About: Unibail-Rodamco-Westfield (“URW”)is a depository receipt that operates as a REIT in the Australian market. The company leases and rents building space, finances real estate investments and renovates buildings for sale. URW’s primary assets include shopping centres, exhibition centres and office buildings.

Why it’s in the portfolio: URW provides the portfolio with exposure to one of the worlds largest and prominent owners and developers of retail real estate, with particular exposure to major markets such as the UK, Europe and North America. Despite the uncertain outlook and a tough retail environment in the short to medium term, URW’s emphasis on high-end, trendy shopping centres in affluent areas provides it solid long-term growth prospects. We entered URW on attractive valuations and believe the stock is fairly priced to benefit from it’s long-term growth strategy.

Fundamentals: URW has a PE ratio of 12x, EPS of 0.6 and a PEG ratio of 4.5. At the time of writing the indicated gross dividend yield is 7.5% and a dividend payout ratio of 72% for 2018.

What could go wrong? URW is highly exposed to the consumer spending cycle, particularly declining retail sales and increasing vacancies in prime shopping centres. Off the back of it’s recent expansion into the UK and US markets, the company also faces currency risks between the markets in which it operates. If we are to see considerable shifts in the development cycle, inflating costs may impact profits of current project under renovation.