Westfield $16 billion Unibail-Rodamco sale rings the
bell on retail's next chapter
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[December 13, 2017]
By Byron Kaye and Sonali Paul
SYDNEY/MELBOURNE (Reuters) - For investors
in Australia's Westfield Corp <WFD.AX>, its $16 billion sale to European
property giant Unibail-Rodamco <UNBP.AX> may mark a turning point for a
mall industry under pressure to reinvent itself amid fierce online
But to billionaire Frank Lowy, who built Westfield's vast European and
U.S. shopping center network into multi-purpose leisure venues, it was
also the perfect moment to call time on a family empire.
"He probably thought that he'd taken it as far as he could with his
sons, and there were other people that may have a different way of
approaching the industry," said Harold Finger, founder of Sydney-based
shopping center investor Haben Property Fund Pty Ltd, who has known Lowy
since he was a boy.
"He's 87 years old, his kids are not little babies any more, they've got
kids and they've got other interests that they can get involved in," he
said, referring to two of Lowy's sons, Peter and Steven.
The sale of Westfield to Paris and Amsterdam-listed Unibail-Rodamco is a
milestone for so-called bricks-and-mortar retailers, which have so far
argued they can downsize or, in Westfield's case, go upmarket to avoid
the incursion of online competitors led by U.S. giant Amazon.com Inc <AMZN.O>.
But analysts and investors in the sector disagree about what comes next.
"Lowy has bailed on Westfield before Amazon destroys his malls and turns
them into relic tombs of the 20th century," said Eric Schiffer, CEO of
private equity investor the Patriarch Organization, by telephone from
"You can only do so much to re-imagine a shopping mall, and they've
tried here in Los Angeles, but it's like trying to reinvent the horse
and carriage. No matter how much you try you can't turn a horse into a
Tesla. It's not going to happen."
The deal may nudge other mall owners towards considering a sale more
seriously, though some point out that further M&A action will be more
difficult with Westfield and Unibail-Rodamco - two big players - now off
The Lowy family, which owns 9 percent of Westfield, will end up with a
2.8 percent stake in the combined group.
Citi analysts noted Lowy's public statement that he remained committed
to his seven-decade-old company as an investor but said "it's hard not
to see today's announcement as signaling a significant shift in view".
The deal has lifted expectations in a sector sold down by investors over
its gloomy outlook.
[to top of second column]
Frank Lowy, Chairman of Football Federation Australia (FFA), listens
a question from the media at Sydney airport March 31, 2010.
REUTERS/Daniel Munoz/File Photo
Shares of Scentre Group <SCG.AX>, which Westfield spun off in 2014 to hold its
Australian shopping centers while Westfield kept the U.S. and British assets,
rose 2 percent on Wednesday, on top of a 4 percent jump a day earlier.
The explosion of online retail has led to a worldwide decline in department
store footprints, forcing mall owners such as Westfield to rethink their
business models to sustain or grow earnings.
In the United States, Macy's Inc <M.N> and J C Penney Co Inc <JCP.N> have said
they would shut hundreds of stores to protect themselves from declining sales.
Credit Suisse estimates that up to 25 percent of U.S. malls will shut by 2025.
Westfield has been seen as a pioneer of reinventing the mall concept, adding
cinemas, apartment towers, high-end food courts and luxury fashion labels to its
The overhaul - which has spanned the Westfield portfolio from Beverly Hills,
California, to London and Milan - has nonetheless curtailed earnings growth as
capital works hit rents, weighing on the company's share price and making it
attractive for buyers.
"Westfield particularly we saw as a good opportunity because it's rare that you
see a group that has such high quality assets, and they're building out what is
really the pre-eminent retail portfolio globally," said Grant Berry, a portfolio
manager at Australian broker S.G. Hiscock, which invests in retail real estate
investment trusts (REITs), including Westfield.
"They've been doing all the right things and the market hasn't been giving them
credit for that."
Winston Sammut, managing director of Folkestone Maxim Asset Management, said the
deal offered Lowy and his family an exit just as their business entered its most
challenge phase, while offering the buyer access to a fresh market.
"It'll probably turn out to be good timing," said Sammut. "There's still a lot
of headwinds for the sector in general. The writing's on the wall. You've got to
take opportunities as they come."
(Reporting by Byron Kaye in SYDNEY and Sonali Paul in MELBOURNE; Additional
reporting by Jonathan Barrett; Editing by Alex Richardson)
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