WESTFIELD GROUP TO SELL 50% INTEREST IN RETAIL COMPONENT OF STRATFORD CITY FOR Â£871.5 MILLION (A$1,425 MILLION)
22 November 2010
SYDNEY: Westfield Group (ASX:WDC) today announced an agreement to sell a 50% interest in the retail component of Westfield Stratford City for 871.5 million (A$1,425 million) to a new joint venture comprising APG of The Netherlands and Canada Pension Plan Investment Board (CPPIB).
The transaction values the retail component of Stratford City at 1,743 million (A$2,850 million). As a result, WDC will achieve a development profit of approximately 300 million (A$490 million).
WDC will retain full ownership of the adjacent non-retail development sites, where it has invested approximately 182 million (A$298 million) and which are expected to create significant additional value over time. The total value of the combined Stratford City site will be in excess of 1,925 million (A$3,148 million).
Under WDC’s new distribution policy announced as part of the proposed restructure, the realised development profit of approximately 150 million will be added to WDC’s future retained earnings. The unrealised 150 million component will be recognised as development valuation gains.
WDC expects to reinvest retained earnings into its future capital activities including redevelopment opportunities, which have expected unlevered long term annual investment returns of between 12% – 15%.
“On completion, Stratford City will be a landmark world class shopping centre, joining our iconic centres such as Westfield London and Sydney”, Westfield Group Managing Director Mr Steven Lowy AM said.
“Today’s announcement continues our strategy of creating value through the introduction of joint venture partners into our assets globally, at the appropriate time. Importantly, this transaction delivers, a year ahead of opening, the value and profit we have created through the development of Stratford City.
“As a result, the Group will significantly improve its return on invested capital from the development, and will remain a long term investor, property manager and developer of this landmark shopping centre,” he said.
WDC’s development of Stratford City, which is located adjacent to the site of the 2012 London Olympics, is primarily focussed on the creation of a 1.9 million square foot major retail and entertainment destination, due for completion in the third quarter of 2011. Today, approximately 75% of the retail area is either leased or committed.
WDC’s yield on its remaining investment in the retail component of Stratford City is expected to increase from the current range of between 7% – 7.5% to in excess of 9%. WDC expects to achieve a total unlevered return on its invested capital in the range 15% to 20%.
Westfield Stratford City is the gateway to the London Olympic Park which will host the Olympic and Paralympic Games in 2012. Approximately 70% of the anticipated 10 million spectators will pass through Westfield Stratford City en route to the Park during the Games.
The centre will be anchored by John Lewis, Marks & Spencer, Waitrose and an all-digital Vue cinema and will include over 300 shops and 50 places to dine.
“We are pleased to be able to expand our long term partnership with both CPPIB and APG, through the joint venturing of Stratford City,” Mr Lowy said.
The transaction is not expected to have a material impact on WDC’s operating earnings per security forecast of 74.6 cents for the 2011 financial year as detailed in the Explanatory Memorandum on the Establishment of Westfield Retail Trust, dated 3 November 2010.
Following completion, the transaction is expected to have a beneficial impact on WDC’s financial metrics, with gearing expected to reduce by approximately 2.0% and interest cover expected to increase by approximately 0.3 times.
The transaction is expected to close in late 2011 and is subject to the project completing and opening.\n\n
Notes to editors
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. It has investment interests in 119 shopping centres across Australia, the United States, the United Kingdom and New Zealand, encompassing in excess of 23,000 retail outlets and total assets under management in excess of A$60 billion. The Westfield Group is the largest retail property group in the world as measured by the FTSE/ EPRA NAREIT Index