Unibail-Rodamco-Westfield’s corporate strategy plan has been shredded by a group of investors holding barely 5% of the shares. Step forward Leon Bressler.
It is 4.56 pm on Friday, 4 December.
Many in the property industry will at this time have stopped work already for the weekend. But not Leon Bressler.
The managing partner of Aermont Capital is at the headquarters of Unibail-Rodamco-Westfield (URW) in Paris about to go into his next meeting, and he will remain in the French capital for another few days before returning to London.
It must be a strange feeling in some ways. He left Unibail some 16 years ago after serving as chairman and CEO of the company for a total of 14 years. During that time, the company performed very well. Total annualised shareholder returns of 28.7% from 1997 to 2006 made shareholders successful and employees a lot of money via stock options.
Bressler left in 2006 to launch Perella Weinberg Partners’ private equity real estate firm and now it is fully independent as Aermont Capital.
The meeting he is about to step into is about nothing less than trying to make URW great again.
The last two to three years have been a torrid one for the company. As Bressler put it himself in an interview with Bloomberg several weeks ago, the company has ‘bizarrely’ lost up to 60% of its value.
And that is not good given Aermont has a financial investment in URW as a minority shareholder.
Public mutiny
Bressler was not about to sit around and wait for any more value destruction for Aermont, to which he gives 100% of his time. Instead, he and billionaire fellow shareholder, Xavier Niel - who together with a group of investors represent just under 5% of the total share capital - very publicly led a mutiny against the URW board.
Bressler and Niel won what became a fantastic battle – indeed it was a first in French corporate history, overturning the company’s ‘Reset’ plan and installing instead the dissident shareholders’ ‘Refocus’ plan.
Blood was spilt. Bressler is now the newly installed chairman of the supervisory board (a non-executive position) as the former custodian, Colin Dyer, was forced out. Moreover, CEO Christophe Cuvillier has also been ousted, though he is ‘leading’ the new ‘transition phase’ until he goes on 1 January to be replaced by the person Bressler and Niel wanted – Jean-Marie Tritant. Tritant is a company veteran who currently leads URW’s US business.
For Bressler, this is all about Aermont’s investment, not some vanity ride. He is not a seductress but someone who convinced the other shareholders that his plan was better for value creation than Reset which he argued would only lead to value destruction.
The previous plan to raise €3.5 bn in a new rights issue was egregious to Bressler. Instead, a vital plank of the Reset plan has been to tap the financial markets in a different way; at the end of November, the shopping centre operator and owner issued €2 bn of bonds – an offering which was more than three times oversubscribed, and has been seen as a ‘great success’.
US business
The second key issue is what to do about the US business. Bressler and Niel’s alternative is to jettison the North American part inherited when Unibail-Rodamco took over Westfield in June 2018.
Bressler does not want to keep the malls business in the US where URW is only a ‘small player’. For example, leading US mall company Simon Property Group is more than five times the size of URW in that market.
That is in stark contrast to Europe where the group has a leading position, which is what Bressler wants.
There will certainly be no fire sale of the US business. With ample liquidity and therefore no special reason to need funds again imminently, URW will try to be patient, looking to sell the US malls in the next two to three years in what Bressler expects will be a post-Covid world.
The last thing the company will do is ‘rush into’ a sale now, which would look like a fire sale. As Bressler knows, the US almost always rebounds economically faster than Europe, and when URW finally sells the assets – which could be sooner than the two to three years – it would be a ‘great result for the company’.
He believes the mood is optimistic inside the company, which may be hard to fathom given the very public way in which the CEO has been made to leave and the unceremonious manner in which the former chairman of the supervisory board was elbowed out.
But the smooth-talking Frenchman knows how to transmit calm and control. The market seems to have liked what the company has done under the new plan so far.
But, in the short term it will not be easy.
While internal issues have been resolved after the rebel shareholders’ attack, the next three months will remain difficult because Covid-19 will not suddenly disappear. Certainly not before Easter at least is the current thinking at the HQ.
Post-Covid world
But the management is optimistic about a post-Covid world in Q2 2021 which should mark the end of the seasonal dimension of Covid-19.
Part of the optimism stems from better treatments for the virus.
On 2 December, the UK became the first country in the world to approve a vaccine - manufactured by Pfizer and BioNTech - which is set to be rolled out nationally after the British medical regulator, the MHRA, pronounced its safety. Other countries are reportedly close to authorisations too.
So there is some reason to believe that after Easter, people will be free to start going out again normally, and to enjoy the arts, and of course, shopping.
It could be a case of history repeating itself, the way the world rebounded in the 1920s after the Spanish Flu.
With a fresh plan, a €2 bn bond issue successfully done, and the spectre of Covid-19 subsiding in Q2 2021, it is said people inside URW feel happy as they rally round with solutions to the firm’s issues.
Asked if Aermont will be taking a greater stake in the company, Bressler seems happy to show confidence. Personally, he does not own even one share in the company but would invest more on behalf of Aermont and its investors. It will not be seeking control, however.
Westfield Mall of the Netherlands to open in March
Westfield Mall of The Netherlands in Leidschendam near The Hague is due to open its doors on 18 March 2021, after the original opening date in October this year was postponed due to the pandemic. URW has invested a total €600 mln in the project, essentially a redevelopment of an existing shopping centre.
The 117,000 m2 mall is 85% pre-let and will house 280 shops and hospitality outlets as well as provide 4,000 free parking spaces. It will be URW's 11th mall in Continental Europe after the group opened 10 centres in France, Sweden, Poland and the Czech Republic in 2019. The new Dutch mall aims to attract 12-14 million shoppers per year.
Timeline - Four eventful months
16 SEPTEMBER
Supervisory board led by Colin Dyer presents €9 bn corporate RESET plan, including proposed €3.5 bn rights issue.
15 OCTOBER
Group of rebel shareholders led by former URW CEO Léon Bressler and French telecoms billionaire Xavier Niel issue statement calling on investors to reject the RESET plan, calling it ‘a failed strategy’. Activist shareholders together hold 4.1% of URW’s share capital. They urge a 'REFOCUS' on Western Europe and sale of US business.
19 OCTOBER
Supervisory board reiterates importance of RESET plan to address URW's challenges.
26-29 OCTOBER
Three independent proxy advisory firms recommend proposed €3.5 bn capital increase to shareholders.
1 NOVEMBER
Presentation of URW's 9-month results revealing recurring net result down nearly 30% and net rental income down more than 17%.
9 NOVEMBER
Proposed rights issue is voted down at URW's combined general meeting and appontments of Leon Bressler and Xavier Niel to supervisory board are approved.
13 NOVEMBER
Announcement that Colin Dyer to resign as supervisory board chairman and be replaced by Leon Bressler.
18 NOVEMBER
Announcement that Jean-Marie Tritant to replace Christophe Cuvillier as management board chairman and CEO from 1 January 2021. Cuvillier to stay on as COO during 'transition phase'.
25 NOVEMBER
URW announces successful €2 bn bond placement which is more than 3x oversubscribed.
9 DECEMBER
Announcement that Jaap Tonckens to step down as group CFO and be replaced by Fabrice Mouchel, group finance director and CFO Europe.
