More change in the Westfield Group (WDC) empire of the Lowy family with the present two-company structure remaining, but with a completely reshuffled make-up.
Westfield’s announcement yesterday confirmed gathering rumours of another shake up in the shopping centre empire founded by Frank Lowy and Peter Saunders decades ago. Now it’s controlled by Mr Lowy and his family.
They remain in place, Frank Lowy as chair. The changes see Westfield Group combining its Australia and New Zealand businesses with those of Westfield Retail Trust (WRT) to create a $29 billion company and a separate international company.
The two new entities – Scentre Group in Australia and New Zealand and Westfield Corp for the international portfolio – will be listed on the ASX and have separate boards and managements.
The market saw Westfield Group as the winner – its units rose 4.3% or 45c to $10.81, while investors marked Westfield Retail Trust as the loser – its units lost 1% or 3c to $2.97. It really is the ugly sibling of the Lowy family’s master company according to the market.
The sharp rise in the price of Westfield Group units though can’t disguise the weak performance of the Lowy companies this year – from a high of more than $12 a unit mid year, the price of Group units has sunk to a low last month of less than $10.20.
It is a similar story with the Retail Trust – its units peaked above $3.40 in May and have been on a slow slide ever since. They bottomed out under $2.90 a unit in early September.
If anything the latest restructure appears to be aimed at rekindling investor interest in both groups, especially the retail trust, which is losing the name in favour of a completely new moniker and structure.
WDC vs WRT YTD – Westfield’s latest reshuffle aimed at putting some pep into the Lowy empire
Westfield Group’s Chairman Frank Lowy said in a statement that, "Westfield’s international business and its Australian/NZ business have both grown in scale and quality to the stage where they can now stand on their own.
"They can each operate more efficiently, and generate greater growth and value for investors, by being independent.
"The proposal represents the latest in a series of capital restructures that have maintained the success of Westfield since it was first listed in 1960."
The new Scentre Group will have total assets of $US28.5 billion ($26.04 billion) comprising interests in 47 centres, while the new Westfield Corporation will have total assets of $US17.6 billion, comprising interests in 44 centres in the US, the UK and Europe, the company said.
Under the proposal, Westfield Retail Trust security holders will receive $285 and 918 securities in the new Scentre Group for every 1,000 WRT securities held.
Westfield Group holders will receive 1,000 securities in the new Westfield Corporation and 1,246 securities in Scentre Group for every 1,000 WDC securities held.
The deal is subject to security holder approval, expected to be voted on in May next year.
Mr Lowy will become chairman of both entities, while Westfield’s Australian management team will be transferred to the new company.
Westfield Group Co-chief executives Steven and Peter Lowy will head the new Westfield Corporation, though Peter Lowy is expected to stand down at the end of the transition period of around 18 months, according to yesterday’s statement.
Westfield Group said in the release that under the new structure, Scentre Group will be internally managed and benefit from the skills and experience of the Westfield management team.
"Its scale and quality will be attractive to investors as a proxy for investing in Australian retail real estate. It will have significant scope to increase long term returns through its development pipeline and the opportunities to joint venture its wholly owned assets.
"The proposal is expected to deliver 5.2% accretion to WRT’s Funds from Operations (FFO) per security and 2.9% accretion per security for WDC, on a pro forma basis for 2014," Westfield said.
Westfield said the Scentre Group’s portfolio will include 15 of the top 20 centres in Australia including Westfield Sydney and Bondi Junction.
It is expected to have "annual retail sales of $22 billion and 555 million annual customer visits".
"It is currently developing $1.2 billion of projects including Miranda in Sydney and Mt Gravatt in Brisbane.
"Its development pipeline includes $3 billion of future projects, including Warringah in Sydney, Chermside in Brisbane and Marion in Adelaide. Scentre Group’s Australian/NZ portfolio will continue to be branded “Westfield”.
"The new Westfield Corporation will be a leading global shopping centre company focused on owning, developing and operating iconic shopping centres in major world cities.
"It will have total assets of US$17.6 billion comprising interests in 44 centres in the US/UK/Europe with more than 8,000 retail shops, 475 million annual customer visits and US$18 billion in annual retail sales.
"It is currently developing Westfield World Trade Center in New York and Garden State Plaza in New Jersey, and has a future development pipeline of US$9 billion including flagship projects at Westfield London, Croydon in south London, Milan, Century City in Los Angeles and Valley Fair in San Jose. Westfield Corporation will also continue to identify further opportunities to expand in existing and new markets around the world," Westfield said.
