The owner of Westfield malls, known to passers-by for decades for their bright red logo signs, plans to sell all of its U.S. properties as fears of a pandemic have transformed the way people shop.
The Company’s Los Angeles-area shopping centers include high-profile properties such as Westfield Century City, Westfield Santa Anita in Arcadia and Westfield Topanga & the Village at Warner Center.
Unibail-Rodamco bought Westfield Corp. four years ago for nearly $16 billion. Unibail-Rodamco-Westfield, as the Paris-based company is now known, wants to stake its future on Europe, where it is the largest owner of shopping centers.
All 24 US malls are set to be sold by 2023, Chief Executive Jean-Marie Tritant told investors last week. The company is becoming a “focused, European pure play,” he said.
Tritant did not elaborate on whether the Westfield malls could be sold together or individually, and company officials declined to comment further on the proposed sale of the property.
Unibail’s exit doesn’t come as a complete surprise. In releasing its 2020 results, Unibail said it will “significantly reduce” financial risk in the US in the near future.
“We understood there was a desire to get out of the US,” said Sandy Sigal, the competing mall owner, but “they could have kept a few trophies.”
New ownership could be good for buyers in some malls, Sigal said. President of NewMark Merrill Cos., based in Woodland Hills.
“Real estate is really a local business,” he said, and with local owners “you end up with tenants who are more relevant to that community,” as well as malls that are more reflective of their neighborhoods, physically and socially. “It’s a lot more purposeful when you’re owned by a local.”
Unibail valued its U.S. malls at about $13.2 billion last year, but hasn’t said how much it hopes to fetch for them now. Real estate analyst Green Street valued it at more than $11.4 billion.
“They are shopping malls of the highest quality” and should be sought out, he said Dirk Aulabaugh, Global Head of Advisory Services at Green Street. The price of the entire portfolio might be too high for a single buyer like another mall, although some might try.
“It’s doable,” he said of a portfolio sale, but “most likely they would break it down into smaller chunks that are more digestible for the market.”
Shopping habits have been changing for decades, with traditional malls that sprung up across the country in the late 20th century losing their once firm hold on consumers.
Rising online sales have eroded profits at malls for years, but the COVID-19 pandemic has driven people out of public spaces and fueled their interest in snagging many goods from home with clicks and taps, the said San Francisco Bay Area real estate consultant, David Greensfelder.
The country has too many malls and the industry “is in a tremendous period of consolidation,” he said. “COVID has only accelerated this.”
In general, people either shop for goods that are readily available or specialty items that they purchase with thought and care, Greensfelder said.
“Commodity is commonplace,” he said. “Specialty is the stuff you spend big on, with a more emotional connection.”
Malls that primarily sell merchandise, including many Westfield malls, are struggling, he said. However, Westfield has a handful of the best specialty shopping centers in the country, including Valley Fair in Santa Clara and Century City, where the previous owner completed a $1 billion renovation in 2017.
“These are absolute ‘A’ malls because they are able to differentiate themselves and have a compelling tenant mix,” he said. “Everyone else is either treading water or slowly sinking.”
However, these Westfield malls offer investors “huge” opportunities “because they’re incredibly well located,” he said. They could be repurposed or converted into mixed use complexes of shops, offices and apartments.
The Sherman Oaks Galleria, for example, was a national icon of 1980s teenage mall culture, immortalized in Frank and Moon Zappa’s song “Valley Girl” and films like “Fast Times at Ridgemont High.” It was closed in 1999 due to a drop in sales. A new owner converted the once-huge mall into a smaller, open-air shopping and entertainment center with adjacent office space for rent in the early 2000s.
Last month, Unibail-Rodamco-Westfield announced it had sold the former Promenade mall at Warner Center for $150 million to investors believed to be connected to the Rams. The team is allowed to set up a practice facility there and set up other operations.
Unibail-Rodamco-Westfield’s US operation has value beyond its real estate, competitor Sigal said.
“They are leaders in technology and marketing,” he said, “with very good people as an organization. My hope is that somehow they stay together and are owned by a local operator.”
If that happens, the brand’s familiar red logo could live on for years to come, he said. “You could still see those marks, I hope.”