One of the most experienced property boardroom veterans and the former boss of Centro, Glenn Rufrano has backed calls for an overhaul of Westfield Retail Trust should its parent company’s $70 billion restructure proposal fail to secure enough approval to pass.
The New York-based property executive, who helped rescue the troubled Australian shopping centre empire Centro before it was renamed Federation Centres, said the company’s alternative plan should its deal not secure shareholder support was problematic.
Westfield Group wants to sell its Australian and New Zealand shopping centre stakes and management rights to its listed satellite WRT, which owned the remaining passive interests, creating a new locally listed company called Scentre Group.
In the event of failing to win support, the parent company would embark on “Plan B” — a spin-off of its Australasian assets into a separately listed trust trading on the Australian Securities Exchange.
If that came to pass, Mr Rufrano said, it would be the only case he knew of globally where two listed companies owned equal shares in the same properties, with one entity also holding the management rights. They would be competing with each other for shareholders’ money.
Should the situation emerge, regardless of whether the WRT board acted independently or not, given that it was selected by Westfield, there would still be perceived conflicts of interest.
“Those perceived conflicts would be terrible,” he said.
However, he believed the two trusts would ultimately merge at a later date, regardless of the vote outcome. “I ultimately bet that they will combine the companies,” he said. “I can’t think of a comparable (situation) around the world,’’ he said, referring to two sides of the same real estate assets trading in that format.
A vote on the Scentre proposal last month was deferred until June 20, and based on the proxy votes received at the time, the deal lacked enough support to pass.
Some WRT shareholders, predominantly UniSuper, are opposing the proposition, arguing the price for the Westfield management rights they are being asked to pay is too expensive.
Despite Mr Rufrano’s views, WRT has maintained the vote would most likely provide the only opportunity for it to merge with Westfield’s Australian and New Zealand side of the business and has argued that there would be negative consequences for shareholders should the deal not pass.
Mr Rufrano is now chairman and chief executive of US-based O’Connor Capital Partners, which jointly owns six shopping malls in Florida with Westfield. He was chief executive of Centro from 2008 to 2010 and was credited with securing a multi-billion-dollar restructure deal for the company that prevented its collapse.
Mr Rufrano said the closest comparison in the US to what was happening at Westfield involved unlisted property funds owned by retail investors, where many headed to the public market and there was opposition to the amount being paid for the management rights.
“The problem now is that many of those trusts are becoming public, and when they become public you go through a similar process to what the Lowys are going through where they have to be self-administered.
“There is a cost to being self-administered, buying the manager, and so we have had a number of those type of issues over the last 12 to 18 months.”
The highest-profile example involved American Realty Capital Properties, where the management has attracted shareholder criticism.
Westfield declined to comment.