This article is from the Australian Property Journal archive
WESTFIELD is daring to go where no proposed A-REITs has gone in the past three years, with an ambitious plan to spin off 50% of its stake in 54 shopping centres in Australia & New Zealand into a new listed property vehicle, Westfield Retail Trust.
Westfield Retail Trust is set to be the third largest listed property trusts, behind No. 1 Westfield and No 2. Stockland.
WRT will also be the first IPO in the A-REITs sector since the Global Financial Crisis. Many other groups have flirted with the idea of launching a listed property vehicle, including Brookfield Multiplex, Investa Property Group and Grocon, but ultimately pulled the plug.
Westfield Group chairman Frank Lowy said the proposal, which will return $7.3 billion to the group, was the latest in a series of capital restructures that Westfield Group has undertaken over its 50-year history.
“Rather than sell interests in our portfolio to outside parties, this proposal provides the opportunity for our securityholders to participate in our joint venture partner and benefit directly from the ownership of our portfolio in Australia and New Zealand,” he added.
WRT will undertake a $3.5 billion offering of which $1.75 billion has been underwritten, the offer comprises:
· An IPO to raise up to $2 billion; and
· To eligible securityholders to raise the remaining $1.5 billion.
Westfield Group will not own an interest in Westfield Retail Trust, which will have gross assets of $12.2 billion and is expected to have a gearing ratio in the range of less than 10% to 24%, depending on the amount raised under the offer.
The trust will only be the second listed property trust managed by Westfield, the other being Westfield Carindale Trust.
Similar to Westfield Carindale Trust, Westfield Group will own the responsible entity of WRT and act as the property and development manager. The two entities will also cooperate on future retail property acquisition and growth opportunities.
WRT will have its own board and management team, led by Richard Warburton AO as Chairman and Domenic Panaccio as managing director.
However, Westfield Group will not charge fees for managing the trust.
WRT will own interests in 54 shopping centres in Australia & New Zealand comprising 13,195 retail outlets which last year generated $22 billion in sales. Over the last 10 years, the portfolio has delivered compound annual investment returns of 14.6% including compound annual income growth of 5%.
In addition, the Australian & New Zealand portfolio was the standout performers during the GFC when Westfield’s United States and United Kingdom portfolio took a battering.
Lowy said from the proceeds raised from the spin off, $4.4 billion will be used to reduce Westfield Group’s net debt. The group currently has a gearing of 37.4% and liquidity of $7.3 billion.
Westfield Group is expected to have a gearing ratio of approximately 36% post the implementation of the proposal. Westfield Group has approximately $10 billion of future development projects identified, with around $5 billion in Australia and New Zealand.
“We will grow through our development activity, with annual project commencements anticipated to be between $750 million to $1 billion, of which Westfield Group’s share is expected to be between $300 million and $400 million in 2011.
“Following this restructure, Westfield Group will retain some $600 million of earnings each year and we therefore do not expect Westfield Group to require any additional common equity in order to fund its share of the development program,” Lowy said.
“We will continue with our strategy of reducing, over time, our exposure to less productive assets in the United States. We will also consider introducing further joint venture partners in the United States and the United Kingdom,” he continued.
Following the implementation of the proposal, the combined earnings per security for Westfield Group and WRT, for the 2011 year, is forecast to be between 92.9 cents and 93.1 cents. This is expected to be comprised of 74.6 cents per Westfield Group security and between 18.3 cents and 18.5 cents per Westfield Retail Trust unit.
The combined distribution per security for Westfield Group and WRT, for the 2011 year, is forecast to be approximately 64.9 cents. This is expected to be comprised of 48.4 cents per Westfield Group security and approximately 16.5 cents per Westfield Retail Trust unit.
Westfield Group reconfirms its previously provided forecast for 2010 of operational earnings per security of 90 cents and distribution per security of 64 cents.
The Westfield Group securityholder meeting to approve the proposal will be held on 9 December 2010.
Citi, Credit Suisse and Morgan Stanley are acting as Advisors, Bookrunners, Underwriters and Joint Lead Managers to the Offer. Deutsche Bank, JP Morgan, Merrill Lynch, RBS and UBS are acting as Equity Advisor to Westfield Retail Trust and Joint Lead Managers to the Offer. ANZ, Commonwealth Bank, National Australia
Australian Property Journal
