Westfield to spend $160 million to develop Italian shopping centre

Westfield has taken its overseas spending tab for the week to $600 million following a 50% investment in Italy.

The shopping centre group will spend $160 million to acquire a 50% interest in a development site in Milan, Italy.

It follows the retail giant’s August 10 announcement that it will spend $440 million to acquire a half-share of a Brazilian shopping mall owner.

The 60-hectare site adjacent to Milan's Linate airport has planning approval to develop a regional shopping centre similar in scale to Westfield London.

The site is being acquired in a joint venture with Gruppo Stilo, an Italy-based developer owned principally by its founder, Antonio Percassi.

Westfield chairman Frank Lowy says the acquisition is “another significant step in the expansion of our business globally”.

"This acquisition represents a unique opportunity, notwithstanding the volatile financial markets at present, to establish our franchise in one of the wealthiest population centres in Europe. We believe that this site represents one of, if not the, best shopping centre development opportunities in Continental Europe,” he says.

Milan, in the north of Italy, is the country's major financial centre and has the highest income demographic. It is considered to be one of the world's fashion capital cities.

The project is due to be completed in 2015 to coincide with the Milan World Expo.

Westfield expects the 170,000-square-metre project would represent a total investment in the range of €1 billion to €1.25 billion ($1.38 billion to $1.72 billion ) with a target yield in the range of 7%  and 7.5% and an unlevered internal rate of return of between 12% - 15% on the capital invested.

On completion, the centre will be branded Westfield Milan and will be managed by Westfield in conjunction with Gruppo Stilo.

Westfield expects to invest a further €20 million ($28 million) in acquiring additional development rights, which will be payable when a second stage project of approximately 60,000 square metres commences in the future.