Westfield and AMP -- which have one of Australia's most enduring corporate partnerships in shopping centres, spanning half a century -- have agreed to a divorce and will divvy up assets worth about $6 billion.
Sources told The Weekend Australian that the terms of an asset swap involving at least six of Australia's largest shopping centres, five of which were currently managed by AMP Capital Investors, had been agreed.
It is understood that the deal will see AMP take over the stakes that it does not own in three shopping centres and Westfield will do the same with the other three.
A person familiar with the terms of the transaction said AMP Capital would take over the stakes in Macquarie Centre (55 per cent) in Sydney's North Ryde; in Pacific Fair (44 per cent) on the Gold Coast; and Booragoon (25 per cent) in Perth. The assets were valued on the books at December 31 at $1.1bn.
In return, Westfield will take full ownership of Warringah Mall on Sydney's northern beaches, Knox City in Melbourne and Mount Gravatt in Brisbane with a collective carrying value of $1.2bn.
Westfield and its offshoot Westfield Retail Trust already own 12.5 per cent each in Warringah Mall, 15 per cent each in Knox City and 37.5 per cent each in Mount Gravatt.
Westfield will also buy out the management rights for Warringah Mall for about $15m, according to sources. It is also understood that, as a sweetener to Westfield, AMP will offer the redevelopment contracts for Gold Coast's Pacific Fair and North Ryde's Macquarie Centre.
Both AMP Capital Investors and Westfield -- which collectively own and manage assets worth $57.7bn in Australia -- declined to comment.
The AMP property assets are held in the AMP Shopping Centre Fund and AMP Core Property Funds, whose investors include blue-chip superannuation funds in Australia.
"AMP has kept us well informed. A deal is getting pretty close. I would say an announcement could be made inside three months," said an investor who is party to the negotiation.
The break-up between AMP and Westfield came as relations reached a critical point a year ago, in a dispute that has been characterised as a clash of corporate cultures over the style of management and differences over development of the jointly owned properties.
"AMP is a conservative, slow moving organisation. Westfield is aggressive, fast-moving and innovative in its approach," one fund manager said.
A source said Westfield previously bought out AMP's Sydney interests in Westfield Parramatta, Bondi Junction and Centrepoint in the city because they could not agree on the redevelopment plans for these centres.
"Westfield wanted to expand and redevelop them but AMP would say it did not think the projects were feasible. In the end, Westfield bought out AMP's interests in these centres," he said.
Westfield Sydney, Westfield Bondi Junction and Westfield Parramatta now rank as some of Australia's highest-earning shopping centres.
Another person said the nub of the issue was that Westfield wanted 100 per cent of the management rights of jointly owned centres.
"It will not be happy unless it has a 100 per cent management right," an industry insider said.
"So we said to AMP, let's get the management right issue sorted out and if the best way to do this is an asset swap, let's do it and resolve the problem in a single hit.
"So AMP has taken this opportunity to sort their differences once and for all."
An investor said: "We know that there will be capital gains tax, transaction costs and stamp duty involved in this transaction, but we are prepared to wear it."
The Australian first reported in January that AMP Capital's investors were concerned that the differences were having an impact on the value and performance of their shopping centres.
"A classic example is Pacific Fair on the Gold Coast. It was a premium shopping centre for a long time. Today, it is hardly one of the top 10 centres," a property executive said.
In a recent note, David Lloyd, a property analyst with the Commonwealth Bank, said sales per square metre at Pacific Fair fell from $10,663 in December 2006 to $8971 at the end of last year.
"The stake held by AMP Capital in Pacific Fair is actually 75 per cent-owned by AMP Life. If it was an outside investor, he would be screaming by now," an insider said.
Mr Lloyd said speciality sales per square metre in AMP-managed centres had been dropping -- against Westfield-managed centres -- since December 2008.
Several sources said Westfield's attitude was, "if you don't agree with us, we are not going to spend any capex (capital expenditure)". The on-off $350m facelift for Macquarie Centre in Sydney's north is an often quoted example.
The UBS property team wrote in a recent note that the long-term value of these assets would only be maximised if the joint venture was unwound and ownership of assets split.
A fund manager agreed. "It is not surprising that Westfield would choose to apply its development capital on its own centres -- it is the best use of its resources," he said. "But this shows a misalignment of interest. The joint venture is not working."
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