This article is from the Australian Property Journal archive
WESTFIELD has sold a 50% interest in the retail component of the Westfield Stratford City project for £871.5 million ($A1.425 billion), making a development profit of £300 million ($A490 million).
The 50% stake was purchased by a joint venture comprising APG of The Netherlands and Canada Pension Plan Investment Board. The transaction values the retail component of Stratford City at £1,743 million ($A2.850 billion).
The total value of the combined Stratford City site will be in excess of £1.925 billion ($A3.148 billion).
The sale is part of WDC’s strategy to recycle capital which includes the group spinning off assets into a new A-REIT, the Westfield Retail Trust.
Managing director Steven Lowy said the realised development profit of approximately £150 million will be added to future retained earnings and the unrealised £150 million component will be recognised as development valuation gains.
WDC expects to reinvest retained earnings into its future capital activities including redevelopment opportunities, which have expected unlevered long term annual investment returns of between 12% – 15%.
“Today’s announcement continues our strategy of creating value through the introduction of joint venture partners into our assets globally, at the appropriate time. Importantly, this transaction delivers, a year ahead of opening, the value and profit we have created through the development of Stratford City.
“As a result, the Group will significantly improve its return on invested capital from the development, and will remain a long term investor, property manager and developer of this landmark shopping centre,” he added.
WDC will retain full ownership of the adjacent non-retail development sites, where it has invested approximately £182 million ($A298 million) and which are expected to create significant additional value over time.
Stratford City is located adjacent to the site of the 2012 London Olympics and is primarily focussed on the creation of a 1.9 million sq ft major retail and entertainment hub due for completion in the third quarter of 2011. Approximately 75% of the retail area is either leased or committed.
The centre will be anchored by John Lewis, Marks & Spencer, Waitrose and an all-digital Vue cinema and will include over 300 shops and 50 places to dine.
WDC’s yield on its remaining investment in the retail component of Stratford City is expected to increase from the current range of between 7% – 7.5% to in excess of 9%. WDC expects to achieve a total unlevered return on its invested capital in the range 15% to 20%.
The transaction is not expected to have a material impact on WDC’s operating earnings per security forecast of 74.6 cents for the 2011 financial year.
The transaction is expected to close in late 2011 and is subject to the project completing and opening, following completion, gearing will reduce by approximately 2.0% and interest cover expected to increase by approximately 0.3 times.
Australian Property Journal
