Westfield set to create retail trust to generate more income for shareholders
In an effort to bolster the prospect of more profits for its shareholders, Westfield Group gave birth to Westfield Retail Trust on Wednesday, which it said would consolidate up to 50 percent of the property group's Australian and New Zealand assets.
The new entity would also act as Westfield's joint venture partner in 54 of its shopping centre investments in the two countries, effectively fronting for the groups' thrust of raising $3.5 billion in capital.
Westfield Group chairman Frank Lowy expressed confidence that the transaction would lead to eventual success as he added the restructuring initiative would empower the company to generate more income for its shareholders.
In creating one of the biggest listed Australian real estate investments trusts (A-REITS), Westfield said that the retail trust would assume ownership of up to 50 percent of the group's shopping centre interests.
In turn, Westfield Retail Trust would raise $3.5 billion in capital by offering new units to qualified investors, with up to $1.75 billion already underwritten.
The shopping complex operator added that the units issue would comprise of an initial public offer (IPO) for a target of $2 billion and a group security holder offer to raise $1.5 billion, with each retail unit priced at $2.75.
The offer price, according to Westfield, represented an 11 percent discount from tangible assets, with earnings yield of 6.7 percent and a distribution yield of six percent.
Westfield said that the new entity would focus on investing in Australian and New Zealand retail properties with gross assets of up to $12.2 billion, leveraging with a gearing ratio of between 9.4 percent and 24 percent.
Westfield Group managing director Peter Lowy said that the property group and the retail trust would separately trade, resulting to two securities that would deliver greater value for shareholders as he added that "it will have retained earnings that will meet our future capital needs which will allow the Westfield group greater growth after the transaction than previously."
Westfield said that its existing securityholders would be entitled to one retail trust unit for every 4.23 Westfield Group securities held.