The acquisition of shopping center developer Westfield Corp. by a French company has created more questions than resolution within the San Fernando Valley retail real estate market. Industry professionals admit they do not know much about Unibail-Rodamco SE, the company that is paying $24.7 billion for Westfield, which is based in Australia but has a U.S. headquarters in Los Angeles. All that’s certain is that the combination of Westfield and Unibail will create one of the world’s largest developers and operators of shopping destinations. Unibail, the largest real estate company in Europe based on market capitalization, owns shopping centers throughout the continent. Westfield has 35 flagship and regional shopping centers primarily in the U.S. and two in the United Kingdom. The deal is expected to close in the second quarter of the year. The group’s U.S. headquarters would be in Los Angeles. In the Valley region, Westfield has the Westfield Topanga mall located between Victory Boulevard and Vanowen Street and the adjacent Village at Westfield Topanga, an outdoor mall that opened in 2015, both in Canoga Park. It also owns Westfield Fashion Square in Sherman Oaks and Westfield Valencia Town Center in Santa Clarita. Finally, it has the Westfield Promenade in Warner Center, which is in the process of closing down for redevelopment to become Westfield 2035, a $1.5 billion project with more than 1,400 apartments and 244,000 square feet of retail space and 629,000 square feet of offices. Savvy landlords Todd Nathanson, president of illi Commercial Real Estate in Encino, called the merger between the two companies promising. “Westfield is taking advantage of a hot real estate market and the plans by this European company show they are familiar with where retailing is headed,” Nathanson said. Matthew May, owner of commercial real estate firm May Realty Advisors in Sherman Oaks, said the deal will benefit Unibail by getting Class A properties in urban areas, picking up the operational skills of Westfield’s executives that will help their malls become more efficient and gaining relationships Westfield nurtured has with high-end retailers. May described Westfield as an entrepreneurial company that the owners, the Lowy family, controlled so it was easy for them to make bold decisions. One example he gave was the recently completed $1 billion makeover at the company’s Century City property that all but took the mall out of business for a year. “Most companies would not even look at that,” May noted. Unibail Chief Executive Christophe Cuvillier said the acquisition fits in with the company’s strategy of concentration, differentiation and innovation. “We believe that this transaction represents a compelling opportunity for both companies to realize benefits not available to each company on a standalone basis, and creates a strong and attractive platform for future growth,” Cuvillier said in a prepared statement. Westfield spokeswoman Katy Dickey declined a request for an interview with a company executive. Westfield has competition with regional and upscale malls from Simon Property Group Inc. in Indianapolis, GGP in Chicago, Macerich Co. in Santa Monica and Taubman Co. in Bloomfield Hills, Mich. The Westfield-Unibail deal is not the only consolidation taking place in the retail world. Brookfield Property Partners in Toronto, last month made a $14.8 billion offer for the remaining stake in GGP it doesn’t already own. GGP rejected the offer. Talks between the two are likely to continue and it is not expected that others will make an offer. Promenade 2035 One question estate insiders is whether Unibail will move ahead with plans to demolish the nearly vacant Promenade mall and build the Promenade 2035 project. “The future looks bright, the plan looks exceptional; I think we are all waiting for them to execute,” said illi’s Nathanson. The project would add a a residential element in studios, one- to three-bedroom apartments and luxury villas to the Westfield portfolio. It also would feature Class A and creative office space that can accommodate startups and existing businesses. According to Westfield’s website, the company decided to move into developing residential assets adjacent to its retail centers to generate “increase the value of our portfolio and generate additional customer visits and retail sales.” It has started construction on several apartment projects, but none are currently operational. Promenade 2035 is still moving through the city of Los Angeles’ approval process. When construction starts in about three to four years it will begin in areas of the mall where there are no tenants so as not to disrupt the businesses that remain. That also allows for the project to be built properly with lower-story buildings constructed first followed by taller buildings as they get closer to other high rises on Oxnard Street and Owensmouth Avenue. Mike Adler, chief executive of Adler Realty Investments Inc., a Woodland Hills-based owner of office properties in the Valley, elsewhere in California and several other states, said that in his opinion the best use for the housing component of the project is in for-sale condominiums rather than as apartments for rent. But he was told by an executive with Westfield that the company could not do for-sale housing because of its status as a real estate investment trust, or REIT, Adler said. He hoped Unibail, as a foreign company, might have the ability to move into for-sale properties. “Right now, we are very limited on for-sale (multi-family) housing in this market,” he said. As the Promenade 2035 plans call for apartments and hotels, it is a project that does not fit in the traditional box of a retail developer. Since Unibail is not based in the U.S., the question becomes how much of an appetite for risk will the company have, said May. “My belief is they will continue with the projects because of the large value-add component, but maybe they then decide they don’t want to build and will sell it off or do a joint venture,” he explained. Entertainment factor The Unibail-Westfield deal occurs in an evolving retail environment. As shoppers have gravitated toward online purchases, retail stores have suffered. Big names like Sears, Roebuck & Co. and J.C. Penney Co. Inc. have closed hundreds of stores in the past year. Still, those who handle commercial properties, such as Nathanson and May, don’t see retail stores as a dying breed. “Showrooms will still be needed,” Nathanson said. “They will morph but the public will still need a place to see, feel and experience (products). The entertainment factor is also going to be a big part of the mall’s future.” Adler, of Adler Realty Investments, said that in the past when a retail project opened it was filled completely with retail stores. Now retail is more about a lifestyle center that people can hang out in and not necessarily go there just to shop. “That is indicative of the Village,” Adler said, referring to Westfield’s Canoga Park outdoor center. “It is not as much about shopping as it is about experience. There is retail, but it is sprinkled between the other amenities.” When shopping malls were first being built in the 1960s and 1970s, they were designed for a 60-year life, said May. In those days there was a large middle class with disposable income, he added. Fast forward to today and there have been big shifts in the population and a smaller middle class that have different tastes when they go shopping, he said. “They want an experience, thy want the emotion, they want to be entertained,” May said. To boost its entertainment offerings at its properties, Westfield last year hired Broadway film and television producer Scott Sanders as its creative head of global entertainment. What the company has done with its shopping centers is create a true sense of place and put a lot of time and money into technology and working with the tenants, May said. “As a result, their sales per square foot could be the highest in the country on a companywide basis,” he added.