Westfield has confirmed Tuesday’s market leaks and will create a new listed trust and seek to raise $3.5 billion.
The new Westfield Retail trust will be a joint venture partner in the company’s 54 Australian and New Zealand shopping centers, and will have $12.2 billion of assets, the company said in a statement to the ASX.
The move partially reverses a merger of Westfield’s three units six years ago, which created the world’s biggest shopping mall operator.
It comes after the Sydney-based company saw its share price fall about 40% over the past three years and 16% since the combined group’s public listing in July 2004.
“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,” chairman Frank Lowy said in the statement.
Westfield Group is to restructure its business and create a separately-listed property trust, called the Westfield Retail Trust and effectively distributing $7.3 billion to securityholders.
Mr Lowy said the company had changed its capital structure several times in Westfield’s 50-year history in its pursuit of growth.
"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 security holders and remain in a very strong position to pursue our global growth opportunities," Mr Lowy said in the statement.
"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 focused on investing in high quality retail real estate, with conservative gearing and income sourced primarily in Australian dollars."
Westfield said the new Retail Trust would undertake a $3.5 billion offering of new units to eligible investors, of which $1.75 billion had been underwritten.
The offer includes a Public Offer seeking up to $2 billion, and a Westfield Securityholder Offer seeking up to $1.5 billion.
Westfield said the Retail Trust would invest in Australian and New Zealand retail property.
The 54 malls comprise, according to Westfield, 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%," the company said.
It would have gross assets of $12.2 billion and is expected to have a gearing ratio in the range of less than 10% to 24%.
The Trust will have its own board and management team. Former David Jones and Caltex chair Dick Warburton, also a former board member of the Reserve Bank of Australia, will be chairman and Domenic Panaccio will be Managing Director.
Westfield Group will be the Responsible Entity, for which it will not charge fees, Westfield said in a statement.
Instead, around $23 million in costs will be charged against the new trust.
Westfield Group and Westfield Retail Trust will be separately listed entities, the company said, but would maintain "a close ongoing relationship".
"The two entities will also cooperate on future retail property acquisition and growth opportunities."
The statement said that following the implementation of the proposal, "the combined earnings per security for Westfield Group and Westfield Retail Trust, for the 2011 year, are 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 said it was reconfirming "its previously provided forecast for 2010 of operational earnings per security of 90 cents and distribution per security of 64 cents".
Securities in Westfield Group remained in a trading halt yesterday at $12.81 when the suspension was requested on Tuesday afternoon.
