UNIRF - Unibail-Rodamco-Westfield: Assessing The Impact Of ECB Rate Cuts

2024-01-23 07:13:40 ET

Summary

• The market-implied cap rate for Unibail-Rodamco-Westfield has increased since 2019 due to COVID-19 (+0.87%) and ECB rate hikes (+1.27%).
• The ECB is set to reduce rates over the next two years, with the company being a key beneficiary due to its high leverage.
• I expect the share price to increase to 73-95 EUR/share over the next two years, depending on the magnitude of ECB rate cuts.
• Risks to the investment case include persistently high risk premiums in REITs, excessive leverage, and limited redevelopment opportunities.

Introduction

I previously covered Unibail-Rodamco-Westfield ( UNBLF ) (UNIRF), or URW for short, all the way back in October 2022, highlighting the company's unique opportunity to retire its long-dated debt at a 50% discount to par value. By pure chance, my article coincided with a bottom in the price of URW's FR0013431715 1.75% bond maturing in 2049:

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