Telecoms boss and real estate investment fund team up to push for change at indebted shopping centre owner

Xavier Niel, the French telecoms billionaire, has teamed up with a well-known real estate investor to buy a 4.1 per cent stake in Europe’s biggest shopping centre operator, Unibail-Rodamco, with the aim of scuppering its forthcoming €3.5bn rights issue.
Mr Niel and Aermont Capital’s founder Leon Bressler, who led Unibail himself for 14 years until 2006, sent a four-page letter to the board on Thursday laying out a broad critique of the company’s strategy and calling for changes. They declared they would vote against the “severely dilutive” and “unnecessary” rights issue and urged others to do the same.
The pair argued that Unibail-Rodamco should instead sell its US property portfolio to pay down its €24bn debt load incurred in the 2018 acquisition of Australian mall operator Westfield. They are also seeking three board seats.
The surprise campaign throws doubt over the shareholder vote on the rights issue on November 10. Unibail-Rodamco needs to win over two-thirds of shareholders to move ahead with the share sale.
It is a key part of the €9bn debt reduction plan announced in September, which the company cast as needed to avoid a ratings downgrade and cope with the fallout from the Covid-19 pandemic. 
Xavier Niel: ‘We want to be a reference shareholder that can help [Unibail-Rodamco] rebuild to generate more value’ © REUTERS
In an interview, Mr Niel said Unibail-Rodamco’s current management and board of directors were “acting out of fear” and were “prisoners of a failed strategy” that began with the Westfield acquisition.
“We cannot let this company, which is a European champion, self-destruct,” said Mr Niel, who earned his fortune by creating French telecoms group Iliad.
“The governance of the company does not function properly since none of the directors own significant stakes. We want to be a reference shareholder that can help it rebuild to generate more value.” 
Unibail’s woes highlight the broader challenges for owners of commercial property, and particularly landlords of malls, whose rental income has plummeted as a result of coronavirus.
As Europe grapples with a resurgence of infections and the spectre of new restrictions on business and social life, retailers are struggling to stay afloat, with some seeking to renegotiate cheaper leases. The pandemic has also accelerated the shift to ecommerce, which some investors believe will weaken commercial property companies over time. 
Unibail-Rodamco has been one of the most shorted stocks in Europe since the summer. Nearly 30 per cent of the shares in free float are out on loan to investors betting against the company, according to IHS Markit data on Bloomberg. 
Mr Bressler said that Unibail-Rodamco would be able to weather the downturn triggered by the pandemic because of its strong portfolio of high-end malls in Europe. They include Westfield London, the Carrousel du Louvre in Paris and La Maquinista in Barcelona.
“In a post-Covid world, the best malls in attractive locations will be the big winners,” he said. “It is time to re-establish Unibail again as a pure player focused on Europe and to end its ill-fated adventure in the US where it does not have the critical mass to succeed.”
Aermont’s funds have owned a 2 per cent stake in Unibail since roughly mid-2019. Mr Niel has been a longtime investor in Mr Bressler’s funds but only began building a direct stake in Unibail-Rodamco recently via his personal holding company, NJJ Capital. 
Although Mr Niel and Mr Bressler rejected the term, they are acting much as activist investors do when they buy shares in a company and agitate for changes. They said they reserved the right to buy additional shares in Unibail-Rodamco but would not seek to gain control.
“We are not activists but can’t remain passive any longer,” said Mr Bressler.