WESTFIELD GROUP ANNOUNCES STRATEGIC TRANSACTIONS
15 February 2012
- – ENTERS INTO US$4.8BN JOINT VENTURE WITH CANADA PENSION PLAN INVESTMENT BOARD OVER 12 US ASSETS
- – SELLS INTEREST IN 3 NON-CORE UK CENTRES FOR 159M
- – INTENTION TO COMMENCE ON-MARKET SECURITY BUY-BACK PROGRAM
The Westfield Group (ASX:WDC) today announced two major strategic transactions including a US$4.8bn (A$4.7bn) joint venture over 12 assets in the United States with Canada Pension Plan Investment Board (CPPIB) and the sale of its interest in 3 non-core shopping centres in the United Kingdom for 159m (A$240m).
The Group also announced the intention to commence an on-market buy-back of securities for up to 10% of its issued capital. An Appendix 3C relating to the buy-back is attached.
Todays announcement follows on from the strategic initiatives we have undertaken since November 2010, beginning with the establishment of the Westfield Retail Trust. Since that time, we have expanded our operating platform globally and reduced our capital invested by entering into strategic joint ventures and disposals of non-core assets, Westfield Group Co-CEOs Peter Lowy and Steven Lowy said.
As a result, we have increased our return on equity and long-term earnings growth potential with the additional property management and development income we earn on our reduced capital investment.
These initiatives provide the Group with approximately $9 billion of capital for redeployment into our higher return opportunities. These opportunities include the Groups share of the $11 billion development pipeline, our recent expansion into the new market of Brazil as well as the investment in major iconic projects at Milan (Italy) and the World Trade Center in New York.
The Group is in a position to return capital through the buy-back of securities, maintain its strong financial capacity and its ability to grow.
We also continue our strategy of divesting non-core assets and we expect to make further announcements on this during the course of 2012.
US Joint Venture
CPPIB will become a 45% joint venture partner in a portfolio of 12 assets in the US currently owned by the Group with a gross value of US$4.8bn. This represents a 3% premium to prior book value. The transaction is expected to close during the first quarter of 2012.
This transaction continues the Groups strategy of creating value through the introduction of joint venture partners into our assets globally, Peter Lowy said. This joint venture represents CPPIBs largest real estate investment globally to date and we are pleased to have expanded our long term relationship with them.
The transaction will generate approximately US$1.85bn of net cash to the Group after the assumption by CPPIB of property related debt.
WDC will act as the managing general partner for the joint venture and will be responsible for property management, leasing and development. The transaction will increase the number of joint ventured centres in the US to 19, representing 50%, by value, of the Groups US portfolio.
Attached is a schedule detailing the assets to be included in the joint venture. As at 31 December 2011, the new joint venture portfolio was 93.4% leased with annual specialty sales of US$456 per square foot.
UK Asset Sales
WDC has agreed to sell its interest in 3 non-core smaller centres in the UK. The sale of its interests in Belfast (33%), Guildford (50%) and Tunbridge Wells (33%) will result in gross proceeds of 159m, in line with prior book value, and net proceeds of 107m.
These assets were originally purchased in 2000, at the time of our initial entry into the UK. Since that time we have refocused our business into iconic assets such as Westfield London and Stratford City and we continue to examine new growth opportunities in the UK. Along with the recent sale of Nottingham, these assets divested today became non-core to our UK portfolio, Steven Lowy said.
Transaction Impact on earnings
The US joint venture and UK asset divestment would have an annualised dilutionary impact to the Groups Funds from Operations (FFO) of approximately 4.0 cents per security, prior to the redeployment of capital and the impact of any buy-back of WDC securities.
The Westfield Group (ASX Code: WDC) is an internally managed, vertically integrated, shopping centre group undertaking ownership, development, design, construction, funds/asset management, property management, leasing and marketing activities and employing over 4,000 staff worldwide. The Westfield Group has interests in and operates one of the world’s largest shopping centre portfolios with investment interests in 118 shopping centres across Australia, the United States, the United Kingdom, New Zealand and Brazil, encompassing around 24,300 retail outlets and total assets under management of A$61.7 billion.
About Canada Pension Plan Investment Board
Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 18 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, CPPIB is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At December 31, 2011, the CPP Fund totalled $152.8 billion. For more information, please visit www.cppib.ca.
This release contains forward-looking statements, including statements regardingfuture earnings and distributions. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release. You should not place undue reliance on these forward-looking statements. These forward-looking statements are based on information available to us as of the date of this presentation. Except as required by law or regulation (including the ASX Listing Rules) we undertake no obligation to update these forward-looking statements.