Pre-Pandemic Occupancy Encourages Westfield To Keep U.S. Malls

The prospect of Westfield malls group owner Unibail-Rodamco-Westfield (URW) retaining more of its U.S. malls ramped up this week after the Paris-based parent company posted financials that saw its sales return to pre-pandemic levels.

URW reported strong operating performance with tenant sales up 6.4%, above core inflation, and footfall up 4.9%.

Importantly, shopping center vacancy rates are back to 2019 levels at 5.4%, representing a 110 bps improvement compared with 2022. In its financial update, URW said that like-for-like EBITDA was up 6.7% and continued deleveraging had led to an improved net debt/EBITDA ratio at 9.3x.

Shopping center net rental income was up 8.0% and Westfield Rise, URW’s retail media business, is up 17.4% on a net margin basis.

That could mean a rethink on its previous plan to exit the U.S., which became an unhappy acquisition for the company when it scooped up Australian-based Westfield’s U.S. and European centers.

Instead, URW looks set to hold onto some of its best-performing malls, while still ditching a number of its American properties after Tritant told investors last year that strong operational performance has given the business flexibility on when it executes additional sales.

Westfield Exits Market Street

One of those it no longer holds is Westfield San Francisco, where it handed back the keys to the ailing center after anchor Nordstrom
JWN
pulled the plug on its department store and a host of other brands shuttered citing crime levels in the city.

The company now owns 16 U.S. malls, among them Westfield Century City in Los Angeles and Westfield Garden State Plaza in northern New Jersey and has invested substantially into some of the properties it was expected to have sold off.

URW secured a major refinancing of a $925 million cash-out refinancing of the 1.4 million sq. ft. Westfield Century City, an outdoor mall popular among celebrities for product launches and host to numerous events, on Santa Monica Blvd last year.

Fitch Ratings reported from a site visit last year and said: “While URW has sold off some of its U.S. regional mall holdings over the past two years, recent conversations with management representatives, during the site visit, indicated that the company intends to maintain a presence in the U.S. with a focus on its 12 flagship malls, of which Westfield Century City is considered the crown jewel.”.

URW has invested in the Westfield Century City mall since it bought the property in 2002, notably injecting $1 billion into the shopping center in 2017.

URW Hamburg Opens April

Circa 90% of its committed pipeline will be delivered in 2024 including Westfield Hamburg-Überseequartier, opening on 25 April. A huge mixed-use development in HafenCity in Hamburg, Germany, URW is investing $1.05bn in the project, which will span more than 4.3 million sq. ft. and comprise 14 buildings including office towers, retail, three hotels, 579 residential units, entertainment and a cruise terminal.

The development will feature 200 retail outlets within an 866,000 sq. ft. shopping area over three floors, along with a 2,500-vehicle parking lot, plus 226,000 sq. ft. dedicated to dining and entertainment, including a ten-screen movie theater, dining, bars and wellness centers.

“In 2023, we delivered strong operational performance across all activities, supported by dynamic leasing activity and the positive effect of indexation. Our like-for-like group earnings are now back at 2019 levels, ahead of the 2024 target we set ourselves at our 2022 Investor Day,” said Jean-Marie Tritant, URW’s CEO.

“We made further deleveraging progress in challenging investment market conditions, securing 11 transactions totaling $1.08 billion. Total disposals since 2021 have contributed $5.5 billion to our net debt reduction, and we remain committed to further deleveraging. The success of our hybrid exchange offer and the over-subscribed $808 million green bond issue demonstrate the continued confidence of debt investors.”