- Jun 27, 2010
http://westfield.com/corporate/news-announcements/media-releases/2010/20101103_26995.htmlWESTFIELD GROUP TO RESTRUCTURE ESTABLISHING NEW WESTFIELD RETAIL TRUST DISTRIBUTING $7.3 BILLION OF CAPITAL TO SECURITYHOLDERS
3 November 2010
NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES
SYDNEY: Westfield Group (ASX:WDC) today announced a proposed restructuring creating a new separately listed property trust - the Westfield Retail Trust. The proposal will be effected through a pro-rata distribution of units in the new trust to Westfield Group securityholders equating to a capital distribution of $7.3 billion.
Westfield Retail Trust will become the joint venture partner in 54 of the Westfield Group's shopping centres in Australia and New Zealand.
The proposal is expected, over time, to create greater value for securityholders by increasing future earnings potential and return on equity.
The Chairman of Westfield Group, Mr Frank Lowy AC, said the proposal was the latest in a series of capital restructures that Westfield Group has undertaken over its 50-year history.
"We have continually evolved our capital structure to position the Group for growth," he said.
The Westfield Group was formed in 2004 to provide the scale and large capital base to pursue major acquisition opportunities globally at that time. Between 2004 and today, the Group invested over $22 billion of capital expanding its global business, acquiring approximately $7 billion of assets and developing approximately $15 billion of projects.
"As the global economies emerge from the recent crisis and we near the completion of a number of major global redevelopments, we are able to restructure, distribute capital to securityholders and remain in a very strong position to pursue our global growth opportunities," Mr Lowy said.
"The new trust will provide existing Westfield Group securityholders, as well as new investors, the opportunity to invest in the pre-eminent retail property portfolio in Australia and New Zealand. It responds directly to significant market demand for a domestic trust focussed on investing in high quality retail real estate, with conservative gearing and income sourced primarily in Australian dollars," he said.
The Westfield Retail Trust will undertake a $3.5 billion offering of new units to eligible investors, of which $1.75 billion has been underwritten. The offer comprises:-
1. A Public Offer, which seeks to raise gross proceeds of up to $2 billion; and,
2. A Westfield Securityholder Offer available to eligible Westfield Group securityholders, which seeks to raise gross proceeds of up to $1.5 billion.
Westfield Retail Trust will become an investor in Australian and New Zealand retail property, focussed on maximising the long term investment returns from its portfolio. It will have gross assets of $12.2 billion and is expected to have a gearing ratio in the range of less than 10% to 24%, depending on the amount raised under the Offer. It is also expected to be one of the three largest listed A-Reits in Australia.
The Trust will have its own separate experienced Board and management team, led by Mr Richard Warburton AO as Chairman and Mr Domenic Panaccio as Managing Director. The Westfield Group will act as the Responsible Entity for which it will not charge fees.
Westfield Retail Trust will own interests in 54 shopping centres of the Westfield Group's pre-eminent portfolio in Australia and New Zealand comprising 13,195 retail outlets. Last year, the portfolio saw over 550 million shopping visits which generated $22 billion in retail sales. Over the last 10 years the portfolio has delivered compound annual investment returns of 14.6% including compound annual income growth of 5%.
Under the proposal, Westfield Group and Westfield Retail Trust will be separately listed entities, but will maintain a close ongoing relationship.
Westfield Group will continue to act as the property and development manager for the joint venture on terms materially consistent with those already in place with Westfield Group’s other third party joint venture partners. The two entities will also cooperate on future retail property acquisition and growth opportunities.
"The creation of Westfield Retail Trust is another step in our evolution and presents a number of advantages to existing securityholders and new investors," Mr Lowy said.
"Rather than sell interests in our portfolio to outside parties, this proposal provides the opportunity for our securityholders to participate in our joint venture partner and benefit directly from the ownership of our portfolio in Australia and New Zealand," he said.
The key benefits of the proposal include:
* A capital distribution to Westfield Group securityholders of $7.3 billion;
* A $4.4 billion reduction in Westfield Group's net debt;
* Increases Westfield Group's earnings potential and return on equity through the additional property management and development income earned from joint ventured assets;
* Creates a new joint venture partner for Westfield Group in Australia;
* Reduces Westfield Group's future capital needs;
* Creates a geographic and asset specific investment vehicle that provides investors the opportunity to partner with Westfield Group in the ownership of a pre-eminent retail real estate portfolio in Australia and New Zealand.
* Provides investors the flexibility to determine their level of investment in Westfield Group (the global manager, developer and investor in high quality retail property) and the separately listed Westfield Retail Trust (the joint venture partner in the ownership of the Australian and New Zealand portfolio).
The Westfield Group securityholder meeting to approve the proposal will be held on 9 December 2010.
Westfield Group will continue as one of the world’s leading integrated retail property groups, with a global portfolio of 119 centres and providing property, leasing and development capabilities across its $61 billion of assets under management. The Group will retain its strong financial capacity and position with balance sheet assets of over $38 billion and net equity of $17.4 billion. Westfield Group is expected to have a gearing ratio of approximately 36% post the implementation of the proposal.
Westfield Group has approximately $10 billion of future development projects identified, with around $5 billion in Australia and New Zealand.
"Westfield Group's strategy will remain as is. We will continue to maximise the income from the global portfolio for ourselves and our joint venture partners," Mr Lowy said.
"We will grow through our development activity, with annual project commencements anticipated to be between $750 million to $1 billion, of which Westfield Group's share is expected to be between $300 million and $400 million in 2011.
"Following this restructure, Westfield Group will retain some $600 million of earnings each year and we therefore do not expect Westfield Group to require any additional common equity in order to fund its share of the development program.
"We will also continue to assess acquisition opportunities in existing and new markets.
"We will continue with our strategy of reducing, over time, our exposure to less productive assets in the United States. We will also consider introducing further joint venture partners in the United States and the United Kingdom," he said.
Forecast Earnings and Distribution
Following the implementation of the proposal, the combined earnings per security for Westfield Group and Westfield Retail Trust, for the 2011 year, is forecast to be between 92.9 cents and 93.1 cents. This is expected to be comprised of 74.6 cents per Westfield Group security and between 18.3 cents and 18.5 cents per Westfield Retail Trust unit.
The combined distribution per security for Westfield Group and Westfield Retail Trust, for the 2011 year, is forecast to be approximately 64.9 cents. This is expected to be comprised of 48.4 cents per Westfield Group security and approximately 16.5 cents per Westfield Retail Trust unit.
Westfield Group reconfirms its previously provided forecast for 2010 of operational earnings per security of 90 cents and distribution per security of 64 cents.
Citi, Credit Suisse and Morgan Stanley are acting as Advisors, Bookrunners, Underwriters and Joint Lead Managers to the Offer.
Deutsche Bank, JP Morgan, Merrill Lynch, RBS and UBS are acting as Equity Advisor to Westfield Retail Trust and Joint Lead Managers to the Offer.
ANZ, Commonwealth Bank, National Australia Bank, Moelis & Co, and Westpac are acting as Joint Lead Managers to the Offer.
Westfield Retail Trust (WRT) Offer: http://www.westfieldretailoffer.com