The Westfield Group has announced that it has entered into agreements to divest eight US non-strategic assets, raising US$550 million in separate transactions with Centro Properties Group (ASX: CNP) and Somera Capital Management.
We have decided to divest ourselves of these non-strategic assets since they no longer fit within our investment criteria nor are they in our long-term redevelopment plans, said Group Managing Director Peter Lowy. We are constantly reviewing our properties for opportunities to generate higher returns for our shareholders. The recycling of capital into higher returning developments is consistent with the Groups long-term strategy and these transactions are similar to the sales last year of non-strategic properties in the United Kingdom: the Brunel Centre in Swindon and the Millgate Centre in Bury.
The Group has entered into a series of agreements with Centro for the sale of two centers and the contribution of an additional five centers to new investment vehicles managed and controlled by Centro, with Westfield retaining a minority limited partner interest in the investment vehicles of approximately 5%.
The value of the seven centers to be transferred by Westfield reflects an initial cash yield of approximately 7%. Westfield will reinvest the proceeds in its redevelopment programme where the company generates 9%-10% initial cash yields and 14% unleveraged internal rates of return.
We have a history of working well with Centro and are pleased that we were able to complete a transaction that is beneficial for both companies, said Peter Lowy.
The Group has also agreed to sell Northwest Plaza in St. Ann, Missouri with a lettable area of 1,768,524 ft² to Somera Capital Management for US$47 million. The carrying value of Northwest Plaza as of 31 December 2005 was US$41.6 million.
The transactions are expected to close within 60 days and are subject to certain conditions which should be satisfied over the next 30 days.
The divestiture of these eight centers will reduce gearing levels of the Group by approximately 80 basis points and will result in a slight short-term dilution of the Groups operational segment earnings as the proceeds are being reinvested in higher yielding and higher quality developments.
The distribution forecast of A$1.065 per security will not be affected for the 12 month period to 31 December 2006.
The assets involved in the Westfield/Centro transaction are:
- Enfield Square in Enfield, CT
- Westland in Lakewood, CO
- Eagle Rock in Los Angeles, CA
- Midway Mall in Elyria, OH
- Richland Mall in Mansfield, OH
- West Park Mall in Cape Girardeau, MO
- Independence* in Wilmington, NC
*The contribution of the Groups interest in Independence Mall is subject to the satisfaction of certain conditions, including obtaining final approval from an independent third party owner.