The Westfield Group (ASX:WDC) announced two major strategic transactions including a US $4.8 billion (3.7 bln) joint venture over 12 assets in the United States with Canada Pension Plan Investment Board (CPPIB) and the sale of its interest in three non-core shopping centers in the United Kingdom for £159 million (190 mln.).
Westfield has refocused its business into iconic assets such as Westfield Stratford City.
"Today's announcement follows on from the strategic initiatives we have undertaken since November 2010, beginning with the establishment of the Westfield Retail Trust. Since that time, we have expanded our operating platform globally and reduced our capital invested by entering into strategic joint ventures and disposals of non-core assets," Westfield Group Co-CEOs Peter Lowy and Steven Lowy said.
"As a result, we have increased our return on equity and long-term earnings growth potential with the additional property management and development income we earn on our reduced capital investment. These initiatives provide the Group with approximately $9 billion of capital for redeployment into our higher return opportunities. These opportunities include the Group's share of the $11 billion development pipeline, our recent expansion into the new market of Brazil as well as the investment in major iconic projects at Milan (Italy) and the World Trade Center in New York. The Group is in a position to return capital through the buy-back of securities, maintain its strong financial capacity and its ability to grow. We also continue our strategy of divesting non-core assets and we expect to make further announcements on this during the course of 2012".
US joint venture
CPPIB will become a 45% joint venture partner in a portfolio of 12 assets in the US currently owned by the Group with a gross value of US $4.8 bln. This represents a 3% premium to prior book value. The transaction is expected to close during the first quarter of 2012.
"This transaction continues the Group's strategy of creating value through the introduction of joint venture partners into our assets globally," Peter Lowy said. "This joint venture represents CPPIB's largest real estate investment globally to date and we are pleased to have expanded our long term relationship with them."
The transaction will generate approximately $1.85 bln. of net cash to the Group after the assumption by CPPIB of property related debt.
WDC will act as the managing general partner for the joint venture and will be responsible for property management, leasing and development. The transaction will increase the number of joint ventured centers in the US to 19, representing 50%, by value, of the Group's US portfolio.
UK asset sales
WDC has agreed to sell its interest in three non-core smaller centers in the UK. The sale of its interests in Belfast (33%), Guildford (50%) and Tunbridge Wells (33%) will result in gross proceeds of £159 mln., in line with prior book value, and net proceeds of £107 million.
"These assets were originally purchased in 2000, at the time of our initial entry into the