Major fund manager Antares Equities expects Westfield Corporation will sell its second-tier malls in the US in what would be a second major restructure of the group born out of last year’s painful demerger.
Brett McNeill, a fund manager at Antares Equities which has $32 billion in funds under management, said in the group’s fourth quarter update to investors that a further restructure was likely.
“The portfolio has now been split into ‘flagship’ and ‘regional’ (malls) which has led us to believe that a further rationalisation of the portfolio is likely, possibly in the form of a major sale of ‘regional’ assets.”
Westfield owns 23 regional malls in the US that are together valued at $US8.2bn ($10.3bn).
A split would leave Westfield with a $US18.3bn portfolio of top-tier mega malls including New York’s World Trade Centre development, Westfield London and Westfield Stratford in Britain and a development in Milan that is set to become Europe’s second largest shopping mall when complete.
Westfield sparked speculation in its third quarter update that was released in November by reorganising the way it reported earnings from its business into flagship and regional malls.
Previously, Westfield has reported on a geographic basis.
Another top fund manager who declined to be named, also said they expected the portfolio to be sold or spun off.
“I’m not sure how soon it will happen, though. The company has been managing their capital very well and doesn’t need to do it,” the fund manager said.
Analysts at Macquarie say Westfield will pursue another demerger with appetite for its second-tier malls among American buyers expected to be very strong. “The motivation — create a pre-eminent flagship portfolio,” Macquarie analyst Paul Checchin said in a note to clients last year when he first floated the idea of a split.
“We believe the Lowy family exposure would be concentrated in the flagship portfolio, opening the possibility for corporate activity in the regional portfolio.”
Mr McNeill said it was significant that the Lowy Family increased their stake in Westfield in October to 9.5 per cent from 8.4 per cent previously.
“We took this vote of confidence from the management team as a very positive sign for Westfield’s future prospects.”
He said both Westfield and its Australian spin-off Scentre had performed “extremely well” since the split with Westfield’s shares up 28 per cent over the period between June 25 and December 31 and Scentre up 13.6 per cent over the same period. Westfield declined to comment. Its shares closed up 7c to $9.88 yesterday.
This article first appeared in The Australian and is reproduced here with permission.