Westfield Group has confirmed reports last month in the UK media that it is going to sell a stake in its second big British shopping mall at Stratford City in London, near the site of the 2012 Olympics.
The company says it will sell the half interest for 871.5 million pounds ($1.41 billion), which will help lower debt and boost earnings, but not until 2012.
The deal will complete towards the end of next year, the company said yesterday.
Westfield will gain a development profit of around 300 million pounds ($490 million) after the sale of the centre in London’s east to a new joint venture.
The news has been in the market now for more than a month.
Yesterday’s statement from Westfield was the first public admission from the group that such a sale planned.
The news comes 18 days after the company revealed plans to restructure itself and create a separate Australian and NZ trust.
Westfield Retail Trust will become the joint venture partner in Westfield Group’s shopping centres in Australia and New Zealand.
Westfield also announced an institutional and retail fund raising to generate up to $2.9 billion in new money.
The bulk of the shares were issued to big institutions at $10.50 a share.
Yesterday the securities jumped 38c, or more than 3%, to close at $12.20, still short of the $12.81 close the day before the new trust announcement and fund raising was revealed on November 3.
They closed at $12.15, up 33c, or 2.8%.
The securities are just below the price on October 26 of $12.21 when they started rising as rumours of a big deal started appearing in the market.
The buyers of the 50% stake in Strathford City are APG of the Netherlands and Canada Pension Plan Investment Board (CPPIB).
Westfield said it will keep full ownership of the adjacent non-retail development sites.
"Today’s announcement continues our strategy of creating value through the introduction of joint venture partners into our assets globally, at the appropriate time," Westfield Group managing director Steven Lowy said in the statement yesterday.
"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."
Westfield said the realised profit of around 150 million pounds would be added to the group’s future retained earnings while an unrealised 150 million pounds would be recognised as development valuation gains.
The group’s development of Stratford City, a 1.9 million square foot retail and entertainment complex, is next to the site for the 2012 Summer Olympic Games.
The centre is due to open in the third quarter of next year, with around 75% of the retail area either leased or committed, Westfield said.
The deal will also cut Westfield’s gearing by 2%, but won’t have much impact on its operating earnings per share forecast of 74.6c in 2011.
