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Westfield spins off retail trust

Wednesday 3rd November 2010

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Westfield, the world’s biggest owner of shopping malls, will create a new retail trust that will raise A$3.5 billion and own a half stake in its centres in Australia and New Zealand.

The group, chaired by high-profile businessman Frank Lowy, will seek a separate ASX listing for Westfield Retail Trust, which will gross assets of A$12.2 billion. The new trust will own a stake in 54 malls, including 42 in Australia and 12 in New Zealand.

The transaction would start with capital distribution to its security holders of A$7.3 billion by way of units in the new trust. Westfield retail would then raise up to A$3.5 billion offering new units, with A$1.75 billion underwritten by Citi, Credit Suisse and Morgan Stanley.

The public offer element is to be $2 billion and Westfield security holders will be offered units worth A$1.5 billion.

The new trust “responds directly to significant market demand for a domestic trust focused on investing in high quality retail real estate, with conservative gearing and income sourced primarily in Australian dollars,” Lowy said in the statement. “

The restructuring will reduce Westfield Group’s net debt by A$4.4 billion and reduce its future capital needs, it said. The retail trust will have its own board and management team while Westfield Group will act as responsible entity, property and development manager, without charging a fee, the statement said.

After the restructuring, combined per-security earnings in 2011 are forecast at between 92.9 Australian cents and 93.1 cents. That would be made up of 74.6 cents per Westfield Group unit and between 18.3 cents and 18.5 cents for Westfield Retail.

The 54 shopping centres hold some 13,195 retail outlets across Australia and New Zealand. They generated 550 million shopping visits and A$22 billion of retail sales, Westfield said.

Shares of Westfield Group were unchanged at A$12.81 on the ASX, having been halted earlier for the announcement. They have dropped 1.3% this year.

Westfield Group has 119 malls worldwide and some A$61 billion of assets.

Investors in Westfield Group will vote on the spinoff plan on Dec 9.

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