Westfield Group (ASX: WDC) and its affiliate Westfield Retail Trust (ASX: WRT) have decided to exit from the $740 million Karrinyup Shopping Centre in Perth, after just days ago being cleared to take full control of the centre by the competition watchdog.
The pair owned a one-third stake in the promising mall and had been gunning to take over the remaining two thirds from UniSuper in order to expand their exposure to the wealthy northern suburbs of Perth. The agreement, struck just days ago, with the Australian Competition and Consumer Commission (ACCC) required that, should Westfield wish to take full ownership of Karrinyup, they must sell their nearby Innaloo shopping centre so as to not compromise local levels of competition.
Instead, the pair will sell their stake in Karrinyup to UniSuper for $246.6 million in what has been established as one of the largest shopping centre transactions so far this year. AMP Capital Shopping Centres will retain its management position of the centre.
The Australian quoted UniSuper head of property and private markets Kent Robbins as saying "It's an excellent asset for a long-term investor like UniSuper and we are delighted with the outcome", whereby the resolution between the two parties would allow for the centre to be "developed to its full potential."
As it stands, Karrinyup boasts a gross lettable area of 59,000 square metres and is home to David Jones, Myer, Big W and Woolworths stores. The centre had a turnover of $11,500 per square metre in the year to June and represented one of Westfield's top 10 performing assets in its Australian portfolio.
In addition to the Karrinyup news, it was also announced that a new Charter Hall (ASX: CHC) managed entity has entered into a put option agreement to acquire Innaloo for a contract price of $255 million. Should the put option be exercised by Westfield, the Innaloo properties would be held within the newly established unlisted wholesale trust, RP3. This would be 85% owned by a global institutional partner whilst the remaining 15% would be owned by Charter Hall Group.
Foolish takeaway
Westfield's decision certainly came as a surprise, given that it has fought so hard for the right to take full control of the centre whilst also retaining the rights to Innaloo. Regardless, the property group will continue to strengthen its asset portfolio by investing in top performing assets and divesting in those which it does not believe fits its global strategy.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.
