Westfield likely to unveil US assets sale
The Age
Monday February 14, 2011
WESTFIELD Group has moved into the spotlight amid suggestions it may unveil a partial sale of its non-core North American assets, worth a total of $1.7 billion, when it releases its full-year results on Wednesday.The figures will be impacted by the group's float last December of the Australian-focused Westfield Retail Trust and the opening of the first stage of the flagship $1.2 billion Westfield Sydney centre in Pitt Street Mall.At the float of Westfield Retail Trust, chairman Frank Lowy said that sales of non-core assets, mainly in the US, and the office towers attached to Westfield Sydney were on the agenda in the short to medium term.Property analysts are now speculating that more details could be revealed this week and that any cash raised would be channelled to new countries and the group's $12 billion development pipeline.Deutsche Bank's Matthew Bertram expects Westfield will expand joint venture relationships in the US markets over time."In the near term, this could include the sell-down of lower growth or non-core assets. For example, we estimate the sale of 10 per cent of the US portfolio at book value of $1.7 billion would reduce gearing by up to 300 basis points," the broker said."If we assume a 6.75 per cent average yield, the initial earnings dilution is $30 million or 1.8 per cent. This capital would be available for redeployment into higher-growth developments, or potentially higher-growth emerging markets."JP Morgan's property team says Westfield has already given recent specific operating earnings per security guidance of 90, translating to operating earnings of $2.07 billion. Westfield's joint managing directors Steven and Peter Lowy also forecast a full-year operating EPS at 74.6."Our forecast on the same basis is close, at $2.08 billion," JP Morgan says.The analyst said there were "four key issues to look for in the upcoming result announcement for the year ending December 31, 2010".First was Westfield selling down 10 to 15 per cent of its less productive US malls into the open market (not to joint venture partners).Second was putting in place a US joint venture vehicle like the listed Westfield Retail Trust vehicle as it tries to improve return on equity.Third, Westfield continues to increase development project starts to accommodate a large-scale domestic pipeline and the potential re-emergence of US opportunities.Finally, JP Morgan said to look out for Westfield making an entrance in an emerging market such as China.Other brokers said expectations of something big had one or more larger equity funds placing buy orders, while there remained reluctance from most investors to sell just yet.Simon Wheatley, the executive director of real estate at Goldman Sachs, also said it was being speculated that Westfield "will potentially sell down more interests in its US portfolio".He said the assets would be well received.
© 2011 The Age
