Coverage: Large mall operator Westfield being sold to French firm

Westfield Corp., which operates upscale shopping malls in dozens of U.S. cities and in Britain, agreed to be acquired for nearly $16 billion by French commercial real estate giant Unibail-Rodamco.

James Peltz of the Los Angeles Times had the news:

Unibail-Rodamco operates 69 shopping centers in major European cities including Paris, Madrid, Stockholm, Amsterdam and Munich, Germany, and it’s developing malls in Brussels and Hamburg, Germany.

The new company will be based in Paris and Amsterdam, with regional headquarters in Los Angeles and London.

“The industry is under severe pressure from internet selling and particularly Amazon,” John Colley, a professor at Britain’s Warwick Business School, said in an email. “Clearly there are significant savings as the new enterprise will need only one head office, board, systems and functional management.”

Hundreds of brick-and-mortar stores — especially department stores, apparel-heavy outlets and sporting-goods stores — already have closed in the United States in the last year as foot traffic has fallen, putting pressure on mall operators to fill the vacancies, especially when the outlets were among the mall’s larger anchor stores.

Julie Creswell and Chad Bray of the New York Times reported that European shopping centers are faring well:

The acquisition came amid growing expectations that mall operators, many which have seen their real-estate investments battered badly, are ripe for alliances. Just this week, GGP, the rebranded General Growth Properties, turned down a $14.8 billion bid from Brookfield Property Partners for the shares of GGP it didn’t already own. Activist hedge fund investors have taken stakes in Macerich and Taubman Centers.

European shopping center owners have fared relatively well this year, with many of the biggest owners reporting gains in rental income. Unibail-Rodamco, whose real estate portfolio also includes office and convention space, said that rental income from its shopping center arm was up 4.1 percent to 781 million euros, or about $920 million, in the first half of the year.

But their counterparts in the United States have struggled. That’s due, in part, to the fact that retail real estate expanded at a much more rapid clip in the United States than it did in Europe, so the pullback has been much sharper.

In the United States, there appears to be two bets emerging on the future of malls, analysts said.

Byron Kaye, Sonali Paul and Maya Nikolaeva of Reuters reported that the combined company would have 37 percent of its portfolio in France and 22 percent in the United States:

Around 37 percent of the combined entity’s portfolio would be in France and 22 percent in the United States.

“Westfield is the best fit for us and a natural extension of our strategy,” Unibail’s chief executive Christopher Cuvillier said following the announcement of the proposed deal, which would be worth $24.7 billion including debt.

Unibail is focused on large sites with heavy pedestrian traffic and high-profile tenants such as Apple, Zara and Primark and analysts said it would gain from importing the Westfield model.

.