URW’s Strategic Shift to Retain US Flagships Raises Questions on Future Portfolio Risk

Strong Operational Momentum

Unibail-Rodamco-Westfield (URW) reported a solid operational performance for fiscal year 2024, underpinned by a 7.0% increase in like-for-like EBITDA and an adjusted recurring earnings per share (AREPS) of €9.85, surpassing prior guidance. This growth was driven by increased tenant sales and footfall across its flagship shopping centres in Europe and the US, alongside dynamic leasing activity and a record performance in its Convention & Exhibition (C&E) segment, which benefited from the Paris Olympic and Paralympic Games.

Tenant sales rose by 4.5% group-wide, with US Flagship centres outperforming national sales indices by a significant margin. Footfall also increased by 2.6%, reflecting the continued appeal of URW’s retail destinations. The company’s proactive leasing strategy resulted in a vacancy rate reduction to 4.8%, the lowest since 2017, and a strong uplift in minimum guaranteed rents (MGR) signed, particularly on long-term deals.

Strategic Asset Management and Financial Strength

URW completed or secured €1.6 billion in disposal transactions at book value, contributing to improved financial ratios including a net debt to EBITDA ratio of 8.7x, the lowest since 2017. The company also acquired €0.6 billion of joint venture partner stakes on attractive terms, notably increasing its ownership in key US Flagship assets.

Importantly, URW has made a strategic decision to retain its high-performing US Flagship assets, signaling confidence in their growth potential. The company’s liquidity position remains robust, with €13.9 billion available, including €5.3 billion in cash, ensuring coverage of debt maturities for more than 36 months.

Dividend Increase and Outlook

Reflecting its strong operating and financial performance, URW proposed a 40% increase in cash distribution to €3.50 per share, subject to shareholder approval. This marks a significant step up from the prior year’s €2.50 per share and underscores the company’s commitment to returning value to shareholders.

Looking ahead, URW forecasts 2025 adjusted recurring EPS in the range of €9.30 to €9.50, supported by expected underlying growth of at least 5%. This outlook factors in continued strong retail performance, increased variable income including from Westfield Rise, disciplined cost management, and the positive impact of recent and upcoming asset deliveries.

Sustainability and Portfolio Development

URW continues to advance its sustainability agenda through its Better Places plan, achieving significant reductions in carbon emissions and expanding renewable energy capacity. The company also progressed its development pipeline, with key projects such as Westfield Hamburg-Überseequartier set for phased openings in 2025, alongside mixed-use and office developments that enhance portfolio diversification and long-term value creation.

Despite a challenging retail investment market, URW’s portfolio valuation remained stable at €49.7 billion, supported by capital expenditures, acquisitions, and currency effects, offsetting valuation pressures in certain regions.