A consortium of investors led by former Unibail-Rodamco-Westfield CEO Léon Bressler and French telecoms billionaire Xavier Niel has called on all investors to oppose the European listed property giant’s recently announced €9 bn ‘Reset’ plan, calling the programme ‘a failed strategy’ and saying the capital raise would be ‘devastating’ for shareholders.
In a statement sent to the board of URW and to the press, the investors, which include the Gallardo family and together represent 4.1% of URW’s share capital, argued that the company should refocus instead on its European prime shopping centre portfolio and sell its US assets. Proceeds should then be used to repay its €24 bn debt load, instead of carrying out a ‘severely dilutive’ rights issue.
‘URW’s Reset plan, underpinned by a severely dilutive rights issue, is a misguided act by a management team that remains prisoner of its failed strategy that started with the acquisition of Westfield. This acquisition polluted URW’s dominant position in Europe with a more marginal position in the US, a less attractive market. Moreover, it burdened the company with debt, distracted management and was a gross misallocation of resources,’ said Bressler, who led URW (Unibail at the time) himself for 14 years until 2006 and is now managing partner of Aermont Capital.
‘The high level of debt generated by the Westfield transaction must be addressed, but does not present a near-term liquidity issue. While we support the other debt reduction initiatives in the plan, the situation does not warrant a capital raise with devastating consequences for shareholders.’
He added: ‘It is time to re-establish URW as Europe’s leading pure-play prime shopping centre business by selling the US portfolio and using proceeds to solve the company’s debt issues. The solid liquidity profile and continued access to the bond markets which URW currently enjoys affords time to execute that strategy in a disciplined manner and at realistic prices once liquidity returns to the US market.’
Bressler and Niel urged investors to vote against the ‘severely dilutive’ and ‘unnecessary’ rights issue. They even set up a website in a surprise campaign that throws doubt over the shareholder vote on the rights issue on November 10. Unibail needs to win over two-thirds of shareholders to move ahead with the share sale.
In a reaction issued later in the day, the supervisory board of URW expressed its 'strong disagreement' with the consortium's proposals, arguing they add 'significant uncertainty and risk in the current complex environment'.
The board reiterated its 'unanimous support' for the Reset plan, which it said was the result of an in-depth review of the group’s strategic options and which it as described as 'comprehensive and well-calibrated'.
Colin Dyer, supervisory board chairman, said: 'The Reset plan is already on track, as evidenced by the recent announcement of the disposal of the SHiFT office building, which demonstrates URW management’s ability to deliver on its strategic roadmap. The RESET plan is about immediate action to ensure the operational and financial flexibility of the group. It will reinforce URW in the long term to the benefit of all its shareholders.'
URW announced Reset - its largest restructuring programme ever – a few weeks ago. The €9 bn initiative aims to raise over €9 bn of fresh capital in a bid to strengthen its balance sheet and prepare itself for ‘uncertain times’ ahead.
As part of the plan, URW will seek to complete €4 bn of property disposals by year-end 2021, carry out a fully underwritten €3.5 bn capital raise, reduce its development and non-essential operating capex by a further €800 mln and limit cash dividend payments, resulting in €1 bn of savings over the next two years.
‘This plan is designed to enable the group to preserve the group’s strong investment grade credit rating and maintain a sustainable capital structure with an LTV(5) below 40%,’ the company said in a statement.
In terms of asset sales, the company has earmarked €2 bn of retail properties for sale and €2 bn of offices & others, particularly JV stakes in its most liquid and mature assets.
Around €1 bn of disposals are well advanced, URW added.
