Westfield Corporation, the operator of 35 malls and shopping centers in the U.S. and the UK, has been acquired by Europe’s largest property firm, Unibail-Rodamco, for $15.7 billion ($24.7 billion including debt).
Westfield is one of the companies widely credited for modernizing the U.S. mall experience, combining retail stores with upscale food courts, restaurants, bars, cinemas and boutique fashion outlets. Westfield also has made a commitment to innovation initiatives, in part to deal with the challenges stemming from slowing brick-and-mortar retail growth. However, many of Westfield’s competitors are even less prepared to respond to shifting consumer preferences.
By creating an international mall giant, the acquisition could spell even bigger trouble for outdated shopping centers. While retail bankruptcies and the rise of online shopping have made life tougher for all mall operators, competition from newer shopping centers was the most common cause of “dead malls,” according to a study from Wells Fargo Securities.
Malls have been forced to reinvent themselves in recent years as this competition increases, with as many as 25% of malls in the U.S. possibly closing by 2022. As traditional mall anchors such as department stores perform poorly or close for good, malls have sought new identities with entertainment, lifestyle offerings and even residential real estate.
Even with its solid position in the mall space, Westfield could still use the financial backing of its new owners. The mall operator has taken steps to transform parts of its locations to create experiential environments, such as short-term pop-up spaces, and has partnered with Uber to designate drop-off and pickup stations.
The acquisition is a mark of confidence from Unibail that Westfield’s initiatives will create a positive impact in the long run. With the deal, Unibail now has access to the U.S. and UK markets, with a portfolio of 104 shopping centers across 13 countries and 1.2 billion annual shopper visits. Approximately 37% of the combined company’s portfolio would be in France, with 22% in the U.S.
Westfield’s U.S. Rivals Potentially Up For Sale
The deal might convince other mall owners to consider a sale more seriously. One major mall owner, GGP, recently rejected a $14.8 billion buyout offer from its biggest shareholder, real estate operator Brookfield Property Partners. But negotiations between the two parties are expected to continue, and it’s possible that the pressure of both the Unibail-Westfield acquisition and further department store closings may push GGP to accept a later offer.
Another rival mall operator, Macerich, has come under pressure from activist investor Third Point Management to explore strategic alternatives that could include a potential sale.