Published On: Mon, Dec 2nd, 2013

Frank Lowy’s Giant Westfield Group Announces Major Corporate Restructuring

Australian Assets of Westfield Group to merge with Westfield Realty Trust and change name to Scentre Group. The international part of the company will be called simply Westfield Corporation. Each will be listed separately.

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Frank Lowy

Yesterday Frank Lowy announced a significant restructuring of the giant Westfield Group’s worldwide retail shopping centre operations and development activities. He did so, moreover,  with a proposal for a complex corporate reshuffle that has the ultimate goal of simplifying its operations and clarifying its value propositions to investors.

Currently the Westfield Group, which trades on the Australian Stock Exchange (symbol WDC), has a portfolio of shopping centres in Australia and New Zealand, which it manages largely for the stability of income they produce in a mature market.

With a strong acquisition-oriented,  operating and development management team and Board of Directors, WDC also has a large portfolio of retail assets abroad. These are located primarily in the US and the UK, and WDC is actively developing many more in such major international markets, including the retail franchise underneath the soon-to-be-finished Westfield World Trade Center in New York.

Then there is also the Westfield Retail Trust, which also trades on the Australian Exchange under the symbol WRT. This is a basically passive and mature real estate investment trust (REIT) which presently offers a steady income stream to its security holders from an exclusively Australasian portfolio of high quality shopping centres.

This is all now going to change under the proposed restructuring announced yesterday.

First, the existing Australian and New Zealand retail assets of WDC will be merged with those of WRT into a new entity which will be called Scentre Group. The new vehicle will on day one immediately become the largest REIT on the Australian market, will have its own separate management, Board of Directors and of course its own listing on the Australian Stock Exchange.

Total assets of the new REIT will be over US$25 billion on day one, comprising interests in 47 shopping centres. The portfolio will include 15 of the top 20 shopping centres in Australia, including Westfield Sydney and Bondi Junction.

Scentre Group’s properties will generate estimated annual retail sales of about US$20 billion. As an entity it will not be completely passive like WRT but will have a development pipeline of about US$1 billion initially, and substantial future projects as well. WDC’s existing development team with responsibility for its Australian projects will move over to the new company.

WTC_2

 Westfield World Trade Center in New York

The remaining assets of WDC,  which are all of its existing international shopping centres,  and its development activities outside of Australasia will become known corporately in future as the Westfield Corporation.

On day one, the new Westfield Corporation will come out of the blocks as a leading global shopping centre company, focused on developing, owning and operating important shopping centres in major cities of the world.

The new Westfield Corporation will have an initial asset base of over US$17 billion,  comprising 44 shopping centres in the United States,  the United Kingdom and in Europe,  with about US$18 billion in estimated annual retail sales.

The new entity will have a very active development pipeline from the get go as well.  Westfield World Trade Center in New York and Garden State Plaza in New Jersey are already under way. Then there is a future development pipeline of an estimated US$9 billion of additional new projects. These include flagship projects at Westfield London,  Croydon in south London,  Milan, Century City in Los Angeles and Valley Fair in San José,  California.

The new Westfield Corporation will have a goal to continue to identify further opportunities to expand in existing and new markets around the world, as a dynamic publicly traded shopping centre development company with a blue chip portfolio of international properties already on its balance sheet.

The current Board of Directors of Westfield Group will morph into the Board of Directors of the new Westfield Corporation. The Board of Directors of the new Scentre Group will include current members of WRT’s existing Board. This will provide experience,  continuity and stability during the transition to both entities.

Frank Lowy will of course remain as Chairman of both of the new vehicles. Current co-CEOs of Westfield Group, Steven Lowy and Peter Lowy will become co-CEOs of Westfield Corporation.

Peter Lowy will later step down from an executive role after a transition period and subsequently remain on the Board as a non-executive Director.

Header_Westfield_London

Westfield London

To bring about the new arrangements there will have to be a big shuffle of corporate pieces of paper and securities. If the proposals are approved, existing WRT security holders will then receive securities in the new Scentre Group, plus some cash. Existing WDC security holders will receive securities in both the new Westfield Corporation and in the Scentre Group.

The exchange basis for these transactions is very detailed, has been determined carefully based on relative valuations professionally undertaken, all of which is being presented to the securities holders of both existing entities for approval.

The Boards of Directors of both WDC and WRT have unanimously approved the restructuring as well, which it is hoped to complete by the middle of 2014.

Frank Lowy said of the proposals for the two new companies,  “Both companies are large and strong enough to operate independently of each other and this proposal allows them to pursue their individual strategic goals and financing plans.”

“The proposal provides investors with a clear choice as to what they invest in, both in terms of geographic and currency exposure”.

Sounds like a very clever plan indeed.  One thing that won’t change though, is that the names on every single individual Westfield shopping centre,  including in Australia and New Zealand, and everywhere else will still have the Westfield name as part of it.

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