Westfield likely to continue sell-down in Australia
The deal saw Westfield raise $US700 million ($670 million), which is its net share in the total value of the $US1.283 billion sale. O'Connor Capital Partners was the buyer, but Westfield will remain as the property, leasing and development manager, consistent with its other joint ventures.
Brokers said Westfield was expected to use the money for its global development program and its on-market buyback. Under the current scheme, there are still about 130 million shares to buy back. Westfield co-chief executive Peter Lowy said the sale would dilute the forecast funds from operations by about 1¢ a security, which would be offset by the share buyback.
The sale, part of the US portfolio flagged for divestment last year, is part of the group's strategy to enter into joint ventures in its US, European, Australian and New Zealand businesses.
In the past 18 months it has sold down stakes in the US, London and Australian shopping centres to a range of private investors including London-based Hammerson, the Canada Pension Plan Investment Board, Starwood Capital Group and Westfield Retail Trust.
The aim is for the Westfield Group to retain the minimum 25 per cent interest needed to keep management rights to the centres.
Simon Wheatley, from Goldman Sachs Australia, said the asset sale did not affect his earnings-a-security growth outlook or fundamental view.
"It is in line with the stated strategy of increasing joint ventures to reduce capital employed and move towards a business which is more operationally leveraged," he said.
Against the backdrop of the US sales, there is speculation that the group could sell down its stake in the Australian assets to its listed associate, Westfield Retail Trust.
According to JPMorgan analysts, they see a case for $5 billion of Australia/NZ assets to be sold down to Westfield Retail Trust (or the highest bidder); $2.5 billion of prospective development exposure might be sold, halving Westfield's interest on completion.
"In all, we think as an endgame that Westfield could be comfortable selling the entire NZ portfolio (perhaps excepting two assets), and in Australia selling down all exposure to 25 per cent," the brokers said.
"We say that because Westfield's water-tight management contracts make clear that whilst ever a 25 per cent stake is held by a Westfield entity it will retain management rights. Such a transition would see about $5 billion of cash raised and is a process that Westfield controls almost completely."
Frequently Asked Questions about this Article…
Westfield sold a 50% interest in a portfolio of eight Florida assets to O'Connor Capital Partners. The transaction was part of a US$1.283 billion sale in which Westfield’s net share raised about US$700 million (roughly A$670 million). Westfield will remain as the property, leasing and development manager for those centres.
O'Connor Capital Partners was the buyer. Westfield’s net proceeds from the deal were about US$700 million, which equates to approximately A$670 million, from the total US$1.283 billion sale.
According to the article, Westfield’s strategy is to reduce capital employed by entering joint ventures across its US, European, Australian and New Zealand businesses. That approach aims to make the group more operationally leveraged while retaining management roles where feasible.
Westfield co-CEO Peter Lowy said the sale would dilute forecast funds from operations by about one cent per security. Brokers expect that effect to be offset by Westfield’s on-market share buyback program, where there are still about 130 million shares remaining to be bought back under the current scheme.
Yes. Over the past 18 months Westfield has sold down stakes in the US, London and Australian shopping centres to a range of private investors. Named buyers in the article include London-based Hammerson, the Canada Pension Plan Investment Board, Starwood Capital Group and Westfield Retail Trust.
The article reports market speculation and JPMorgan analysts’ views that Westfield could sell down up to about A$5 billion of Australia/New Zealand assets — potentially reducing its interest to around 25% in Australia and possibly selling most of the New Zealand portfolio (perhaps excepting two assets). Such a transition would allow Westfield to retain management rights while raising cash.
The article explains Westfield aims to retain a minimum 25% interest because its management contracts make clear that as long as a Westfield entity holds a 25% stake it will retain management rights for the centres. That helps Westfield control operations while monetising capital.
Investors should monitor the progress of Westfield’s share buyback (about 130 million shares remaining), any announcements about further sell‑downs in Australia or New Zealand, updates on how sale proceeds are allocated to the global development program, and commentary from brokers and analysts (such as Goldman Sachs and JPMorgan) about earnings and operational leverage.
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