Westfield has pulled the plug on its much anticipated $2 billion Australian wholesale shopping centre fund.
Yesterday, Westfield managing director Steven Lowy said the establishment of the wholesale fund would not go ahead, citing a number of conditions set out by investors which Westfield would not agree on.
Lowy said whilst interest in the assets has been positive, there are a number of structural elements that are important to Westfield, which has created an impediment to the establishment of the fund.
“As an example, investors have requested pre-emptive rights over all future asset sales and acquisitions. Granting rights over both our current Australian portfolio and future opportunities would be too restrictive on the Westfield model and would result in a transfer of assets from the group to the news fund.
“Furthermore, the package of preemptive rights and control in favour of Westfield in both the asset and entity level has not been accepted by Australian wholesale market,” he added.
“Our position is that, Westfield is not prepared to establish a wholesale shopping centre by transferring assets from our existing portfolio and subsequently face a possibility that management of the fund could pass to an entity outside the group.
“We have therefore decided not to proceed with the fund under the circumstances,” Lowy said.
In August this year, Westfield unveiled plans for the establishment of a wholesale shopping centre fund. The fund was to comprise six shopping centres including a 25% interests in Adelaide’s Tea Tree Plaza, Southland shopping centre in Melbourne and Belconnen in Canberra and 50% interest in the Parramatta, Hornsby and Burwood shopping centres in Sydney.
Westfield’s planned foray into the wholesale fund sector was expected to be similar to the success enjoyed by Centro and its MCS entities, which help the group free up assets on its balance sheet and realise profits from the sales.
More importantly, Centro maintained control of the spin off entities and has created a strong funds management business from the entities.
Meanwhile, there were no announcements whether Westfield will continue pursue an unlisted fund in the United Kingdom, where the group owns seven malls and developments valued at £1.5 billion.
In August, Westfield was considering a United States unlisted fund, where the group owns 57 centres valued at $US14.2 billion.
Yesterday, Westfield reported an EPS growth of 6% and DPS of 106.5 cents for FY06, with sales growth of 5% in the United States and 3.6% in Australia.
In addition, the group’s five development projects in Australia/US were completed during third quarter resulting in a $900 million valuation gain.
By Nelson Yap