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Westfield, Canadian fund forge $4.8B mall JV

by Paul Whitfield | Published February 15, 2012 at 12:48 PM

Australian shopping mall owner Westfield Group said Wednesday, Feb. 15, that it created a $4.8 billion joint venture with the Canada Pension Plan Investment Board and sold £159 million ($250 million) of U.K. shopping malls, freeing cash to invest in new assets.

CPPIB will pay about $2.2 billion for 45% of a portfolio of 12 U.S. malls that Westfield values at $4.8 billion. The investment includes $1.8 billion in equity, with the rest in assumed debt.

"This acquisition represents our largest real estate investment to date globally and supports our retail real estate strategy of investing in dominant regional malls," said Graeme Eadie, senior vice president of real estate investments at CPPIB.

Canadian Pension Plan is Canada's No. 2 retirement fund and has about C$14.4 billion ($14.4 billion) of real estate investment, equivalent to around 9.5% of its C$152 billion asset base.

Westfield has spent much of the past year seeking partners for many of its existing malls and offloading slower-growth businesses to raise funds to invest in faster-growing markets and assets. The company embarked on this strategy in late 2010, when it sold half its Australian and New Zealand malls into the Westfield Retail Trust, which is listed separately from the parent group in Australia.

Westfield said it would raise $1.85 billion in cash from the creation of the joint venture. It will take in a further £159 million in gross proceeds, equating to £107 million in net cash, from the sale of stakes in British shopping malls located in Belfast, Guildford and Tunbridge Wells. Westfield bought the assets in 2000 when it entered the U.K. market.

The sales, along with a program of reduced capital expenditure have freed about "A$9 billion ($9.6 billion) of capital for redeployment into our higher return opportunities," Westfield co-CEOs Peter Lowy and Steven Lowy said in a statement. "These opportunities include the group's share of the A$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 CEOs added that they would continue to seek new acquisitions and development projects.

Westfield said Wednesday that group net income had risen to A$1.53 billion in 2011, up 37.6% on the previous year's figure of A$1.11 billion. A 7% increase in income from property, a 100% rise in income from management fees and a 92% increase in project income drove the increase.

Shares in Westfield closed Wednesday at A$8.81, up 5.3%, or A$0.44, on their previous close.

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