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Westfield Sells Five US Malls for $1.1B

Australian mall operator Westfield Corp. on Monday announced that it sold five of its U.S. shopping centers for $1.1 billion in a bid to reduce gearing and help fund a development program.

“Our strategic focus is to create and operate flagship assets in leading markets and divest non-core assets,” Peter Lowy, co-CEO, said in a statement, calling it a “significant milestone” in the company’s divestment strategy.

The five regional malls—in Connecticut, Illinois, California and Washington—have more than six million square feet in retail space combined and feature an average occupancy of more than 97 percent.

The purchaser is a newly formed joint venture comprising Centennial Real Estate, Montgomery Street Partners (an affiliate of Blum Capital Partners) and USAA Real Estate. Westfield will retain a 20 percent stake in the five shopping centers.

Combined with the November sale of the Carlsbad mall in Carlsbad, California, Westfield has about $1 billion in net proceeds, which it intends to use to reduce gearing (debt as a percentage of equity capital) by about 3 percent, as well as be used to fund an $11.4 billion development program.

The transaction, which closed Friday, will also dilute funds from operations by around 3.5 cents per security.

“Our investment program is almost entirely weighted toward our flagship assets with estimated development yields in the range of 7-8 percent and is expected to create significant long-term value and earnings growth for security holders,” Lowy continued.

Centennial plans to evaluate each shopping center to ensure that it’s meeting the needs of each local market and implement marketing and leasing efforts to offer a mix of retail, dining, entertainment and special events.

“A mall can’t just be about shopping anymore,” Steven Levin, Centennial’s chief executive officer, said. “Understanding the needs of your market is the cornerstone of creating a one of a kind experience that guests can’t get online or anywhere else.”