Commentary

$15.7 Billion Deal Creates Largest Global Mall Operator

Paris-based commercial landlord Unibail-Rodamco is acquiring Sydney, Australia-based Westfield Corp., which counts the World Trade Center mall in lower Manhattan among its U.S. properties, in a cash-and-stock deal valued at $15.7 billion. The deal creates a combined platform of 104 assets worldwide that attract 1.2 billion visits annually.

“Westfield was built by Frank Lowy, the billionaire shopping center tycoon who started with one shopping center outside of Sydney in 1959. It now includes premier shopping malls in California, Connecticut, New York, New Jersey and London, as well as shopping areas at Newark Liberty International Airport in New Jersey and Kennedy International Airport in New York. Westfield is also the developer behind the Century City retail hub on the west side of Los Angeles and a new shopping center adjacent to Linate Airport in Milan that is expected to be completed in 2020,” reports Chad Bray for the New York Times

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“Westfield has been seen as a pioneer in U.S. mall redevelopment, melding traditional mall retailers with atypical mall fixtures like upscale food courts, high-end restaurants, bars, cinemas and boutique fashion outlets,” write Reuters’s Byron Kaye and Sonali Paul. Unibail-Rodamco, which is the largest mall operator in Europe, will replace its properties with the Westfield logo.

“The deal accelerates consolidation of the global retail property sector,” Kaye and Paul point out, and “comes on the heels of world No. 2 retail real estate investment trust GGP Inc’s rejection of a $14.8 billion offer from Brookfield Property for the two-thirds it did not already own.”

And last week “Hammerson, which owns Birmingham’s Bullring shopping center, agreed to buy Intu, the company behind Manchester’s Trafford centre, in a £3.4 billion deal that will create Britain’s biggest property company worth £21 billion,” Julia Kollewe reports for the Guardian.

“Westfield, which owns and operates 35 shopping centers in the United States and United Kingdom valued at $32 billion, said the transaction was ‘highly compelling’ for Westfield and Unibail-Rodamco’s shareholders,” the Reuters story continues.

Not yet. Unibail-Rodamco’s value fell as much as 4.1% on news of the deal. And “if you invested in Westfield 18 months ago, you would have lost money even if you accepted the [Australian] $10-a-share offer now on the table,” observes Elizabeth Knight for the Sydney Morning Herald.

“Unibail is mounting the biggest takeover of a company in the Asia-Pacific region this year — and the largest ever in Australia — as mall owners seek to contend with relentless pressure from online commerce. Shares of such companies have been hit hard and store closures are accelerating, pressuring landlords to fill empty space and reinvent shopping centers,” Pooja Thakur Mahrotri and Matthew Burgess write for Bloomberg.

“This is a combination of two of the best-in-class mall operators in the world,” Bloomberg Intelligence analyst Sue Munden tells them. “They will become a dominant player, have the best relationships with retailers and therefore be best placed to create the malls of the future.”

“For Westfield chairman Frank Lowy, the deal represents the culmination of a decades-long career in shopping malls that began when he opened a deli in a western Sydney suburb. Mr. Lowy, born in 1930 in Czechoslovakia, survived the Holocaust and fought in the Israeli war of independence before moving to Australia,” writes Mike Cherney for the Wall Street Journal.

“His sons, Peter Lowy and Steven Lowy, are co-chief executives of Westfield, which spun off its Australian and New Zealand assets in 2014 into Scentre Group. Steven Lowy serves on Scentre’s board,” he continues. They will retire.

Jill Margo, author of a biographyFrank Lowy: Pushing the Limits, says the terrible experiences of the second world war instilled a deep sense of the importance of family and of determination in Sir Frank. “‘The extremes of the Holocaust did not melt Frank. They forged him into steel,’ she said,” write Jamie Smyth, Harriet Agnew and Aime Williams for Financial Times.

One challenge he faced was a shareholder revolt in 2014 over his proposal to demerge Westfield’s Australian and New Zealand assets from the U.S. and U.K. portfolio, they continue. “I never felt so unjustly criticized as I felt then. I was wondering whether there was some underlying motive here to punish me or bring me down,” he told the FT at the time.

“Sir Frank hit the phones, rallied investors’ support and a few weeks later won approval for the demerger, creating an international group, Westfield Corporation, and a local operation, Scentre. On Tuesday he told reporters the sale to Unibail-Rodamco was a natural outcome from that demerger,” they write.

“Lowy has given time and money to many other causes, including the Lowy Institute for International Policy, a think tank that focuses on Australia's place in the world, and he has donated millions to medical research in Australia. He is a companion of the Order of Australia,” according to the Australian Associated Press.

Oh, and last Friday he was knighted by Queen Elizabeth “for his contribution to the British economy and philanthropic efforts in the country.” Nice closures to a triumphant story.

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