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���������ֳ� - Stockholm - 28 Apr 2025: ���������ֳ� has affirmed Unibail-Rodamco-Westfield SE's (Unibail) Long-Term Issuer Default Rating (IDR) at 'BBB+'. The Outlook is Stable. ���������ֳ� also affirmed the company's senior unsecured rating at 'BBB+', and subordinated perpetual bonds at 'BBB-'. A full list of rating actions is below.

Unibail's ratings reflect its portfolio of high-quality, actively managed shopping centres (SCs) across Europe (77% of the SC portfolio, at share) and the US (23%). In 2024 the retail portfolio had high rental growth, growing tenants' sales and footfall, and reduced vacancy. The opening of its key development project, Westfield Hamburg, will add additional rental income in 2025 and 2026.

���������ֳ� forecasts Unibail's net debt/EBITDA leverage to decline to 10x by end-2025 and to 9.5x by end-2026, driven by further increases in rents and disposals proceeds applied to debt reduction. ���������ֳ� forecasts Unibail to maintain interest cover above 3x, aided by its low 2% average cost of debt.

Key Rating Drivers

Westfield Hamburg Opening: The April 2025 opening of Unibail's flagship development project in Hamburg added 94,474 sqm of retail space and 170 retail units (including food and beverage, and entertainment) at this city-centre waterfront location. On opening, the cost-overrun EUR1.5 billion retail investment was 95% let. A further 50,000 sqm of office space (64% pre-let) and 819 hotel rooms (100% pre-let) at a total cost of EUR0.9 billion is scheduled to open during 2025 and 2026.

Strong Operating Performance: Unibail achieved strong 5.8% like-for-like net rental growth for its SCs in 2024 (2023: 8%), supported by active leasing activity and an improving retail environment. Occupancy also improved to 95.2% (2023: 94.6%), primarily driven by US flagships and the UK, where vacancy is above that of the group's continental Europe portfolio. Recently announced higher tariffs on imported retail goods may dampen US consumer sentiment and retail sales, especially in discretionary categories. ���������ֳ� lowered its US retail outlook to Deteriorating on 8 April 2025.

New Leasing Activity: Unibail signed leases with minimum guaranteed rents of EUR465 million in 2024, of which 80% was longer leases than 36 months. Year-on-year minimum guaranteed rent uplifts on these longer leases were 11.1% (1Q25: 14.7%) on top of indexation, driven by a 29.9% increase in the recovering US portfolio, 8.9% in the UK, and 5.7% in continental Europe. The increase partly reflects sales-based rents being crystallised into base rents. Including shorter leases, rents on new leases were 8.1% higher across all geographies, including 1.6% indexation.

Higher Tenant Sales and Footfall: The group's higher retail rents in 2024 were supported by tenants' sales growing faster (4.5%) than national sales indices (2.3%), particularly in Spain (13.6%) and in recovering US flagships (6.6%). Growth in tenants' sales outperformed footfall, which increased 2.6% on average. This trend continued in 1Q25 with a 2.1% increase in tenant sales and 0.4% increase in footfall. The occupancy cost ratio (OCR) is a high 15.6% in its European SC portfolio, reflecting the high sales density of this mostly prime, actively managed SC portfolio.

Completing Developments: The completion of Westfield Hamburg-Überseequartier's SC materially reduces Unibail's committed development pipeline from a total EUR3 billion investment cost at end-2024, of which EUR0.7 billion remained unspent. The pipeline's yield-on-cost averaged a low 3.4% following Hamburg's cost overruns, adding around EUR100 million in annualised rents during 2025-2026. The EUR420 million of investments remaining in the group's controlled pipeline is scheduled for completion during 2027-2029.

Accessing Bond Market: Unibail issued EUR815 million in hybrid bonds in March 2025 to partially fund the tender of its EUR995 million hybrid bond and will redeem the remaining outstanding. The issuance will help reduce the group's interest cost, as the newly issued hybrid has a lower 4.875% coupon than the tendered hybrid's 7.25%. ���������ֳ� applies 50% equity credit to the new deeply subordinated bond. This issuance follows a total EUR1.3 billion of senior unsecured bonds issued in 2024 at five- and 10-year maturities.

Continued Disposals: ���������ֳ� forecasts Unibail will continue to sell selected assets, with proceeds applied to debt reduction. The group has already agreed disposals totalling EUR1 billion in 2025, including the EUR305 million disposal of Bonaire in Valancia to Castellana Properties Socimi, S.A. (BBB-/Positive), a 15% equity stake in Forum des Halles and an 80% stake in the La Défense office Trinity Tower.

Deleveraging Progress: ���������ֳ� forecasts Unibail's net debt/EBITDA leverage to decline to 10x at end-2025 (using annualised rents) and to 9.5x in 2026. ���������ֳ� expects rental growth, new rents from completed developments and proceeds from asset disposals to be used for debt reduction, to drive deleveraging. ���������ֳ� forecasts Unibail's EBITDA net interest cover (including hybrid interest) to remain comfortable at 3x-3.5x. Unibail benefits from a low cost of debt (2024: 2%, excluding hybrids) and 5.7 years of remaining average debt maturity. The ���������ֳ�-calculated proportional loan-to-value (LTV) ratio was 57% at end-2024.

Peer Analysis

Unibail's closest peer is Klépierre SA (IDR: A-/Stable) which also has dominant city centre destination SCs that benefit from retailers consolidating and expanding their space into successful locations. Klépierre has more than 70 quality SCs across 11 continental European countries. Unibail is larger and has the established Westfield brand for its higher quality, larger destination SCs with a greater focus on higher-price brands, and therefore higher rents and OCR.

The quality of Unibail's continental SC portfolio is indicated by an end-2024 net initial yield of 5.4% versus Klépierre's 5.9% (albeit reflecting a different country mix). Unibail's geographical presence is wider than Klépierre's with assets in the UK (6% of its SC portfolio) and the US (25%). Both companies are active managers and developers of their asset class, responding to retail's continuous changes.

Post-pandemic operational performance has so far been broadly comparable. Unibail's continental European end-2024 portfolio had 96%-97% occupancy versus Klépierre's 96.5%. Unibail's rent uplift on renewals and re-lettings (above indexation) totalled 11.7% during 2021-2024, which is comparable to Klépierre's 13.4%. Klépierre's OCR was 12.6% (end-2023: 12.8%), whereas Unibail's equivalent is more expensive at 15.4% (end-2023: 15.3%), reflecting each entity's approach to optimising mall rents.

We forecast Unibail's ���������ֳ�-calculated net debt/EBITDA to decrease to around 10x in 2025. Klépierre's end-2024 ���������ֳ�-calculated leverage is already lower, with net debt/EBITDA below 8x and its LTV below 40%.

Unibail's leverage is also higher than that of Hammerson plc (IDR: BBB/Positive), whose end-2024 SC mix (at share) was 38% UK, 40% France and 22% Ireland. ���������ֳ�'s other rated retail SC owners are country specific and do not benefit from the geographic diversification and size of SCs that Unibail has.

Key Assumptions

���������ֳ�'s Key Assumptions Within Our Rating Case for the Issuer

- Like-for-like rental income increase of over 3% for the group in 2025, resulting from CPI rent indexation and rent uplift on renewed leases; thereafter increases each year of around 2.5%, reflecting CPI indexation and 4% uplifts on renewals of expiring leases

- Rental income-derived dividends from JVs fluctuating in line with gross rental income changes (excluding disposals or foreclosures, and capex effect)

- Development capex of around EUR0.9 billion each year with average yield-on-cost of 6%

- Slowly increasing cash dividends paid by Unibail to its shareholders in 2025 and 2026 before reverting to a payout ratio of 90% of funds from operations in 2027

- Around EUR1.5 billion of disposals in 2025, thereafter EUR0.5 billion a year

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

- A material rise in tenant defaults or lease arrears, leading to a fall in total rents beyond ���������ֳ�'s base case

- Deteriorating occupancy rates below 90%

- Net debt/EBITDA consistently above 10x

- EBITDA net interest cover below 1.75x

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

- Net debt/EBITDA less than 9.0x on a sustained basis

- EBITDA net interest cover above 2.25x on a sustained basis

-Unencumbered investment property assets/unsecured debt ratio trending towards 2x and commitment to a senior unsecured debt-funded structure

Liquidity and Debt Structure

At end-2024, Unibail had EUR13.9 billion in available liquidity, comprising EUR8.6 billion in undrawn committed credit lines with maturities beyond the next 12 months and EUR5.3 billion of cash on balance sheet. This comfortably covers all debt maturing in the next 12 months, including EUR3 billion of bonds and EUR22 million of bank loans. At end-2024, Unibail's average debt maturity was 5.7 years and its average cost of debt increased slightly to 2% (2023: 1.8%), aided by interest rate hedges and improved remuneration on its cash position.

���������ֳ� aligns Unibail's senior unsecured debt rating with its IDR with no sector uplift.

The total outstanding of Unibail's undated hybrid notes was EUR1.85 billion at end-2024. Pro forma for the hybrid bond issuance in 2025, and the tender offer and planned redemption of the EUR995 million hybrid, the outstanding is reduced to EUR1.67 billion. The hybrids are rated two notches below Unibail's unsecured debt. This reflects the notes' deeply subordinated status, ranking behind senior creditors and senior only to ordinary equity, with coupon payments deferrable at the discretion of the issuer and no formal maturity date. The notching of the hybrids reflects the notes' greater loss severity and higher risk of non-performance relative to senior obligations, with 50% equity credit.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

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ESG Considerations

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APPLICABLE MODELS

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• Corporate Monitoring & Forecasting Model (COMFORT Model), v8.1.0 (1)

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