We are a consortium of major investors in Unibail-Rodamco-Westfield (“URW”).
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.
We view the company’s existing liquidity profile and continued access to the bond markets as solid in the context of the challenges it faces.
The proposed €3.5 billion rights issue, which would be the largest equity issuance in US and European REIT history, is therefore completely unnecessary and highly destructive to shareholders.
There is a better long-term strategy.
URW should refocus itself as Europe’s leading prime shopping centre business, by selling its US portfolio in due course and using proceeds to eliminate any debt concerns. Unshackling URW from its US portfolio will generate a superior performance over the long-term, to the benefit of all stakeholders.
We will vote against the resolution authorising the capital increase at the General Meeting and encourage all shareholders to do the same. We also propose strengthening the Supervisory Board with three new members to drive the delivery of a strategy that creates value for all shareholders.
We are a consortium of leading European real estate and technology investors, led by Léon Bressler, the former Chairman and CEO of Unibail (the precursor to URW), and leading French technology entrepreneur Xavier Niel.
Together, the consortium holds 5% of the stapled shares in URW, making us one of the company’s largest shareholders.
Westfield – Wrong Move, Wrong Time, Wrong Price
URW’s problems began with its acquisition of Westfield in 2018. The transaction was the wrong move, at the wrong time and at the wrong price. The acquisition polluted URW’s dominant position in Europe with a more marginal position in the US, a less attractive market. It burdened the company with debt, distracted management and was a gross misallocation of resources.
Consequently, URW entered the Covid-19 pandemic in a vulnerable position and has been disproportionately affected by the crisis.
Debt – The Wrong Focus (For Right Now)
While the high level of debt generated by the Westfield transaction must be addressed over time, it does not present a near-term liquidity issue.
URW has substantial liquidity buffers, continues to access capital markets and is able to service its bonds, which have a long-term average maturity profile.
“RESET” – The Wrong Plan (and Not a Strategy)
The RESET plan is strong on acronyms, but light on strategy. It includes some asset disposals, a reduction in capex and the quasi-elimination of the cash dividend - all debt-reduction initiatives that we support.
But the plan’s main pillar is the €3.5 billion rights issue with the stated objective of maintaining the company’s existing credit rating.
While we are sensitive to the company’s credit quality, targeting a high credit rating is not a strategy in and of itself. It does not justify the devastating consequences for shareholders of the rights issue. Nor are those consequences justified in broader liquidity terms.
RESET is not in fact a long-term strategy. Where is the company going? What should it look like in five or ten-years’ time? The Management is not addressing these fundamental questions, but instead remains prisoner of the Westfield transaction.
Refocus URW as Europe's Leading Prime Shopping Centre Business
We believe URW must re-establish itself as Europe’s leading prime shopping centre business under a pure-play format, by disposing its US portfolio. A sale should be conducted under a disciplined process and at realistic prices when the market is ready. Proceeds should then be used to eliminate the issue of high debt. In the meantime, the company’s solid liquidity profile affords the patience to get it right.
Crucially, this strategy will not require a capital increase.
We expect the execution of such a process to take two to three years, after which URW will enjoy a far superior competitive position under a pure-play format as its sector’s leading European business and with a healthy balance sheet. It will have the strategic focus and capital necessary to invest in assets, technology and people to ensure it thrives in a changing world.
Enhance Leadership and Oversight to Deliver Change
The company’s decision to reduce the Management Board to just the CEO and CFO represents extremely poor governance.
We place great expectations on the Supervisory Board to consider our proposed strategy and help to create the processes under which it can be successfully implemented by the Management Board.
Our resolutions submitted to the General Meeting for the admission of three new members to the Supervisory Board are made in that spirit. Their admission will constructively strengthen the board and help it move the company in the right strategic direction.
We have submitted resolutions to the Shareholder Meeting for the admission of three highly experienced new members to the Supervisory Board, who will help move the company in the right strategic direction.