The Unibail Rodamco Westfield (ASX: URW) share price closed today’s trade down 5.33% to $3.02 per share. This comes after the commercial real estate giant released details of its 9 billion euro (A$14.5 billion) reset plan.
Unibail’s share price is now down to new 52-week lows. Like almost every retail share, Unibail got knocked down during the COVID-19 market rout earlier this year, falling 58% from 18 February through 18 March.
Unlike many of its peers, though, the Unibail share price hasn’t recovered from the selloff. In fact, it’s gone the other way, down another 30% from 18 March. Year-to-date, Unibail’s share price is down 73%.
By comparison the S&P/ASX 200 Index (INDEXASX: XJO) is down 12% in 2020.
What does Unibail Rodamco Westfield do?
Unibail is among Europe’s largest commercial real estate companies, owning retail and office complexes. It has assets in Europe, the United Kingdom and the United States of America.
Unibail acquired Australian shopping centre operator Westfield Corporation, created by the split of Westfield Group, in 2018, which then saw Unibail shares list on the ASX.
What reset plan did Unibail announce?
Unibail said its 9 billion euro reset plan will strengthen its balance sheet and give it increased financial flexibility to pursue its long-term strategies.
The deleveraging plan includes a fully underwritten 3.5 billion euro capital raising the company plans to use straight away to pay down its debt obligations.
Unibail also stated it will limit cash dividends through scrip and a lower payout ratio. A measure it expects will save 1 billion euros in cash over the next 2 years. It also plans to cut its non-essential operating capital expenditures and development by 800 million euros.
By the end of 2021, Unibail expects to complete 4 billion euros worth of disposals. On the European front, approximately half the disposals are retail assets with the other half offices. It also plans to reduce its US regional mall footprint in the near term. The company stated that 1 billion euros of disposals are already well advanced.
The reset plan is intended to maintain Unibail’s strong investment grade credit rating, as well as a sustainable capital structure with a loan to value (LTV) ratio below 40%> It’s also aiming to keep the net debt/earnings before income, taxes, depreciation and amortisation (EBITDA) ratio below 9 times.
Commenting on the announcement, Christophe Cuvillier, group CEO, said:
URW’s immediate priority, as announced on July 29, is to deleverage, primarily through asset disposals. However, given the uncertainties around the duration of the COVID-19 pandemic and the recovery, we have decided, as a matter of prudent management, to substantially strengthen our balance sheet, in order to maintain a robust investment grade credit rating and to ensure flexibility in a world that is unpredictable and requires agility…
On the operational front, we see continued improvement in footfall and tenant sales, and are making steady progress in our tenant negotiations. As the environment remains challenging, we believe today’s announcement, including the fully underwritten capital raise, is an important step to ensure URW is best positioned for the future.
With a tough year behind it, the Unibail share price will be one to watch as the reset plan unfolds.
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