Archive | Westfield

WestCity back on market

Westfield shopping mall owner Scentre Group Ltd has put WestCity in Henderson back on the market, this time through Auckland agency Whillans Realty Ltd & Sydney agency McVay Real Estate Australia.

Whillans hasn’t opened a public campaign yet, but provided the images to support McVay’s Sydney campaign.

6 of Scentre’s 40 malls are in New Zealand, and WestCity is the last still wholly owned by the company after it sold 49% of 5 of them – Albany, Manukau, Newmarket, Riccarton & St Lukes – to Singapore’s sovereign wealth fund, GIC, at the end of 2014.

Scentre put WestCity & the other 3 New Zealand centres on the market last year and sold 3 in November – Glenfield to Ladstone Holdings Ltd, Queensgate in Lower Hutt & Chartwell in Hamilton to the Diversified fund managed by Stride Property Ltd – for a combined $549 million.

According to the Australian Financial Review yesterday, McVay is looking at an $A175 million price tag for WestCity, which sits on 5ha across the rail tracks from the former Waitakere City Council chambers. The mall has 3 anchor tenants, cinemas & 130 specialty stores in a net lettable area of 36,144m², and 1492 parking spaces.

Agency director Sam McVay said intensification of the surrounding area would underpin growth, but loosening of development limits under the new unitary plan meant the mall itself could be further developed to 18 levels of apartments.

Earlier stories:
24 February 2016: Lowy says first results vindicate Scentre restructure
27 November 2015: Scentre sells 3 malls to locals, one to go
25 February 2015: Scentre to sell the other 4 NZ malls
7 November 2014: GIC buys into 5 NZ Westfield malls

Attribution: McVay, Australian Financial Review.

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Lowy says first results vindicate Scentre restructure

Scentre Group Ltd chair Frank Lowy said yesterday the Westfield mall owner & operator’s strong results for 2015 validated the rationale for creating the reorganised Australia-NZ business.

Mr Lowy, who will retire at the annual meeting in May but will continue to chair the northern hemisphere operation, Westfield Corp, said: “Scentre Group’s pre-eminent portfolio & unique market position have provided a strong operating performance & excellent returns for securityholders since the group was established as a separate entity.”

Scentre made $A2.7 billion net profit (the 2014 figure, a profit of $A6.6 billion, wasn’t comparable because of restructuring). The 2014 profit attributable to continuing operations after tax, before charges & credits relating to the restructure, was $A1.8 billion. In 2015 it rose 52% to $A2.73 billion.

Funds from operations for the 12 months grew by 3.8% to $A1.199 billion (A22.58c/security), which Mr Lowy said would have been 5% if the group hadn’t undertaken a large selldown of assets. The group’s 12-month distribution of A20.9c/security was in line with the forecast.

Chief executive Peter Allen said: “We are very pleased with these results, which highlight the quality of our portfolio and the benefits of curating the right retail mix for our shoppers. The secure cashflows from our shopping centres, together with our accretive development programme, will provide growth in income through the economic cycles.”

In New Zealand, Scentre has $NZ2.4 billion of assets under management out of a total $A42 billion, and the capitalisation rate on the New Zealand assets is much higher – 6.98% versus 5.51% for the Australian malls.

6 of the group’s 40 malls are in New Zealand, only one of the 6 (WestCity at Henderson) now wholly owned after Scentre sold 49% of 5 of them – Albany, Manukau, Newmarket, Riccarton & St Lukes – to Singapore’s sovereign wealth fund, GIC, at the end of 2014. Scentre put its other 4 New Zealand centres on the market and sold 3 in November – Glenfield to Ladstone Holdings Ltd, Queensgate in Lower Hutt & Chartwell in Hamilton to a fund managed by Stride Property Ltd – for a combined $549 million.

The ownership change doesn’t mean Scentre has forgotten New Zealand – Albany, Newmarket & St Lukes are included in its $A3 billion development pipeline.

Mr Allen said the group’s $A1.5 billion of revaluations in 2015 were driven by growth in underlying income, the completion of developments and a firming of capitalisation rates across the portfolio.

At 31 December, Scentre had a strong balance sheet – total assets of $A31.8 billion, a gearing ratio of 33.3% & liquidity of $A3.7 billion.

Comparable specialty sales in the Australian portfolio grew 5.3% for the 12 months, averaging $A10,826/m² for the year. In New Zealand, those sales grew 6.6% to $NZ12,117/m².

Mr Allen said comparable property net operating income increased 2.6% for the 12 months, higher than the forecast range of 2-2.5%, reflecting lower vacancies & additional income streams.

The group is forecasting 3% growth in funds from operations this year.

Earlier stories:
27 November 2015: Scentre sells 3 malls to locals, one to go
25 February 2015: Scentre to sell the other 4 NZ malls
7 November 2014: GIC buys into 5 NZ Westfield malls

Attribution: Company release.

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World property W23Dec15 – West Melbourne deals, Westfield reshapes

Melbourne development site sells
Westfield sells 6 US malls

Melbourne development site sells

A Melbourne apartment development site has been sold to the Asian Pacific Group (Will Deague) for $A35 million at $A9117/m², and 3 adjoining buildings have been sold for $A38.8 million.

The 3839m² site at 83-113 Batman St, West Melbourne, has a permit for 522 apartments in 2 27-level towers, including 33 2-storey lofts, plus retail, designed by Bruce Henderson.

The whole site, known as the Spencer portfolio, contained the historic Sands & McDougall buildings and a warehouse at 355 & 371 Spencer St & 102 Jeffcott St.

Hume Partners (Peter Scanlon) took the development site & 3 buildings to the market through separate CBRE campaigns.

Bennelong Group (Jeff Chapman) had earlier proposed 2 towers of 39 & 29 storeys above a 5-level podium for the whole site, with a gross floor area of 85,000m² and originally containing 749 apartments.

The 1770m² Jeffcott St warehouse & office, on a 920m² site, sold for $A6.1 million.

The CBRE team also said yesterday it had sold 206 Bourke St, on the edge of Bourke St Mall, for $A116.28 million at a 5.75% yield, on behalf of Hiap Hoe Ltd and that it had been bought by unlisted fund manager ISPT, which has $A11 billion of properties under management.

206 Bourke St has a net lettable area of 11,922m² – 9582m² retail, 2340m² office – and an approved planning permit to build a 142-room hotel above the fourth level of the existing development.

Westfield sells 6 US malls

Westfield Corp, owner of the US & UK malls of the former Westfield Group, sold 5 of the US malls this week for $US1.1 billion. It sold another in November to Rouse Properties Inc for $US170 million. The Australia-NZ Westfield portfolio is owned by Scentre Ltd, some now in partnership with Singapore sovereign wealth fund GIC.

The US assets sold are in Connecticut, Washington, and 2 each in California & Illinois, reducing Westfield’s US portfolio to 32 malls. It also has 2 in the UK and has entered a partnership with Gruppo Stilo to develop a centre in Milan, Italy.

Westfield Corp co-chief executives Peter & Steven Lowy said in August: “Our strategy is to create & operate flagship assets in leading markets that deliver great experiences for retailers & consumers. We are focused on innovation and are creating a digital platform to converge with our physical portfolio, in order to connect retailers & consumers both physically & digitally.

“Our capital investment is almost entirely weighted towards our flagship assets, with estimated development yields in the range of 7-8%. Upon completion of these projects, we expect Westfield Corp’s flagship assets will represent 85-90% of the total portfolio and our business will be more evenly weighted between the US & UK/Europe.”

When they announced the northern hemisphere company’s results in August, the Lowy brothers said: “The performance of Westfield’s pre-eminent portfolio remains strong. The benefits of our restructure last year can be seen in the significant progress being made on our $US11.4 billion development programme. This year we expect to commence $US2.5 billion of projects, having already commenced $US1.6 billion of redevelopments to date in 2015.”

Attribution: CBRE, Westfield.
Regular leads: Europe Real Estate, Mingtiandi, Planetizen

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Scentre restructure leads to Lynch’s exit

Justin Lynch.

Justin Lynch.

The structural change at Westfield mall owner & operator Scentre Group Ltd has cost New Zealand business director Justin Lynch his job, and he left the company at the end of September.

“I was in charge here for 8 years, in the country for 11, starting as head of development,” Mr Lynch said today.

Scentre was created last year as owner-operator of Westfield malls in Australia & New Zealand. Before that, Westfield Group had owned malls and ran development, and the Westfield Retail Trust held a stake in the assets and ran operations.

The Westfield NZ business was a standalone operation with 2 management platforms, but after the restructure Scentre decided to run everything from Sydney and New Zealand was treated like the Australian states, with one management platform.

Mr Lynch’s management career in real estate & construction stretches back 30 years to his appointment by Concrete Constructions as design & contracts manager for the Hotel Nikko in Sydney. Since then he’s worked for Lend Lease Corp, Prudential Portfolio Managers Australia, Colonial First State Global Asset Management and, since 2000, Westfield.

“I’ve thoroughly enjoyed New Zealand,” he said. “If something else comes up here I may stay.”

Scentre has named Linda Trainer as New Zealand national regional manager after 8 years as shopping centres & marketing general manager. Ms Trainer joined Westfield’s forerunner as portfolio owner, St Lukes Group Ltd, in 1993 as centre manager at the Pakuranga mall.

Frank Lowy.

Frank Lowy.

Another member of the Westfield group – chairman Frank Lowy – is also on the move. He announced a fortnight ago that he’d retire as Scentre chair at the annual meeting next May, when deputy chair Brian Schwartz will succeed him. Mr Lowy said he considered it was the right time to announce his retirement, given the group had successfully completed its establishment phase.

Frank Lowy will continue to chair Westfield Corp, which took over the international business outside Australian & New Zealand in last year’s restructure. One of his sons, Steven, remains a non-executive director of Scentre and he & his brother Peter are directors & co-chief executives of Westfield Corp.

Scentre’s third-quarter operational update on Wednesday showed its New Zealand malls lifted their performance in terms of average specialty retail sales more than the Australia malls did – up 5.8% in Australia to $A10,666/m² ($NZ11,528) for the 9 months to 30 September, but up 6.5% in New Zealand to $NZ10,534.

The group still owns malls in New Zealand that it doesn’t want. After it sold 49% of 5 malls – Albany, Manukau, Newmarket, Riccarton & St Lukes – to Singapore’s sovereign wealth fund, GIC, at the end of last year, Scentre put its remaining 4 New Zealand centres on the market – Glenfield & WestCity in Auckland, Chartwell in Hamilton and Queensgate in Lower Hutt.

Attribution: Company releases, phone interview.

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Scentre to sell the other 4 NZ malls

Scentre Group, operator of the Westfield malls in Australia & New Zealand, has begun the process of selling the 4 New Zealand shopping centres it hadn’t already sold 49% of.

Scentre sold 49% of the other 5 centres – Albany, Manukau, Newmarket, Riccarton & St Lukes – to Singapore’s sovereign wealth fund, GIC, in November. That sale’s due to settle by the end of March, giving Scentre proceeds of $1.036 billion.

The 4 now going on the market are Glenfield & WestCity in Auckland, Chartwell in Hamilton and Queensgate in Lower Hutt.

Scentre was created last year from the restructure of Westfield Retail Trust & Westfield Group. Scentre Group took the Australian & New Zealand business and Westfield Corp took the international business outside Australian & New Zealand.

One big change from the trust to Scentre is that Scentre is internally managed. A second is that Scentre is no longer a pure landlord acquiring assets – once developed – from its manager, Westfield Group. If it’s to develop new stock, it will have to undertake that itself.

Apart from the cursory mention of a sales process which Scentre said it had already announced, the New Zealand malls didn’t feature strongly in the group’s annual results announcement.

The $2 billion New Zealand portfolio lifted specialty store sales by 2.3% to $8765/m² in 2014 ($8542) after 0.1% & 0.4% rises in the previous 2 years. Specialty store rental growth also picked up from rises of 0.6% & 0.4% in the previous 2 years, rising by 1% in 2014 to $1139/m² ($1128).

By comparison, the Australian portfolio’s performance was much stronger. Australian sales rose 3.6% and rent 2.4% last year.

A number of the financial report lines were incomparable because of the differences between the 2013 & 2014 entities, such as the increase in net profit after tax from $A1.6 billion to $A6.6 billion.

However, earnings/share seemed comparable, and showed a decline. Basic earnings/share were reported as A5.19c/share for 2014 (A7.01c in 2013) and diluted earnings A5.17c (A6.97c). Gearing at 31 December 2014 was 34.9%.

The group owns interests in 47 Westfield centres and has assets under management of $A41 billion.

Attribution: Company release.

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Propbd on Q W25Feb15 – Downtown deal, Precinct result, rights issue, apartment sales, Metlifecare & Summerset up, panel talks flexibility, ex-MUL rezoning

Downtown deal struck
Precinct ebit up but npat down
Precinct 1:7 rights issue
3 apartments sell at Bayleys
Metlifecare lifts profits
Summerset grows assets & returns
Scentre to sell the other 4 NZ malls
Unitary plan panel talks flexibility
First special housing area gets rezoning & consent

2.45pm:
As the days merge….

One of those days when my report on yesterday’s news – not quite finished this morning – was interrupted by a call about the city rail link & Precinct Properties. That entailed a rapid drive to town and my arrival inevitably at the end of a briefing.

Since then I’ve been out & about, through a couple of auction rooms and nearly completed the bundle of stories lining up for the newsletter. In the meantime, Propbd on Q looks the best option to keep at least some of you informed on a wide range of stories….

Downtown deal struck

The Downtown land deal has been struck conditionally between Auckland Council & Precinct Properties NZ Ltd, enabling a start on the city rail link tunnel mid-year so it’s constructed at the same time as Precinct builds its office tower.

Precinct ebit up but npat down

Precinct also announced its half-year result this morning – net operating income up $3.3 million to $35.3 million (up from 3.1c to 3.33c/share), but net profit after tax down $9.9 million to $31.6 million. The company went from an unrealised interest rate swaps gain of $10.6 million in 2013 to a loss of $5.3 million for the latest period, and from a deferred tax expense of $3.1 million to a benefit of $1.4 million.

Precinct 1:7 rights issue

Precinct Properties also announced this morning that it would raise $174.1 million through a 1:7 accelerated entitlement offer at $1.15/new share. The offer will be underwritten (excluding management company Haumi Co Ltd’s share).

The institutional offer will be held over the next 2 days, with settlement & allotment on Wednesday 4 March. The retail offer to eligible shareholders will open on Monday 2 March and close on Wednesday 18 March.

3 apartments sell at Bayleys

3 of the 8 cbd apartments taken to auction at Bayleys today were sold under the hammer. Auction results:

Waldorf Celestion, 19 Anzac Avenue, unit 204, sold for $375,000, sales agents Cheryl Regan & Harry Cheng
Carlisle, 7 Emily Place, unit 31, sold for $805,000, Diane Jackson & Julie Prince
Scene 3, 30 Beach Rd, unit 906, leasehold, no bid, James Mairs & Aled Luffman
Quest on Eden, 7 Eden Crescent, unit 301, sold for $415,000, Dave Hamlyn
Avenue 105, 105 Anzac Avenue, unit 1D, passed in at $315,000, Diane Jackson & Julie Prince
Spencer on Byron 9-17 Byron Avenue, unit 1703, passed in at $90,000, James Mairs & Aled Luffman
Heritage Farmers, 35 Hobson St, unit 436, passed in at $350,000, Dave Hamlyn
Spencer on Byron 9-17 Byron Avenue, unit 1906, passed in at $100,000, James Mairs & Aled Luffman
Forte, 37 Symonds St, unit 101, auction postponed until Wednesday 4 March, James Mairs & Aled Luffman

Metlifecare lifts profits

Retirement village owner, developer & operator Metlifecare Ltd Lifted net profit after tax by 48% to $39.7 million for the December half, and underlying profit by 70% to $26 million. The 29 sales & 202 resales generated gross cashflows of $89.1 million, up 28%. Gross cashflows from new sales doubled to $16.1 million, and realised resale gains rose 64% to $14.1 million.

Summerset grows assets & returns

Retirement village owner, developer & operator Summerset Group Holdings Ltd lifted its assets by 23% to $1 billion in 2014, and grew the returns on its portfolio substantially.

It lifted net operating cashflow by 25% to $$110.4 million, net profit after tax by 58% to $54.2 million and underlying profit by 10% to $24.4 million. Sales of occupation rights rose 14%, and the company increased delivery of retirement units by 25% to 261 units.

Scentre to sell the other 4 NZ malls

Australasian mall owner Scentre Group has begun the process of selling the 4 New Zealand shopping centres it hadn’t already sold 49% of [correction: the sentence originally read 51%, which is the proportion Scentre kept, and also said Scentre was selling 5 malls now, when it’s selling 4].

Scentre sold 49% of the other 5 centres to Singapore’s sovereign wealth fund, GIC, in November. That sale’s due to settle by the end of March, giving Scentre proceeds of $1.036 billion.

The $2 billion New Zealand portfolio lifted specialty store sales by 2.3% to $8765/m² in 2014 ($8542) after 0.1% & 0.4% rises in the previous 2 years. Speciality store rental growth also picked up rises of 0.6% & 0.4% in the previous 2 years, rising by 1% in 2014 to $1139/m² ($1128).

By comparison, the Australian portfolio’s performance was much stronger. Australian sales rose 3.6% and rent 2.4% last year.

Unitary plan panel talks flexibility

The independent panel hearing submissions on the Auckland unitary plan has told submitters the council’s proposed provisions for the new rural:urban boundary “may be overly stringent” and that a more flexible boundary would be better.

The panel made its comment in interim guidance released on Monday on the section of the plan on urban growth.

The panel’s interim guidance message, issued a short time before the urban growth one, said the unitary plan should provide for rural lifestyle subdivision: “It may be discouraged or constrained, but should not be effectively prevented.”

Along with those 2 strong hints at more flexibility when the panel makes its recommendation to the council next year, the panel stated as its first point that the objective of a quality compact urban city was appropriate for a region expecting strong population growth to continue.

The panel decided to issue interim guidance on regional policy statement topics ahead of hearings on the regional & district plans.

Earlier story:
22 February 2015: Unitary plan panel to give interim guidance next month

Links: Panel minute
Interim guidance, urban growth
Interim guidance, rural

First special housing area gets rezoning & consent

The first special housing area in Auckland to get consent for development is a 31.4ha site at Whenuapai, where commissioners have approved rezoning from future urban under the proposed unitary plan to mixed housing urban, and the development of 168 residential lots plus 14 “super” lots.

The land is outside the metropolitan urban boundary, with a zoning of countryside living under the operative Waitakere district plan, which most likely would have prevented this development. Under the proposed unitary plan, it would fall within the rural:urban boundary, and would have been zoned future urban without the accelerated process of the council-government housing accord signed in 2013.

The site will be developed by Oyster Capital Ltd (David Wilson) as the first 4 of a total 8 stages. The land is at 143-149 Totara Rd, 32 & 36 Brigham Creek Rd & 4-8 Dale Rd, Whenuapai. Whenuapai Village and the RNZAF Whenuapai Base are east of it.

Links: Hearing report
Oyster Capital

Attribution: Company release, unitary plan panel guidance, rail link discussions, commissioners’ decision.

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GIC buys into 5 NZ Westfield malls

Singapore’s sovereign wealth fund, GIC, has followed up a joint venture with Goodman Property Trust, announced on Tuesday, by signing a similar joint venture on Thursday to acquire 49% of 5 New Zealand malls from Westfield operator Scentre Group.

The 5 malls – Albany, Manukau, Newmarket, Riccarton & St Lukes – have a combined gross value of $2.1 billion.

The 4 Westfield malls excluded from the deal are Glenfield & WestCity in Auckland, Chartwell in Hamilton and Queensgate in Lower Hutt [incorrectly referred to as Eastgate in the original version of this article].

While Goodman said its joint venture was GIC’s first transaction in New Zealand, the Singaporean fund has been a Westfield partner in Australia for 7 years. Joint ventures represent 28% ($A10.2 billion) of Scentre’s $A39.7 billion mall portfolio in Australia.

Scentre chief executive Peter Allen said yesterday: “A strategic focus of Scentre Group is the introduction of joint venture partners into some of our wholly owned assets, with the capital proceeds available for redeployment into our development pipeline & the repayment of debt.”

The transaction represented a 4% premium to the book value of the 5 New Zealand malls as at 30 June and an effective implied cap rate of 6.8%.

Scentre will retain a 51% interest in all 5 malls and will continue to provide property management, development, design & construction services.

The transaction remains subject to Overseas Investment Office approval.

Scentre Group has interests in & operates 47 Westfield malls in Australia & New Zealand, containing 12,500 retail outlets, has a total $A39.4 billion of assets under management and has 2000 staff.

It will receive proceeds of $NZ1.036 billion from the transaction, which will initially be applied to repay debt. Closing is expected by 31 December.

Mr Allen said the transaction wasn’t expected to materially impact the group’s funds from operations, but its pro forma gearing would be cut from 37.6% at 30 June to 35.5%.

Performance figures the company gave in its third-quarter result on Wednesday were:

Australia: specialty retail sales $A10,105/m², specialty retail growth 3.6% for the 12 months to 30 September, average specialty store rent $A1551/m², growth year on year 1.9%
New Zealand: sales $NZ8685, growth 1.7%, rent $NZ1140/m², growth 0.7%.

Scentre said in the results announcement the group was undertaking predevelopment activity on $A3 billion (its share on Wednesday $A2 billion) of development opportunities, and it expected $A1.5-2 billion of developments to start over the next 3 years.

These developments included Albany, Newmarket & St Lukes in New Zealand and 12 Australian malls.

Attribution: Company release.

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Propbd on Q F20June14 – Westfield wins this time, M&C restructure approved

4.57pm:
Westfield Retail Trust votes – just – for restructure

Westfield Retail Trust securityholders approved the proposed restructure of the trust & Westfield Group at the second attempt today.

On 4 proposals requiring 75% support, securityholders voted 76.09% in favour. There were 19-20 million abstentions on each vote, but including them in the negative would have not quite swung the decision – it would still have been carried by about 0.23% over the 75% requirement.

Westfield Group gave 98% support to the restructure on 29 May. However, the trust’s meeting that afternoon was adjourned before the vote was taken, when proxies indicated the proposal might be defeated.

Westfield will be split next week into 2 new, independent companies – Scentre Group, which will own & operate the Australian & New Zealand business, and Westfield Corp, which will own & operate the international business outside Australian & New Zealand.

One big change from the trust to Scentre is that Scentre will be internally managed. A second is that Scentre will no longer be a pure landlord, acquiring assets – once developed – from its manager, Westfield Group. If it’s to develop new stock, it will have to undertake that itself.

Only a handful vote against Millennium & Copthorne restructure

Millennium & Copthorne NZ Ltd shareholders voted solidly in favour yesterday of the restructure which will see the company back concentrating on its New Zealand hotel business, and selling down its 31.4% stake in a Singapore-registered Chinese developer to individual M&C shareholders.

0.15% of the ordinary shares were voted against the restructure resolution, and 0.05% of the preference shares.

The parent Hong Leong Group of Singapore controls Millennium & Copthorne NZ through London-listed Millennium & Copthorne plc, which owns 70.22% of the New Zealand company’s ordinary shares and 85.18% of its preference shares, all of which were able to be voted yesterday. A 75% majority was required in the vote by each class of share.

Attribution: Company releases.

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UniSuper explains its opposition as new Westfield restructure vote date set

Westfield has rescheduled the meeting of its retail trust on the group’s proposed $A70 billion restructure for Friday 20 June, in Sydney.

Meanwhile, the super fund which has pitted its 8.5% of Westfield Retail Trust against the desires of Westfield’s royals, the Lowy family, explained itself last Thursday in a backgrounder on its website.

The restructure has been opposed by UniSuper, a superannuation fund for people working in higher education & research, and by Commonwealth Bank of Australia property arm Colonial First State Global Asset Management.

John Pearce of UniSuper.

John Pearce of UniSuper.

UniSuper chief investment officer John Pearce laid out very clearly why the fund thinks the restructure is a very poor deal for investors in the trust, but why investors in both the trust & Westfield Group (historically the developer & asset manager) would think it was a good deal.

Mr Pearce wrote: “The difference between the proportion of assets Westfield Retail Trust is contributing to (new Australia-NZ entity) Scentre (69%) and the ultimate ownership (51.4%) is effectively payment for management rights that Westfield Group will relinquish to Scentre.

“The independent expert has deemed this to be a fair price, but we strongly disagree. The valuation ascribed by the independent expert implies a level of property development management fees, in perpetuity, which we simply cannot reconcile. The property experts we speak to agree. Suffice to say that we are far apart in terms of fair valuation.”

On the supposedly revised proposal, Mr Pearce added: “The new information appears to have been Westfield’s ‘plan B’, in the event that the proposal was not approved by securityholders. Plan B involves the establishment of a new company (for this update let’s call this ‘Scentre B’) housing the Australasian assets spun off by Westfield Group. Furthermore, it was made clear to members that Scentre B would be a very attractive company competing with Westfield Retail Trust (the “ugly sister” according to one journalist) in the marketplace for capital & assets. In other words, it could be viewed as a thinly veiled warning to potential ‘against’ voters.

“We hope that Westfield Retail Trust securityholders see through this. In our view, Scentre B will not be the attractive sister to Westfield Retail Trust —indeed we think quite the contrary. Scentre B, after incurring the costs of a restructure, will be highly geared and be forced to sell assets as investors demand lower debt levels. This would in itself be a great outcome for Westfield Retail Trust, given that it has pre-emptive rights (ie, first right of refusal) to purchase the properties.”

Mr Pearce said that, without the high level of common ownership of the 2 existing entities, “the proposal would have struggled to even get a simple majority in favour”.

For UniSuper, which started accumulating retail trust securities in early 2012 and has done very well out of the investment in the mall landlord – buying in at $A2.70, a 17% discount to asset value, price now $A3.20, total return 11.2%/year compared to 8.1% for the broader Australian equities market – Mr Pearce said what it was offered by the Lowy family was this: “In simple terms one could say we bought an apple, and now we are being asked to accept an orange.”

The vote will come at an adjourned meeting, not a new one – the original meeting on 29 May was adjourned after proxies fell short of securing approval. That followed a meeting of Westfield Group the same day, where the restructure won 98% approval.

The adjournment was to consider “the impact of material new information announced by Westfield Group” at the first of the 2 29 May meetings.

The trust board said: “Westfield Group has now indicated that if the revised proposal does not proceed, Westfield Group would pursue the separation of its Australian & New Zealand business without any involvement by Westfield Retail Trust.”

There isn’t in fact a revised proposal. Rather, it’s the original proposal of realigning Westfield Group & Westfield Retail Trust businesses & assets “or else”, and the “or else” is that Westfield Group would go it alone, most likely to the detriment of the trust.

Trust chairman Dick Warburton said the independent board committee believed “there is no prospect of an amended or enhanced deal being negotiated with Westfield Group. Westfield Group has indicated that if the revised proposal is unsuccessful, it will pursue the separation of its Australian & New Zealand business without any involvement by Westfield Retail Trust.

“This further strengthens our view that the revised proposal is in the best interests of (trust) securityholders.”

Assuming approval by the required 75% majority on 20 June, securities in the 2 existing entities would cease trading on Tuesday 24 June, and trading would open on 25 June in the new securities of Scentre Group (the Australia-NZ business) & Westfield Corp (the rest of the world), on a deferred settlement basis.

At this stage, getting over the 75% threshold can’t be assumed. Westfield Retail Trust securities closed at $A3.16 on Friday after hitting $A3.25 on 16 May, but there is bound to be buying by both sides to shore up positions before the meeting.

Link: UniSuper commentary

Attribution: Westfield releases, UniSuper.

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Westfield adjourns restructure meeting when trust proxies fall short

Westfield Group sweetened the proposed restructure deal for Westfield Retail Trust unitholders on 6 May, but it wasn’t enough. Westfield pulled the vote at yesterday’s retail trust meeting in Sydney because proxies fell short of the required 75% support.

The Westfield Group meeting in the morning had voted 98% in favour of the restructure.

The decision not to proceed with the votes on 4 resolutions was purportedly to give unitholders a chance to consider new information.

The retail trust voted on the first of 5 resolutions, supporting Auckland lawyer Andrew Harmos’ reappointment as a director with a vote of 92.4% in favour.

For the first of the restructure resolutions, however, only 72.8% of the proxies were in favour and the proxy support was similar for the remaining resolutions. The meeting was adjourned without the restructure resolutions being put, with the promise that it would be reconvened in 10-14 days.

The present group & trust manage $A70 billion of assets in 90 malls containing 20,500 retail outlets. The latest restructure proposal, announced in December, is to establish Westfield Corp & Scentre Group on geographic lines.

Scentre Group would own the combined Australia & New Zealand business and would be internally managed. The rest of the business – malls in the US, UK, Europe & Brazil – would become Westfield Corp.

Westfield Group issued a statement on Wednesday that, “in light of the anticipated closeness of the vote of retail trust securityholders, and the persistent suggestion in media and among investors that Westfield Group would ‘recut’ its deal with the retail trust should the retail trust vote go against the proposal, that it was appropriate to make Westfield Group’s intentions clear.”

Westfield Group chairman Frank Lowy expressed this categorically in his address to group investors: “If the retail trust meeting this afternoon does not approve the proposal, it will not diminish our determination to proceed with Westfield Group’s strategic objective of separating the 2 businesses. We will pursue that separation – but without Westfield Retail Trust.

“Westfield Group is awaiting the outcome of the reconvened meeting of retail trust investors and reiterates that the terms of the proposal, as approved by Westfield Group investors today, are final.”

Westfield Group investors voted 98% in favour of the proposal.

On 6 May, Westfield Group announced that the merger terms for retail trust securityholders would be improved, enhancing the financial position of the new Scentre Group by $A300 million by reducing its gearing ratio and enhancing its funds from operations by 6.6% this year.

The adjustment to the terms of the proposal would be achieved by reducing the net debt of Westfield Group’s Australia/NZ business contributed to Scentre Group from $A7.1 billion to $A6.8 billion. As a result, Scentre Group’s pro forma net assets, at 31 December 2013, would increase from $A14.98 billion ($A2.82/security) to $A15.28 billion ($A2.88/security).

Pro forma gearing would fall to 37.3% and interest cover was forecast to be 3.4 times based on 2014 pro forma funds from operations. Over time, Scentre Group would get its gearing down to a range between 30-35%.

Mr Lowy said: “The gearing ratio does not take into account any value associated with the operating platform, which has been valued by the independent expert of Westfield Group, Grant Samuel & Associates, at $A3-3.5 billion, prior to corporate overheads.

“The strategic focus of Scentre Group will include the introduction of joint-venture partners into some of its wholly owned assets, with capital being redeployed into the development programme. This is expected to improve Scentre Group’s earnings, long-term growth profile & return on equity.”

The adjustment in the merger terms was expected to increase Scentre’s pro forma 2014 funds from operations/security from A21.5c to A21.75c.

Westfield Corp’s pro forma gearing, at 31 December 2013, would fall from 36.3% to 34.4% following the $A1.1 billion disposal of 3 non-core UK assets and the $A300 million adjustment to the terms of the proposal. Westfield Corp’s pro forma funds from operations for 2014 were expected to be US37.6c/security before the redeployment of the proceeds from the UK asset disposal.

All other terms of the merger proposal remained as disclosed in the 14 April securityholder booklet. Retail trust securityholders would continue to receive 51.4% of Scentre Group (with a higher net asset base) and group securityholders would continue to receive 48.6%.

Attribution: Company release.

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