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Notable deal for DLA Phillips Fox

DLA PHILLIPS FOX advised a trustee of the PGGM Australian Investment Trust on its investment in property linked notes worth more than $1 billion issued by the Westfield Group. Mallesons Ste

DLA PHILLIPS FOX advised a trustee of the PGGM Australian Investment Trust on its investment in property linked notes worth more than $1 billion issued by the Westfield Group.

Mallesons Stephen Jaques acted for Westfield Group on the deal.

DLA Phillips Fox said the nature of the terms of the deal are a world first, and neither Westfield nor the ratings service had rated such a note before.

“There was no precedent to draw on, it was just principles in working out how you wanted to establish and regulate the relationship,” said lead partner on the deal, Peter Charteris.

“It was a debt with an equity-type return, that’s what made it unique.”

PGGM is a pension fund based in the Netherlands with total assets under management of more than 77 billion euros ($129 billion), around 10 billion euros of which is invested in real estate.

Westfield managing director Frank Lowy said over the past year the company had investigated several capital management methods.

“We are excited to be able to facilitate this innovative transaction with such a highly regarded global institution as PGGM with whom we have had a long-standing relationship,” he said in a statement.

“This year we have raised over $3 billion through major transactions such as the sale of eight US properties in May, the joint venture of Merry Hill with QIC announced earlier this week and the issue of these notes.”

The notes have been designed by Westfield and PGGM to provide returns based on the economic performance of a number of Australian shopping centres, including 12.5 per cent for Westfield Parramatta, NSW; 25 per cent for Westfield Hornsby, NSW; 25 per cent for Westfield Burwood, NSW; 12.5 per cent for Westfield Southland, Victoria; 25 per cent Westfield Belconnen, ACT; and 25 per cent for Westfield Tea Tree Plaza, South Australia.

The notes’ value in aggregate of $1,012,875,000 is based on the market value of the properties reflected in the Group’s statutory financial statements as at 30 June 2006.

The notes are “perpetual instruments” with a first review date in 10 years, at which time PGGM may elect to redeem the notes. On redemption, the obligation to pay the amount due on the notes can be satisfied, at Westfield’s option, by a transfer of the relevant interest in the underlying property. Subsequent reviews on the same terms are to occur each five years thereafter.

The DLA Phillips Fox team included lead partner, Peter Charteris, who advised on tax and structuring issues, and partners David East (advised on terms of issue), Jodie Masson (property issues), Gerry Bean and Eugene Choi.

The firm started working on the deal in November last year, and it took six weeks to complete.

Westfield said the notes were effective from 1 January and therefore will not impact the distribution forecast of $1.065 per security for the 12-month period to December 2006.

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