SYDNEY (Reuters) - Australian shopping mall owner Westfield Group WDC.AX is selling a stake in a portfolio of 12 U.S. malls to a Canadian pension fund for about $1.85 billion, freeing up cash to fund a share buyback and to expand its global reach.
Westfield, the No.2 mall owner globally, said on Wednesday it was forming a $4.8 billion joint venture with Canada Pension Plan Investment Board (CPPIB) and announced a buyback of 10 percent of its stock, sending its shares up 6 percent to a seven-month peak.
Westfield also said it had sold its interest in three shopping centres in the United Kingdom for A$240 million ($256 million).
The deals are the latest move by Westfield to reinvent itself after spinning off stakes in its Australian malls in 2010 to free up capital and earn greater returns from property management and higher yielding mall development.
Westfield has also ventured into new markets Brazil and Italy in a bid to find growth outside of Australia and the United States, while it looks to sell less productive shopping malls.
Under the U.S. joint venture, CPPIB will pay Westfield about $1.85 billion become a 45 percent partner in a portfolio of 12 malls that Westfield owns.
The deal represents the largest real estate investment ever for CPPIB, one of the world's largest private equity investors.
Westfield operates 118 shopping malls in Australia, New Zealand, the United States, Britain and Brazil.
"We are pursuing developments and acquisition opportunities around the globe," Peter Lowy, Westfield's Co-CEO told a teleconference.
"We have the ability and the balance sheet and the capital to be able to still pursue these opportunities while sending capital back to shareholders," he added.
As of December, Westfield held A$5.3 billion of liquidity through bank facilities and cash, putting its gearing level at 36.4 percent.
For 2011, the company reported funds from operations (FFO), an industry measure of core operating profits, of A$1.49 billion, in line with an average estimate of A$1.48 billion by five analysts.
This was the first time Westfield reported a full-year FFO, widely used by its global peers.
Despite a challenging retail environment at home and abroad, Westfield said it expected about 68 cents per share of FFO for 2012, compared with its 2011 result of 64.8 cents per share.
Westfield expects a pick-up in the U.S. retail market, projecting 2 to 3 percent growth in net operating income for its U.S. shopping malls this year.
CPPIB was part of the world's second-largest private equity transaction in 2011, the C$6.2 billion ($6.2 billion) acquisition of Kinetic Concepts, a U.S. maker of medical devices used in wound care. It marked the third consecutive year that CPPIB has participated in one of the world's largest deals.
Deep-pocketed Canadian pension funds become the world's most active acquirers in the global economic crisis in 2008/09, targeting real estate and infrastructure in a sustained push in emerging and developed market economies.
Additional reporting by Pawel Jordan in TORONTO; Editing by Lincoln Feast and Richard Pullin