Westfield Group, the world’s largest mall operator by assets, plans to build one of Europe’s biggest shopping malls in the fashion center of Milan, its second foray into a new market in a week.
The Sydney-based group will invest 115 million euro ($163.5 million) in two stages to buy a 50 percent stake in the site, which it plans to develop with Italian firm Gruppo Stilo, it said in a statement to the Australian stock exchange. Westfield on Aug. 10 said it would buy a 50 percent stake in Sao Paulo-based mall owner Almeida Junior Shopping Centers SA.
The move into continental Europe and South America mark Westfield’s first purchases beyond the U.S., U.K., New Zealand and Australia. Westfield, which spun off the Westfield Retail Trust to own half of its Australian and New Zealand shopping centers last year, said at the time the move would give the group more scope to seek out new opportunities.
“They were more constrained previously because a lot of their shareholders wanted them to remain focused domestically,” said John Kim, an analyst at CLSA Asia-Pacific Markets in Sydney, who has a “buy” recommendation on the stock. “The spinoff of Westfield Retail gave investors the pure-play Australia investment they wanted and allowed the company to explore other markets.”
Westfield shares fell 0.1 percent to A$7.55 at the 4.10 p.m. close in Sydney, after earlier climbing as much as 1.7 percent.
“Milan is the dominant retail city in Italy for luxury brands and is the headquarters of many major retail chains including Giorgio Armani, Prada and Versace,” Steven Lowy, co-chief executive of the company, said in the statement. “This opportunity leverages the capabilities we have created in the United Kingdom and in particular Westfield London and the soon to be opened Stratford City.”
The company’s entry into Italy comes amid attempts by the country to accelerate austerity measures to balance its budget and escape the debt crisis threatening to engulf the region.
Finance Minister Giulio Tremonti told lawmakers yesterday Italy will seek to ease labor-market laws, sell local services and possibly raise the capital-gains tax to eliminate the budget deficit and secure European Central Bank support for its bonds after Italian borrowing costs reached an euro-era high last week.
“The long-dated nature of Westfield’s development will make shorter-term European issues less relevant, although they could impact on Italian consumer sentiment and associated demand from retailers,” Simon Wheatley, executive director for real estate investment research at Goldman Sachs & Partners Australia Pty, said in an e-mailed note.
World Trade Center
This week’s developments follow an agreement last month to invest $612.5 million to develop the retail part of the World Trade Center in New York in a venture with the Port Authority of New York and New Jersey, even as it seeks to sell some properties in the U.S.
The 170,000 square-meter (1.8 million square-foot) project is expected to be completed by the Milan World Expo in 2015, it said in today’s statement.
The mall will be called Westfield Milan and will be managed by Westfield with Gruppo Stilo, it said.