Westfield likely to continue sell-down

Last updated 13:53 26/03/2013

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Westfield Group's divestment of a 50 per cent interest in its portfolio of eight assets in Florida has sparked speculation that a similar deal is being contemplated in Australia.

The deal saw Westfield raise US$700 million ($838 million), which is its net share in the total value of the US$1.3 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 programme 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 1c 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-per-share 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 A$5b of Australia/NZ assets to be sold down to Westfield Retail Trust (or the highest bidder); A$2.5b 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 A$5b of cash raised and is a process that Westfield controls almost completely."

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- Sydney Morning Herald

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