail was close to bankruptcy as a result of the early 1990s property crash, but he steered it back to health and led it to a deal in 2006 to buy Dutch REIT Unibail and become by far Europe’s largest property company.

His actions when he first took over Unibail mirror what he is proposing the company do today. He simplified the company and sold off extraneous businesses and assets to focus on shopping centres. And he positioned it to take advantage of the distress of others. 

“We [made sure to] see the positives of this very deep crisis and organise ourselves in a way that meant we could take advantage of it,” he told Europroperty in 2017. “We took our losses, remained viable as a small company, and got ready to take advantage of the distressed environment.”

After leaving Unibail, he set up his own opportunity fund manager, Aermont, which has become one of the most successful midsized managers in Europe. It owns the Pinewood film studio west of London, among other assets.