• 0
  • Home
  • About Us
  • What We Do

Shopping Cart

GPAM
  • Home
  • About Us
  • What We Do

Could Unibail’s Westfield deal pressure Simon Property Group to make a big buy?

Unibail Rodamco CEO Christophe Cuvillier and the Westfield mall at the World Trade Center

From TRD New York: Unibail-Rodamco’s $15.7 billion bid to buy Westfield Corp. has the market buzzing about whether or not Simon Property Group will pull out its checkbook and acquire one of its smaller REIT rivals.

Unibail, Europe’s largest real estate investment trust, is creating a $70 billion retail behemoth with its acquisition of Westfield. That puts it squarely in the rearview mirror of Simon, which has a portfolio of real estate valued at $110 billion.

And it comes at a time of consolidation in the mall REIT sector on both sides of the Atlantic.

“Next on the list is Simon Property,” said Kai Klose, a stock analyst who covers Unibail for Berenberg Bank. “If they can make a move that makes sense and be more dominant, I would not be surprised if they would do something.”

Simon already owns a 28.7 percent stake in Europe’s second-biggest mall operator, Klépierre, which had been mentioned as a potential bidder for British REIT Hammerson. About a week before the Westfield deal was announced, Hammerson agreed to buy rival Intu Properties for $4.5 billion, and experts say odds are higher now that Simon could make a move through Klépierre that would allow Hammerson’s shareholders to reject the Intu deal.

Another possibility is that Klépierre could form a joint venture with the German Otto family’s ECE Projektmanagement GmbH & Co. KG, possibly through an acquisition of Deutsche EuroShop.

Stateside, activist investor Daniel Loeb’s Third Point LLC disclosed in November that it had built a position in Macerich, the country’s third-largest shopping center REIT, which last faced activism after it rejected Simon’s $17 billion takeover bid in 2015. And hedge fund Elliott Management in November acquired a stake in Taubman Centers, joining Jonathan Litt as the second activist investor in the country’s fourth-largest mall REIT.

But others are not so convinced that Simon can be pressured into a deal.

“I don’t think Simon management has ever been pressured to do anything,” Sandler O’Neill analyst Alex Goldfarb said. “Unless they’re invited into a transaction, they’ve said they’re out of the big deal business.”

The Unibail Rodamco deal could have consequences on the market’s other big acquisition: Brookfield Property Partners’ bid to buy General Growth Properties. GGP earlier this month rejected the $14.8 billion bid from Brookfield, which is expected to make a second, higher offer.

Brookfield’s $23-per-share offer represented a cap rate of 5.4 percent, while Unibail’s deal to buy Westfield implies a cap rate of 4.9 percent, or what would work out to almost $27 per share for GGP.

“BPY was in the driver’s seat in setting U.S. mall pricing with its bid for GGP – in an environment where transaction activity had been non-existent for some time. For this reason, it was hard to conclude that the offer for GGP was too low even though it was at a discount to our NAV estimate,” read a report from Green Street Advisors.

The New Westfield

Another result of Unibail’s purchase is that Westfield should become more competitive with Simon when it comes to its cost of capital.

Simon has a weighted average cost of capital of 5.11 percent, according to the website GuruFocus. Westfield’s is 4.41 percent.

But Unibail’s average cost of capital is 1.55 percent, and analysts believe that after the acquisition, Westfield’s will fall to somewhere in the 3 percent range.

“I think, ultimately, you will see the average cost of debt for Westfield fall on the back of this deal,” said Robert Woerdeman, an analyst who covers Unibail for Kempen.

Westfield is also being acquired by a company that, contrary to most U.S. mall REITs, focuses on its cash flow instead of net asset value.

“Unibail has historically been able to deliver outsized returns on their development pipeline. That’s future NAV value creation, not necessarily NAV today,” said Peter Papadakos, a stock analyst in the U.K. for Green Street Advisors.

And in a presentation Westfield put together explaining the merits of the deal, the company highlighted the potential of cross-fertilization across the two firms when it comes to the tenants in their respective portfolios.

Victoria’s Secret, Pink and Bath & Body Works make up the biggest tenants in the Westfield portfolio, with 78 stores. In the Unibail portfolio, Zara and its sister brands Pull & Bear and Bershka, which has a pop-up store in Soho at 580 Broadway, make up the largest share with 165 stores.

But CBRE’s Richard Hodos said its unlikely tenants would pick a location based on the fact they lease space somewhere else with a landlord.

“No retailer these days opens a store due to ‘relationships’ with (mall) landlords or developers,” he said. “If the shoe fits, fine, but customer data will tell the story, not a preferred relationship with a landlord.

Powered by WPeMatico

  • 20 December 2017
  • The Real Deal
  • Uncategorized
  •  Like
Malibu and Beverly Hills dominate LA’s most expensive neighborhoods →
  • Recent Posts

    • Hoteliers sound the alarm on looming distress  May 24, 2025
    • Growth markets see retail boom even with tariff uncertainty May 24, 2025
    • Westchester resi project gets city OK after union drops objection May 23, 2025
    • WATCH: ‘Father of CMBS’ Ethan Penner to run for governor of California May 23, 2025
    • Fashion Island office fetches $756 psf May 23, 2025
  • Recent Comments

    • Archives

      • May 2025
      • April 2025
      • March 2025
      • February 2025
      • January 2025
      • December 2024
      • November 2024
      • October 2024
      • September 2024
      • August 2024
      • July 2024
      • June 2024
      • May 2024
      • April 2024
      • March 2024
      • February 2024
      • January 2024
      • December 2023
      • February 2023
      • January 2023
      • December 2022
      • November 2022
      • October 2022
      • September 2022
      • August 2022
      • July 2022
      • June 2022
      • May 2022
      • April 2022
      • March 2022
      • February 2022
      • January 2022
      • December 2021
      • November 2021
      • October 2021
      • September 2021
      • August 2021
      • July 2021
      • June 2021
      • May 2021
      • April 2021
      • March 2021
      • February 2021
      • January 2021
      • December 2020
      • November 2020
      • October 2020
      • September 2020
      • August 2020
      • July 2020
      • June 2020
      • May 2020
      • April 2020
      • March 2020
      • February 2020
      • January 2020
      • December 2019
      • November 2019
      • October 2019
      • September 2019
      • August 2019
      • July 2019
      • June 2019
      • May 2019
      • April 2019
      • March 2019
      • February 2019
      • January 2019
      • December 2018
      • November 2018
      • October 2018
      • September 2018
      • August 2018
      • July 2018
      • June 2018
      • May 2018
      • April 2018
      • March 2018
      • February 2018
      • January 2018
      • December 2017
    • Global Property and Asset Mangement, Inc.
      137 North Larchmont
      Los Angeles, California 90010
      +1 213-427-1127

    © 2025 GPAM