Across client accounts, within the property asset allocation, we have sold Unibail-Rodamco-Westfield (URW) the entity created from the takeover of Westfield Holdings (WFD).

Following the takeover of Westfield by Unibail-Rodamco, a listed French property company, URW became the listed Australian security replacing WFD and incorporating the existing Unibail assets.  After a review of the combined entity we have decided to exit URW for the following reasons:

• One of the main positives for WFD was the dominance of their flagship centres in the key US markets of New York and LA and London. While those assets remain in the combined entity their influence on the returns are diluted by the increase in the size of the overall portfolio;
• In a similar vein, the challenges to retail property of online retailers has been largely felt by regional centres as flagship centres have been able to switch to a destination/experience strategy for their centres. With the addition of the Unibail assets the percentage of flagship centres to regional centres has fallen from 86% to 75%;
• Senior management at WFD who have produced an excellent track record over a long period of time have left the combined entity, and while Unibail’s existing management also would appear to have a decent track record of value creation, they are largely an unknown entity at this time;
• The geographic exposure of the centres has changed significantly from predominantly the strong economy of the US to the more fragile and slow growing European economies.

This trade will be executed for investor accounts across the coming week. We are currently assessing several alternatives as a replacement for URW and will communicate the decision as soon as it is finalised.