Westfield’s newly created Australasian property arm Scentre Group had a rough first day on the bourse while investors who had opposed its creation flagged that they may seek to challenge the former Westfield Retail Trust independent directors who now sit on the new group’s board.
Shares in the Australia and New Zealand shopping centre giant slumped after opening at $3.21 and fell during the day to close at $3.08, with analysts warning the register faced a period of heavy turnover.
There have been suggestions that superannuation giant UniSuper, which opposed Scentre’s formation, might not be committed for the long term. The group has a stake of more than 4 per cent, putting its holding at about the same level as the Lowy family’s 4.2 per cent interest, worth almost $700 million each.
Both the superannuation fund and the founding family have emphasised their commitment to the group, which controls $28.5 billion of shopping centres across Australia and New Zealand. But UniSuper is thought to retain concerns about Scentre’s gearing levels.
Australian investors are also worried that if the other new company created out of the restructure, Westfield Corp, shifts its listing to the US it would be in Delaware, like many US real estate investment trusts.
Westfield Corp co-chief executives Steven and Peter Lowy have stressed that no decisions have been made and any move will be considered over the next 18 months, with a presence on the local exchange to be kept.
Ownership Matters co-founder Martin Lawrence said being located in Delaware would mean the Lowy family, which has an 8.2 per cent stake in Westfield Corp, could rely on “poison pill” provisions in Delware law which ensure a rival buyer can’t go over 20 per cent in the company and the board could change the constitution of the company without needing shareholder approval.
Westfield Corp, whose shares opened at $6.85 but soared to close at $7.05, appears to be benefiting from the appeal it offers to potential suitors.
New York-based BMO Capital Markets managing director, equity research, real estate, Paul Adornato, said: “There’s no question that a very long list of US REITs, institutional investors and private equity firms would love to buy all or part of Westfield’s US mall portfolio.”
However, Westfield’s Peter Lowy told The Australian last week that the family would not have reorganised the $70bn Westfield property empire simply to exit, saying “the speculation doesn’t make any sense, especially to us”.
The contrasting fortunes of the two new groups may add to the pressure on the five former WRT independent directors who shifted on to the new Scentre board.
Phoenix Portfolio managing director Stuart Cartledge said “there will be a compelling reason not to support any of the ‘gang of five’ as we simply do not believe they represented the best interests of unitholders in the most recent transaction”.
One supporter of Scentre indicated that the board may be overhauled. “We would like to see the board refreshed over the next two to three years befitting of the REIT’s status as Australasia’s premier real estate platform,” he said.
Former WRT chairman and Scentre director Dick Warburton defended his board, saying “I think we’ve done a pretty bloody good job”. He was unperturbed by the prospect of moves against directors.