Lend Lease rushes Prussia sale: Aussie construction company expects to walk away with a $US100m profit


LEND Lease has agreed to sell its stake in one of the largest shopping centres in the US to the Morgan Stanley Prime Property Fund in a deal that values the asset at $US1.25 billion ($1.18bn).

Lend Lease has a 50 per cent interest in the King of Prussia shopping mall, northwest of Philadelphia, and will receive $US545 million ($520m) from the transaction after accounting for the asset level debt.

The remainder is held by Kravco Simon, a business co-owned by the US-based Simon Property Group.

Australia’s largest construction company expects to book a profit on the sale of about $US100m, net of tax and other costs, after last valuing its interest in the property at $US354.8m in December. The deal equates to a yield of about 5 per cent. Morgan Stanley is making the purchase after its MESREF fund was in the running to buy Centro Properties Group’s US shopping centre portfolio, which is now in the process of being purchased by the private equity giant Blackstone for $US9.4bn.

It is thought that Morgan Stanley may be a contender to purchase a portfolio of Westfield Group’s 17 US shopping centres, which is understood to be in the second round of negotiations with bidders.

Westfield is expected to channel the funds — expected to be up to $US2bn — into its development program. Analysts say shopping centre owners are timing asset sales to take advantage of a rebound in US values, improving economic and credit conditions, and the appetite of private equity for property.

Last month, The Wall Street Journal reported that Westfield and rival landlords Simon Property Group and General Growth Properties were collectively marketing a total of 40 malls across the US. Most of the Westfield malls for sale were considered to be of average or slightly above average quality.

Yesterday, Lend Lease said the proceeds of the King of Prussia deal, which is expected to be finalised in August, would be used to repay the group’s British debt and to fund its investment pipeline in the US. It was especially interested in opportunities in the healthcare development space following the group’s recent acquisition of the US-based medical real estate business DASCO, which develops and delivers medical office buildings and outpatient facilities.

Lend Lease purchased its interest in King of Prussia — believed to be the largest enclosed shopping mall on the east coast of the US — in 1996 for $US120m. It was placed up for sale, then withdrawn in 2008 after it did not receive suitable offers. The super mall has more than 400 stores across 14.5ha and includes retailers such as the department store Bloomingdales, Sears, Macy’s, Nieman Marcus and JC Penney.

Shares in Lend Lease bucked the trend of the overall market, closing 10c higher to $8.45.

Article published May 25th, http://www.theaustralian.com.au/business/lend-lease-rushes-prussia-sale-the-australian-construction-company-expects-to-walk-away-with-a-us100m-profit/story-e6frg8zx-1226062251968


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