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Unibail-Rodamco strikes deal to buy Westfield

on Wednesday 13 December 2017 in Gainz, Sectors, Securities – overseas, Westfield

European mall owner Unibail-Rodamco SE has entered into an agreement to buy Westfield Corp, the northern hemisphere part of the former Westfield Group which has interests in 35 shopping centres in the US & the UK and total assets under management of $US32 billion.

The announcement was made yesterday in Sydney, Amsterdam & Paris. The transaction requires the approval of shareholders in both groups and is expected to close in the first half of 2018.

When Westfield split in 2014, the Australia-New Zealand part of it went into SCentre Group Ltd. That’s outside this deal.

Sir Frank Lowy AC, who’s 87 and cofounded Westfield in 1960, will retire as chair of Westfield and his sons Peter & Steven Lowy will retire as co-chief executives, but will retain other roles. The group will have its headquarters in Paris & Schiphol (Netherlands), and 2 regional headquarters in Los Angeles & London.

On completion, existing Unibail-Rodamco shareholders are expected to hold about 72% of the group’s stapled securities and Westfield securityholders- including Lowy family interests – will hold about 28%.

Unibail-Rodamco & a newly created Dutch real estate investment trust (reit) holding Westfield’s US operations will become stapled entities. The group intends to establish Chess depositary interest listed on the Australian Securities Exchange, which will be fully exchangeable with the new group’s stapled securities listed in Amsterdam & Paris. Westfield securityholders will be able to elect whether to receive the scrip consideration in Unibail-Rodamco stapled securities or the group’s CDIs.

$US72 billion portfolio

The transaction implies an enterprise value for Westfield of $US24.7 billion, and a total value of $US7.55 (or $A10.01)/Westfield security based on UnibailRodamco’s closing price of €224.10 on Monday, representing a 17.8% premium based on Westfield’s closing security price of $US6.41 ($A8.50) on Monday, and a 22.7% premium based on Westfield’s volume-weighted average closing security price of $US6.1516 over the last 3 months. 38.7 million Unibail-Rodamco stapled securities will be issued to Westfield securityholders to fund the scrip consideration and $US5.6 billion will be paid as the cash consideration, resulting in a 65% stock, 35% cash consideration mix.

The enlarged Unibail-Rodamco will own & operate a portfolio with a total gross merchandise value of over €61.1 billion ($US72.2 billion) and a pro forma proportionate net rental income of €2.3 billion ($US2.6 billion) for the 12 months to 30 June 2017. The shopping centre portfolio will represent 87% of the pro forma group’s gross merchandise value alongside Unibail-Rodamco’s existing office (7%) and convention & exhibition (6%) portfolios, both located in Paris.

Unibail-Rodamco, created in 1968, is Europe’s largest listed commercial property company, with a presence in 11 EU countries and a portfolio of assets valued at €42.5 billion as of 30 June 2017. It owns & operates 69 shopping centres and has €8.1 billion of development projects, including Mall of Europe in Brussels & Überseequartier in Hamburg.

Sir Frank Lowy.

Commenting on the transaction, Sir Frank Lowy said it was “the culmination of the strategic journey Westfield has been on since its 2014 restructure. We see this transaction as highly compelling for Westfield’s securityholders & Unibail-Rodamco’s shareholders alike. Unibail-Rodamco’s track record makes it the natural home for the legacy of Westfield’s brand & business. We look forward to seeing Westfield continue to grow as part of the world’s premier owner of flagship shopping destinations.”

Future control structure

Unibail-Rodamco will maintain its 2-tier board structure – a supervisory board & a management board. Colin Dyer, who retired as president & chief executive of real estate consultancy JLL in October 2016, will continue to chair the supervisory board. 2 Westfield board members, including Peter Lowy, will join it. A newly created advisory board, to be chaired by Sir Frank Lowy, will provide the group with independent advice from outside experts on its strategy.

The management board will consist of group chief executive Christophe Cuvillier & group chief financial officer Jaap Tonckens. The senior management committee will include top executives of both Westfield & Unibail-Rodamco.

Steven Lowy.

Steven Lowy will chair the board of OneMarket (formerly Westfield Retail Solutions) when a 90% interest in Westfield’s retail technology platform is spun off into a newly formed ASX-listed entity. The Unibail-Rodamco Group will retain the remaining 10% interest. OneMarket will have $US200 million in cash at 31 December.

Links:
Unibail-Rodamco
Westfield Corp

Attribution: Joint release.

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Frank Lowy & sons talk the ingredients for future retail

on Wednesday 12 April 2017 in Gainz, Market, Retail property, Sectors, Securities – overseas, Westfield, Westfield

Westfield Corp Ltd chair Frank Lowy told the company’s annual meeting in Sydney last week its focus on flagship assets had kept it ahead of the competition. His sons, Peter & Steven, who are co-chief executives, elaborated – including a new focus on apartment development at some sites.

Westfield restructured in 2014, creating Westfield Corp as owner of its northern hemisphere assets and Scentre Ltd as owner in Australia & New Zealand, all still flying the Westfield flag.

Westfield Corp made $US1.4 billion profit in 2016, including over $US1 billion in revaluation gains, which Frank Lowy said was largely driven by the value generated from its development programme: “Our strategy is to create & operate flagship assets in leading markets that deliver great experiences. We are focused on innovation. Our aim is to create a digital platform that complements our physical portfolio and provides a better connection between retailers, brands & consumers.”

Decline of the secondaries

He said 2 factors were impacting the US retail environment: “The first is the decline of what we refer to as secondary centres, and the second relates to the US department store business.

“On the issue of secondary centres – it has been evident to us for some time that the US is ‘over-retailed’. Put simply, there is too much retail space in that market. This has put pressure on any retail asset which is not considered to be the primary asset in the relevant market.

“At Westfield, for more than a decade, we have been discussing publicly the division of the shopping centre industry – between flagship assets & secondary assets.

“Since 2010 we have been steadily reducing our investment in secondary assets and increasing our focus on the best assets in the best markets – the assets we refer to as flagship centres.

“The difference in performance between flagship centres & secondary assets is obvious when you look at our portfolio metrics. Our flagship assets, which today represent 82% of our portfolio, command higher rents and have higher levels of occupancy & sales growth.

“In executing our flagship asset strategy since 2010, we have divested 29 secondary centres in the US & UK, with a total value of $US 7 billion. We have also joint-ventured 22 assets, raising $US4.6 billion of additional capital. Those proceeds have been reinvested in our $US9.5 billion development programme which is now underway – all with the aim of creating the highest quality retail portfolio in the world.

“When our current development programme is completed in 2020 or 2021, we expect that 90% of our portfolio will comprise flagship centres, with 9 of those centres expected to achieve sales of more than $US1 billion, pounds or euros each year.

Department stores finding new life in malls

“The second factor impacting US retail is the well publicised decline in the US department store business. As most of you know, Westfield has been involved in the shopping centre business in the US since 1977. Since the mid-1980s, we have witnessed a decline in the importance of the department store business in that market. The current weakness is the culmination of a trend which has been in progress for a very long time.

“It is now generally accepted that retailers in the US, including the department stores, need less physical stores to service the markets in which they operate. Recognising this trend, in recent years we have bought back department store space and repurposed that space to introduce new & more productive retailers – retailers who have greater capacity to attract shoppers to our centres. Our expectation is that this trend will continue in future years.

“The department stores also recognise the value of locating their stores in our flagship assets. At the moment, a number of different department stores are opening new stores in our developments whilst closing many stores in other locations. It is these factors which have driven us to reposition the Westfield portfolio toward flagship assets to ensure that the changes in the retail environment have a positive, rather than a negative, impact on the company.

In 2016 our flagship centre strategy was in evidence with the launch of Westfield World Trade Centre. Westfield owned the retail component of the Twin Towers on 9/11 and the journey to its rebirth was long & complex, but the result is something that our company, and the city of New York, can be very proud of. Our centre forms part of an incredible landmark, something befitting the history, culture & people of New York.

Westfield advances digital programme

“In 2016, we took a further step in the evolution of our digital programme. In the shopping centre industry we know we must constantly change & evolve. In the digital world we must move at a faster pace, constantly testing new technologies, and using our data to deliver the best experience.

“To achieve this we have created Westfield Retail Solutions to take a broad approach to digital products, data analytics & all aspects of the Westfield business to create seamless solutions for our consumers, retailers and brand partners.”

Peter Lowy.

Peter Lowy told the annual meeting: “On completion of our development programme, we will have a portfolio of between $US45-50 billion, with 9 centres expected to have annual retail sales in excess of $US1 billion and average flagship specialty sales of over $US1000/ft² ($NZ15,480/m²).

Residential opportunities

“It is worth noting that, in additional to our retail development programme, we have significant residential rental opportunities. We have identified the opportunity to build about 8000 apartments in the US & UK on land already in our portfolio. We plan to partner with third-party capital to fund the construction of many of these opportunities. These opportunities will enhance the value of our portfolio by maximising the value of our existing real estate. In 2018, we expect to commence a 1200-apartment project at Stratford in London and a 300-apartment project at UTC in San Diego.”

Big brands become the new retailers

Steven Lowy.

Steven Lowy said: “We operate in an increasingly connected world, where technology & consumer behaviour moves at a much faster pace than was the case a decade or 2 ago. Retail formats are continually adapting, and not always in predictable ways. It is true that online retailing and the use of digital technology is on the rise. But it’s equally true that this is opening up new & exciting opportunities for Westfield.

“New retail formats that didn’t exist a few years ago are now among the most popular features of our shopping centres. Companies that were never regarded as ‘retailers’ are taking space in our centres – car companies like Ford, Citroen & Tesla are creating exciting new spaces to showcase their latest products. A host of global brands like Pepsi, JP Morgan Chase, Samsung, Lexus & Senheisser now feature on our state-of-the-art digital advertising screens and launch new products from London to New York to Los Angeles & San Francisco.

Other global brands are also increasing their presence in Westfield centres. Technology companies like Apple & Microsoft and the global fashion & cosmetics brands like Zara and H & M and Sephora.

“The food, leisure & entertainment aspect of our business has undergone a revolution – where once we merely provided a shopfront for a retailer selling food, we now host vibrant food concept stores like Eataly, which provide a whole new level of product & experience. In fact, food & dining now plays a vastly more important role in our centres than it used to. At Stratford in London, there are more than 80 food retailers.

“We are able to do this, to stay at the forefront of our industry and respond quickly to change, because we have continued to execute a consistent strategy. This strategy boils down to 2 key objectives: to continually improve the quality of our physical assets while integrating digital & other new technology to deliver great experiences. Both elements of this strategy are reflected in the makeup of our senior executive team.

New type of executive

“Of course, we continue to rely heavily on our traditional real estate & shopping centre management expertise. But we have also recruited executives from the digital, entertainment & advertising sectors. [Westfield Retail Solutions executive director] Don Kingsborough has been building a technology team drawn from companies like Google & PayPal, and we recently acquired a small Broadway production company to build our capacity to create even better experiences in our centres.

The £600 million redevelopment of Westfield London is 6 months ahead of schedule and we expect the project to launch in early 2018. Upon completion, it will be the largest shopping centre in Europe. Our 2 London centres already generate around £2.2 billion of retail sales from 75 million annual customer visits. The $1.1 billion expansion of Valley Fair started last year. Valley Fair is currently one of the most productive centres in the US, with annual specialty sales of around $US1200/ft² ($NZ18,575/m²).

“The chairman briefly described the major changes underway with department stores globally, but especially in the US. Again, by anticipating this long-term trend, Westfield has been able to benefit.

“As underperforming department stores close in less attractive markets, they are opening new stores in our flagship development projects. We will see a new Nordstrom store open at Century City in Los Angeles and another at UTC in San Diego. Bloomingdales will open a new store at Valley Fair in Silicon Valley. France’s biggest department store, Galeries Lafayette, will open their first store in Italy in our new centre in Milan, and John Lewis will have a new store at Westfield London.”

Link:
Westfield Corp

Attribution: Company AGM speechnotes.

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WestCity back on market

on Wednesday 21 September 2016 in Gainz, Henderson, Neighbourhoods, North-west, Scentre, Sectors, Securities – NZ, Securities – overseas, Westfield

Westfield shopping mall owner Scentre Group Ltd has put WestCity in Henderson back on the market, this time through Auckland agency Whillans Realty Ltd & Sydney agency McVay Real Estate Australia.

Whillans hasn’t opened a public campaign yet, but provided the images to support McVay’s Sydney campaign.

6 of Scentre’s 40 malls are in New Zealand, and WestCity is the last still wholly owned by the company after it sold 49% of 5 of them – Albany, Manukau, Newmarket, Riccarton & St Lukes – to Singapore’s sovereign wealth fund, GIC, at the end of 2014.

Scentre put WestCity & the other 3 New Zealand centres on the market last year and sold 3 in November – Glenfield to Ladstone Holdings Ltd, Queensgate in Lower Hutt & Chartwell in Hamilton to the Diversified fund managed by Stride Property Ltd – for a combined $549 million.

According to the Australian Financial Review yesterday, McVay is looking at an $A175 million price tag for WestCity, which sits on 5ha across the rail tracks from the former Waitakere City Council chambers. The mall has 3 anchor tenants, cinemas & 130 specialty stores in a net lettable area of 36,144m², and 1492 parking spaces.

Agency director Sam McVay said intensification of the surrounding area would underpin growth, but loosening of development limits under the new unitary plan meant the mall itself could be further developed to 18 levels of apartments.

Earlier stories:
24 February 2016: Lowy says first results vindicate Scentre restructure
27 November 2015: Scentre sells 3 malls to locals, one to go
25 February 2015: Scentre to sell the other 4 NZ malls
7 November 2014: GIC buys into 5 NZ Westfield malls

Attribution: McVay, Australian Financial Review.

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Lowy says first results vindicate Scentre restructure

on Wednesday 24 February 2016 in Gainz, Sectors, Securities – overseas, Westfield

Scentre Group Ltd chair Frank Lowy said yesterday the Westfield mall owner & operator’s strong results for 2015 validated the rationale for creating the reorganised Australia-NZ business.

Mr Lowy, who will retire at the annual meeting in May but will continue to chair the northern hemisphere operation, Westfield Corp, said: “Scentre Group’s pre-eminent portfolio & unique market position have provided a strong operating performance & excellent returns for securityholders since the group was established as a separate entity.”

Scentre made $A2.7 billion net profit (the 2014 figure, a profit of $A6.6 billion, wasn’t comparable because of restructuring). The 2014 profit attributable to continuing operations after tax, before charges & credits relating to the restructure, was $A1.8 billion. In 2015 it rose 52% to $A2.73 billion.

Funds from operations for the 12 months grew by 3.8% to $A1.199 billion (A22.58c/security), which Mr Lowy said would have been 5% if the group hadn’t undertaken a large selldown of assets. The group’s 12-month distribution of A20.9c/security was in line with the forecast.

Chief executive Peter Allen said: “We are very pleased with these results, which highlight the quality of our portfolio and the benefits of curating the right retail mix for our shoppers. The secure cashflows from our shopping centres, together with our accretive development programme, will provide growth in income through the economic cycles.”

In New Zealand, Scentre has $NZ2.4 billion of assets under management out of a total $A42 billion, and the capitalisation rate on the New Zealand assets is much higher – 6.98% versus 5.51% for the Australian malls.

6 of the group’s 40 malls are in New Zealand, only one of the 6 (WestCity at Henderson) now wholly owned after Scentre sold 49% of 5 of them – Albany, Manukau, Newmarket, Riccarton & St Lukes – to Singapore’s sovereign wealth fund, GIC, at the end of 2014. Scentre put its other 4 New Zealand centres on the market and sold 3 in November – Glenfield to Ladstone Holdings Ltd, Queensgate in Lower Hutt & Chartwell in Hamilton to a fund managed by Stride Property Ltd – for a combined $549 million.

The ownership change doesn’t mean Scentre has forgotten New Zealand – Albany, Newmarket & St Lukes are included in its $A3 billion development pipeline.

Mr Allen said the group’s $A1.5 billion of revaluations in 2015 were driven by growth in underlying income, the completion of developments and a firming of capitalisation rates across the portfolio.

At 31 December, Scentre had a strong balance sheet – total assets of $A31.8 billion, a gearing ratio of 33.3% & liquidity of $A3.7 billion.

Comparable specialty sales in the Australian portfolio grew 5.3% for the 12 months, averaging $A10,826/m² for the year. In New Zealand, those sales grew 6.6% to $NZ12,117/m².

Mr Allen said comparable property net operating income increased 2.6% for the 12 months, higher than the forecast range of 2-2.5%, reflecting lower vacancies & additional income streams.

The group is forecasting 3% growth in funds from operations this year.

Earlier stories:
27 November 2015: Scentre sells 3 malls to locals, one to go
25 February 2015: Scentre to sell the other 4 NZ malls
7 November 2014: GIC buys into 5 NZ Westfield malls

Attribution: Company release.

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World property W23Dec15 – West Melbourne deals, Westfield reshapes

on Wednesday 23 December 2015 in Agency, Australia – Victoria, CBRE, Gainz, Market, Neighbourhoods, Overseas, Sectors, Securities – overseas, US, Westfield, World property

Melbourne development site sells
Westfield sells 6 US malls

Melbourne development site sells

A Melbourne apartment development site has been sold to the Asian Pacific Group (Will Deague) for $A35 million at $A9117/m², and 3 adjoining buildings have been sold for $A38.8 million.

The 3839m² site at 83-113 Batman St, West Melbourne, has a permit for 522 apartments in 2 27-level towers, including 33 2-storey lofts, plus retail, designed by Bruce Henderson.

The whole site, known as the Spencer portfolio, contained the historic Sands & McDougall buildings and a warehouse at 355 & 371 Spencer St & 102 Jeffcott St.

Hume Partners (Peter Scanlon) took the development site & 3 buildings to the market through separate CBRE campaigns.

Bennelong Group (Jeff Chapman) had earlier proposed 2 towers of 39 & 29 storeys above a 5-level podium for the whole site, with a gross floor area of 85,000m² and originally containing 749 apartments.

The 1770m² Jeffcott St warehouse & office, on a 920m² site, sold for $A6.1 million.

The CBRE team also said yesterday it had sold 206 Bourke St, on the edge of Bourke St Mall, for $A116.28 million at a 5.75% yield, on behalf of Hiap Hoe Ltd and that it had been bought by unlisted fund manager ISPT, which has $A11 billion of properties under management.

206 Bourke St has a net lettable area of 11,922m² – 9582m² retail, 2340m² office – and an approved planning permit to build a 142-room hotel above the fourth level of the existing development.

Westfield sells 6 US malls

Westfield Corp, owner of the US & UK malls of the former Westfield Group, sold 5 of the US malls this week for $US1.1 billion. It sold another in November to Rouse Properties Inc for $US170 million. The Australia-NZ Westfield portfolio is owned by Scentre Ltd, some now in partnership with Singapore sovereign wealth fund GIC.

The US assets sold are in Connecticut, Washington, and 2 each in California & Illinois, reducing Westfield’s US portfolio to 32 malls. It also has 2 in the UK and has entered a partnership with Gruppo Stilo to develop a centre in Milan, Italy.

Westfield Corp co-chief executives Peter & Steven Lowy said in August: “Our strategy is to create & operate flagship assets in leading markets that deliver great experiences for retailers & consumers. We are focused on innovation and are creating a digital platform to converge with our physical portfolio, in order to connect retailers & consumers both physically & digitally.

“Our capital investment is almost entirely weighted towards our flagship assets, with estimated development yields in the range of 7-8%. Upon completion of these projects, we expect Westfield Corp’s flagship assets will represent 85-90% of the total portfolio and our business will be more evenly weighted between the US & UK/Europe.”

When they announced the northern hemisphere company’s results in August, the Lowy brothers said: “The performance of Westfield’s pre-eminent portfolio remains strong. The benefits of our restructure last year can be seen in the significant progress being made on our $US11.4 billion development programme. This year we expect to commence $US2.5 billion of projects, having already commenced $US1.6 billion of redevelopments to date in 2015.”

Attribution: CBRE, Westfield.
Regular leads: Europe Real Estate, Mingtiandi, Planetizen

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Scentre restructure leads to Lynch’s exit

on Thursday 5 November 2015 in Gainz, Sectors, Securities – overseas, Westfield
Justin Lynch.

Justin Lynch.

The structural change at Westfield mall owner & operator Scentre Group Ltd has cost New Zealand business director Justin Lynch his job, and he left the company at the end of September.

“I was in charge here for 8 years, in the country for 11, starting as head of development,” Mr Lynch said today.

Scentre was created last year as owner-operator of Westfield malls in Australia & New Zealand. Before that, Westfield Group had owned malls and ran development, and the Westfield Retail Trust held a stake in the assets and ran operations.

The Westfield NZ business was a standalone operation with 2 management platforms, but after the restructure Scentre decided to run everything from Sydney and New Zealand was treated like the Australian states, with one management platform.

Mr Lynch’s management career in real estate & construction stretches back 30 years to his appointment by Concrete Constructions as design & contracts manager for the Hotel Nikko in Sydney. Since then he’s worked for Lend Lease Corp, Prudential Portfolio Managers Australia, Colonial First State Global Asset Management and, since 2000, Westfield.

“I’ve thoroughly enjoyed New Zealand,” he said. “If something else comes up here I may stay.”

Scentre has named Linda Trainer as New Zealand national regional manager after 8 years as shopping centres & marketing general manager. Ms Trainer joined Westfield’s forerunner as portfolio owner, St Lukes Group Ltd, in 1993 as centre manager at the Pakuranga mall.

Frank Lowy.

Frank Lowy.

Another member of the Westfield group – chairman Frank Lowy – is also on the move. He announced a fortnight ago that he’d retire as Scentre chair at the annual meeting next May, when deputy chair Brian Schwartz will succeed him. Mr Lowy said he considered it was the right time to announce his retirement, given the group had successfully completed its establishment phase.

Frank Lowy will continue to chair Westfield Corp, which took over the international business outside Australian & New Zealand in last year’s restructure. One of his sons, Steven, remains a non-executive director of Scentre and he & his brother Peter are directors & co-chief executives of Westfield Corp.

Scentre’s third-quarter operational update on Wednesday showed its New Zealand malls lifted their performance in terms of average specialty retail sales more than the Australia malls did – up 5.8% in Australia to $A10,666/m² ($NZ11,528) for the 9 months to 30 September, but up 6.5% in New Zealand to $NZ10,534.

The group still owns malls in New Zealand that it doesn’t want. After it sold 49% of 5 malls – Albany, Manukau, Newmarket, Riccarton & St Lukes – to Singapore’s sovereign wealth fund, GIC, at the end of last year, Scentre put its remaining 4 New Zealand centres on the market – Glenfield & WestCity in Auckland, Chartwell in Hamilton and Queensgate in Lower Hutt.

Attribution: Company releases, phone interview.

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Scentre to sell the other 4 NZ malls

on Wednesday 25 February 2015 in Gainz, Sectors, Securities – overseas, Westfield

Scentre Group, operator of the Westfield malls in Australia & New Zealand, has begun the process of selling the 4 New Zealand shopping centres it hadn’t already sold 49% of.

Scentre sold 49% of the other 5 centres – Albany, Manukau, Newmarket, Riccarton & St Lukes – to Singapore’s sovereign wealth fund, GIC, in November. That sale’s due to settle by the end of March, giving Scentre proceeds of $1.036 billion.

The 4 now going on the market are Glenfield & WestCity in Auckland, Chartwell in Hamilton and Queensgate in Lower Hutt.

Scentre was created last year from the restructure of Westfield Retail Trust & Westfield Group. Scentre Group took the Australian & New Zealand business and Westfield Corp took the international business outside Australian & New Zealand.

One big change from the trust to Scentre is that Scentre is internally managed. A second is that Scentre is no longer a pure landlord acquiring assets – once developed – from its manager, Westfield Group. If it’s to develop new stock, it will have to undertake that itself.

Apart from the cursory mention of a sales process which Scentre said it had already announced, the New Zealand malls didn’t feature strongly in the group’s annual results announcement.

The $2 billion New Zealand portfolio lifted specialty store sales by 2.3% to $8765/m² in 2014 ($8542) after 0.1% & 0.4% rises in the previous 2 years. Specialty store rental growth also picked up from rises of 0.6% & 0.4% in the previous 2 years, rising by 1% in 2014 to $1139/m² ($1128).

By comparison, the Australian portfolio’s performance was much stronger. Australian sales rose 3.6% and rent 2.4% last year.

A number of the financial report lines were incomparable because of the differences between the 2013 & 2014 entities, such as the increase in net profit after tax from $A1.6 billion to $A6.6 billion.

However, earnings/share seemed comparable, and showed a decline. Basic earnings/share were reported as A5.19c/share for 2014 (A7.01c in 2013) and diluted earnings A5.17c (A6.97c). Gearing at 31 December 2014 was 34.9%.

The group owns interests in 47 Westfield centres and has assets under management of $A41 billion.

Attribution: Company release.

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Propbd on Q W25Feb15 – Downtown deal, Precinct result, rights issue, apartment sales, Metlifecare & Summerset up, panel talks flexibility, ex-MUL rezoning

on Wednesday 25 February 2015 in Apartments, CBD, CBD and fringe, Gainz, Government programmes, Infrastructure, Land use, Market, Metlifecare, Neighbourhoods, North-west, Planning, Precinct Properties, Queen St, Rail, Residential, Sectors, Securities – NZ, Securities – overseas, Spatial plan, Summerset, Westfield, Whenuapai

Downtown deal struck
Precinct ebit up but npat down
Precinct 1:7 rights issue
3 apartments sell at Bayleys
Metlifecare lifts profits
Summerset grows assets & returns
Scentre to sell the other 4 NZ malls
Unitary plan panel talks flexibility
First special housing area gets rezoning & consent

2.45pm:
As the days merge….

One of those days when my report on yesterday’s news – not quite finished this morning – was interrupted by a call about the city rail link & Precinct Properties. That entailed a rapid drive to town and my arrival inevitably at the end of a briefing.

Since then I’ve been out & about, through a couple of auction rooms and nearly completed the bundle of stories lining up for the newsletter. In the meantime, Propbd on Q looks the best option to keep at least some of you informed on a wide range of stories….

Downtown deal struck

The Downtown land deal has been struck conditionally between Auckland Council & Precinct Properties NZ Ltd, enabling a start on the city rail link tunnel mid-year so it’s constructed at the same time as Precinct builds its office tower.

Precinct ebit up but npat down

Precinct also announced its half-year result this morning – net operating income up $3.3 million to $35.3 million (up from 3.1c to 3.33c/share), but net profit after tax down $9.9 million to $31.6 million. The company went from an unrealised interest rate swaps gain of $10.6 million in 2013 to a loss of $5.3 million for the latest period, and from a deferred tax expense of $3.1 million to a benefit of $1.4 million.

Precinct 1:7 rights issue

Precinct Properties also announced this morning that it would raise $174.1 million through a 1:7 accelerated entitlement offer at $1.15/new share. The offer will be underwritten (excluding management company Haumi Co Ltd’s share).

The institutional offer will be held over the next 2 days, with settlement & allotment on Wednesday 4 March. The retail offer to eligible shareholders will open on Monday 2 March and close on Wednesday 18 March.

3 apartments sell at Bayleys

3 of the 8 cbd apartments taken to auction at Bayleys today were sold under the hammer. Auction results:

Waldorf Celestion, 19 Anzac Avenue, unit 204, sold for $375,000, sales agents Cheryl Regan & Harry Cheng
Carlisle, 7 Emily Place, unit 31, sold for $805,000, Diane Jackson & Julie Prince
Scene 3, 30 Beach Rd, unit 906, leasehold, no bid, James Mairs & Aled Luffman
Quest on Eden, 7 Eden Crescent, unit 301, sold for $415,000, Dave Hamlyn
Avenue 105, 105 Anzac Avenue, unit 1D, passed in at $315,000, Diane Jackson & Julie Prince
Spencer on Byron 9-17 Byron Avenue, unit 1703, passed in at $90,000, James Mairs & Aled Luffman
Heritage Farmers, 35 Hobson St, unit 436, passed in at $350,000, Dave Hamlyn
Spencer on Byron 9-17 Byron Avenue, unit 1906, passed in at $100,000, James Mairs & Aled Luffman
Forte, 37 Symonds St, unit 101, auction postponed until Wednesday 4 March, James Mairs & Aled Luffman

Metlifecare lifts profits

Retirement village owner, developer & operator Metlifecare Ltd Lifted net profit after tax by 48% to $39.7 million for the December half, and underlying profit by 70% to $26 million. The 29 sales & 202 resales generated gross cashflows of $89.1 million, up 28%. Gross cashflows from new sales doubled to $16.1 million, and realised resale gains rose 64% to $14.1 million.

Summerset grows assets & returns

Retirement village owner, developer & operator Summerset Group Holdings Ltd lifted its assets by 23% to $1 billion in 2014, and grew the returns on its portfolio substantially.

It lifted net operating cashflow by 25% to $$110.4 million, net profit after tax by 58% to $54.2 million and underlying profit by 10% to $24.4 million. Sales of occupation rights rose 14%, and the company increased delivery of retirement units by 25% to 261 units.

Scentre to sell the other 4 NZ malls

Australasian mall owner Scentre Group has begun the process of selling the 4 New Zealand shopping centres it hadn’t already sold 49% of [correction: the sentence originally read 51%, which is the proportion Scentre kept, and also said Scentre was selling 5 malls now, when it’s selling 4].

Scentre sold 49% of the other 5 centres to Singapore’s sovereign wealth fund, GIC, in November. That sale’s due to settle by the end of March, giving Scentre proceeds of $1.036 billion.

The $2 billion New Zealand portfolio lifted specialty store sales by 2.3% to $8765/m² in 2014 ($8542) after 0.1% & 0.4% rises in the previous 2 years. Speciality store rental growth also picked up rises of 0.6% & 0.4% in the previous 2 years, rising by 1% in 2014 to $1139/m² ($1128).

By comparison, the Australian portfolio’s performance was much stronger. Australian sales rose 3.6% and rent 2.4% last year.

Unitary plan panel talks flexibility

The independent panel hearing submissions on the Auckland unitary plan has told submitters the council’s proposed provisions for the new rural:urban boundary “may be overly stringent” and that a more flexible boundary would be better.

The panel made its comment in interim guidance released on Monday on the section of the plan on urban growth.

The panel’s interim guidance message, issued a short time before the urban growth one, said the unitary plan should provide for rural lifestyle subdivision: “It may be discouraged or constrained, but should not be effectively prevented.”

Along with those 2 strong hints at more flexibility when the panel makes its recommendation to the council next year, the panel stated as its first point that the objective of a quality compact urban city was appropriate for a region expecting strong population growth to continue.

The panel decided to issue interim guidance on regional policy statement topics ahead of hearings on the regional & district plans.

Earlier story:
22 February 2015: Unitary plan panel to give interim guidance next month

Links: Panel minute
Interim guidance, urban growth
Interim guidance, rural

First special housing area gets rezoning & consent

The first special housing area in Auckland to get consent for development is a 31.4ha site at Whenuapai, where commissioners have approved rezoning from future urban under the proposed unitary plan to mixed housing urban, and the development of 168 residential lots plus 14 “super” lots.

The land is outside the metropolitan urban boundary, with a zoning of countryside living under the operative Waitakere district plan, which most likely would have prevented this development. Under the proposed unitary plan, it would fall within the rural:urban boundary, and would have been zoned future urban without the accelerated process of the council-government housing accord signed in 2013.

The site will be developed by Oyster Capital Ltd (David Wilson) as the first 4 of a total 8 stages. The land is at 143-149 Totara Rd, 32 & 36 Brigham Creek Rd & 4-8 Dale Rd, Whenuapai. Whenuapai Village and the RNZAF Whenuapai Base are east of it.

Links: Hearing report
Oyster Capital

Attribution: Company release, unitary plan panel guidance, rail link discussions, commissioners’ decision.

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GIC buys into 5 NZ Westfield malls

on Friday 7 November 2014 in Gainz, Sectors, Securities – overseas, Westfield

Singapore’s sovereign wealth fund, GIC, has followed up a joint venture with Goodman Property Trust, announced on Tuesday, by signing a similar joint venture on Thursday to acquire 49% of 5 New Zealand malls from Westfield operator Scentre Group.

The 5 malls – Albany, Manukau, Newmarket, Riccarton & St Lukes – have a combined gross value of $2.1 billion.

The 4 Westfield malls excluded from the deal are Glenfield & WestCity in Auckland, Chartwell in Hamilton and Queensgate in Lower Hutt [incorrectly referred to as Eastgate in the original version of this article].

While Goodman said its joint venture was GIC’s first transaction in New Zealand, the Singaporean fund has been a Westfield partner in Australia for 7 years. Joint ventures represent 28% ($A10.2 billion) of Scentre’s $A39.7 billion mall portfolio in Australia.

Scentre chief executive Peter Allen said yesterday: “A strategic focus of Scentre Group is the introduction of joint venture partners into some of our wholly owned assets, with the capital proceeds available for redeployment into our development pipeline & the repayment of debt.”

The transaction represented a 4% premium to the book value of the 5 New Zealand malls as at 30 June and an effective implied cap rate of 6.8%.

Scentre will retain a 51% interest in all 5 malls and will continue to provide property management, development, design & construction services.

The transaction remains subject to Overseas Investment Office approval.

Scentre Group has interests in & operates 47 Westfield malls in Australia & New Zealand, containing 12,500 retail outlets, has a total $A39.4 billion of assets under management and has 2000 staff.

It will receive proceeds of $NZ1.036 billion from the transaction, which will initially be applied to repay debt. Closing is expected by 31 December.

Mr Allen said the transaction wasn’t expected to materially impact the group’s funds from operations, but its pro forma gearing would be cut from 37.6% at 30 June to 35.5%.

Performance figures the company gave in its third-quarter result on Wednesday were:

Australia: specialty retail sales $A10,105/m², specialty retail growth 3.6% for the 12 months to 30 September, average specialty store rent $A1551/m², growth year on year 1.9%
New Zealand: sales $NZ8685, growth 1.7%, rent $NZ1140/m², growth 0.7%.

Scentre said in the results announcement the group was undertaking predevelopment activity on $A3 billion (its share on Wednesday $A2 billion) of development opportunities, and it expected $A1.5-2 billion of developments to start over the next 3 years.

These developments included Albany, Newmarket & St Lukes in New Zealand and 12 Australian malls.

Attribution: Company release.

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Propbd on Q F20June14 – Westfield wins this time, M&C restructure approved

on Friday 20 June 2014 in Cut fresh, Gainz, Market, Millennium and Copthorne, propbd on Q, Sectors, Securities – NZ, Securities – overseas, Westfield

4.57pm:
Westfield Retail Trust votes – just – for restructure

Westfield Retail Trust securityholders approved the proposed restructure of the trust & Westfield Group at the second attempt today.

On 4 proposals requiring 75% support, securityholders voted 76.09% in favour. There were 19-20 million abstentions on each vote, but including them in the negative would have not quite swung the decision – it would still have been carried by about 0.23% over the 75% requirement.

Westfield Group gave 98% support to the restructure on 29 May. However, the trust’s meeting that afternoon was adjourned before the vote was taken, when proxies indicated the proposal might be defeated.

Westfield will be split next week into 2 new, independent companies – Scentre Group, which will own & operate the Australian & New Zealand business, and Westfield Corp, which will own & operate the international business outside Australian & New Zealand.

One big change from the trust to Scentre is that Scentre will be internally managed. A second is that Scentre will no longer be a pure landlord, acquiring assets – once developed – from its manager, Westfield Group. If it’s to develop new stock, it will have to undertake that itself.

Only a handful vote against Millennium & Copthorne restructure

Millennium & Copthorne NZ Ltd shareholders voted solidly in favour yesterday of the restructure which will see the company back concentrating on its New Zealand hotel business, and selling down its 31.4% stake in a Singapore-registered Chinese developer to individual M&C shareholders.

0.15% of the ordinary shares were voted against the restructure resolution, and 0.05% of the preference shares.

The parent Hong Leong Group of Singapore controls Millennium & Copthorne NZ through London-listed Millennium & Copthorne plc, which owns 70.22% of the New Zealand company’s ordinary shares and 85.18% of its preference shares, all of which were able to be voted yesterday. A 75% majority was required in the vote by each class of share.

Attribution: Company releases.

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