Westfield sells out of Brazil joint venture
Westfield Group has sold its half-share of its Brazilian joint venture. The company said it was leaving the joint venture but not Brazil, where it still had long-term objectives.
The deal with the Almeida Junior family was launched in August 2011 amid much fanfare, with co-chief executive Steven Lowy calling it a historic day for the group.
Westfield initially invested 740 million Brazilian real ($440 million at the time) into the joint venture for a 50 per cent interest in five assets.
Mr Lowy said at the time that it was a "measured investment".
It was only the fifth new market the retail giant had entered since its founding in Blacktown, west Sydney, 53 years ago.
But in a short statement on Tuesday, the group said it had sold its half share in Westfield Almeida Junior back to the original partner.
Property analysts attributed the collapse of the deal to a difference of opinion between the partners as to the long-term outlook of the business, with Westfield seeing it as a stepping stone to a bigger asset base but Almeida Junior happy to redevelop the existing portfolio.
There were also said to be unfavourable foreign exchange movements at the funding level of the deal.
"We have decided to dispose our interest in this joint venture as the partnership was not conducive to the achievement of the group's long-term objectives in Brazil," Mr Lowy said. "We will continue to independently review opportunities in the region in line with our global operating strategy."
Westfield plans to keep two of the three senior managers in the region.
The sale, completed at book value, was not expected to affect Westfield's annual earnings or distribution.
Simon Wheatley from Goldman Sachs said that since Westfield entered Brazil there had been no new properties acquired or developed and management had not divulged any recent updates on asset-by-asset occupancy or performance. "We expect the divestment means that this region is no longer a focus or opportunity for Westfield," he said.
"It therefore removes a potential growth and expansion opportunity, focusing the group back to core developed markets of the UK, US and Australia/NZ, plus the one potential development project in Europe.
Analysts at Macquarie Equities noted that performance hurdles set at the establishment of the joint venture were not met.