This article is from the Australian Property Journal archive
INSTITUTIONAL investors have snapped up Westfield Group’s new fashion trend for the A-REIT sector, Westfield Retail Trust.
At the same time Fitch Ratings has joined Standard & Poor’s by placing Westfield Group on a negative watch.
Fitch Ratings said last Friday that it had placed Westfield Long-term Issuer Default Rating and senior unsecured ratings of ‘A-‘on Rating Watch Negative following the announcing of Westfield selling its stake in 54 assets to WRT, which will be publicly listed.
“The effect of this transaction is to remove $12.2 billion of high quality assets with a current occupancy of greater than 99.5% and have seen consistently high levels of occupancy and rising incomes over recent years, even through a period of heightened economic volatility.
“These assets represent a significant portion of Westfield’s assets and EBITDA capacity. The remaining assets will see a stronger geographic concentration in markets that have in recent years experienced greater economic and property market stress, as well as a proportionately higher level of development assets,” Fitch’s REIT team director David Carroll said.
“The proposed transaction will see a reduction in Westfield’s overall debt of $4.6 billion and a reduction of net capital of $7.4 billion as a result of the distribution to existing unit holders. Westfield will also see a reduction in its overall interest expense and some additional potential income earned through its potential new joint venture partner.
“If the proposed transaction proceeds, Westfield will reduce its distribution payout ratio to around 65%, enabling it to cover planned development expenditure on its existing shopping centres,” he added.
“This restructure represents a significant loss of quality assets and stable income from Westfield’s balance sheet. In addition, it appears that Westfield is readying itself for expansion opportunities, should they arise,” Carroll continued.
Meanwhile Westfield announced that the institutional offer for WRT has closed fully subscribed, raising $1.2 billion. The allotment of stapled units in WRT is expected to occur on 21 December 2010.
The retail and public offer will open on November 11, seeking to raise $2 billion, for a total of $3.5 billion.
Meanwhile Westfield shares fell 11 cents on Friday November 05 to close at $12.70.
Australian Property Journal
