Westfield sells out of Brazil joint venture
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.
Frequently Asked Questions about this Article…
Westfield sold its 50% interest in the Westfield Almeida Junior joint venture back to the Almeida Junior family. The group said it was leaving the joint venture but not exiting Brazil entirely, and the sale was completed at book value.
Westfield initially invested 740 million Brazilian real (about US$440 million at the time) for a 50% interest in five assets when the joint venture was launched in August 2011.
Westfield said the partnership was not conducive to achieving the group's long-term objectives in Brazil. Analysts pointed to differences of opinion between partners over growth strategy (Westfield seeking to expand vs. Almeida Junior preferring redevelopment), unfavourable foreign exchange movements at the funding level, and unmet performance hurdles.
According to the company, the sale—completed at book value—was not expected to affect Westfield's annual earnings or distributions.
No. Westfield said it was leaving the joint venture but not Brazil. The company said it still has long-term objectives in the country and will continue to independently review opportunities in the region aligned with its global strategy.
Goldman Sachs analyst Simon Wheatley suggested the divestment indicates Brazil is no longer a focus or growth opportunity for Westfield, refocusing the group on core developed markets — the UK, US and Australia/New Zealand — plus one potential European development project.
Analysts noted that since Westfield entered Brazil there had been no new properties acquired or developed, management had not provided recent asset-by-asset occupancy or performance updates, and Macquarie Equities said performance hurdles set when the joint venture was established were not met.
Westfield plans to keep two of the three senior managers in the region despite disposing of its half share in the joint venture.
Call 1300 880 160
Start a chat
Schedule a call
