SYDNEY-A senior analyst has predicted that Westfield Group could spin off some of its assets into third-party management fund to free up capital for its development program. "Given the positive comments at its first-quarter briefing, we believe Westfield is now more likely to establish and grow third-party funds management over the near term [potentially within six months]," UBS analyst Kim Wright predicted in a client briefing note.
Westfield has launched a massive redevelopment program of its shopping centers in Australia, New Zealand, the United States and the United Kingdom. The group currently has 19 projects under way at a estimated cost of A$7 billion (US$5.3 billion), with Westfield's share at $4.8 billion (US$3.6 billion).
"We believe an interesting strategy might be to sell some more mature, lower-yielding assets into Carindale Property Trust, a single-asset trust managed by Westfield, effectively creating a low-risk, pure retail trust," Wright said. She added said the rate that the assets would be sold down could match that of its development pipeline, at about A$2 billion (US$1.5 billion) per year. This would ensure that Westfield would still retain a large and flexible balance sheet.
The company is clearly looking to raise capital to fund development. Earlier this month, it announced it was selling eight non-strategic assets in the US, with seven centers going into a fund managed by Centro Properties Group. Westfield would retain a 5% stake.
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