URW flags Stratford City development
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It's been a disappointing ride since Unibail-Rodamco-Westfield joined our buy list. Having first recommended the stock at a little over $14, it's been a steady grind lower - culminating with an earnings downgrade last month.
It hasn't slowed management down, though - members may have noticed last week's announcement of a plan to develop €750m of residential property next to London's Westfield Stratford City. Partnering with PSP Investments and QuadReal, URW will keep a 25% stake in the venture, and will earn an ongoing management fee as the asset manager following completion in 2023.
Residential development increases the risks and will add to an already bursting development pipeline. It remains to be seen how much demand there will be for 'Stratford city-living', and it's also unclear if URW will prove as adept at residential property as retail.
But the development will create additional income, bring more traffic into its shopping centre and, if successful, the idea could be rolled out at other locations - so we're supportive of the plans.
We lowered our price guide following last month's earnings downgrade, but the stock's 7.6% yield was enough for us to keep it on our Buy list. The stock has risen 7% since then, though, putting it slightly above our Buy price, although we'll wait for a bit of clear space until downgrading. BUY.
Note: Our Model Growth and Model Income portfolios own shares in URW.
Note: The Intelligent Investor Equity Growth Fund and the Intelligent Investor Equity Income Fund own shares in URW.
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