Au revoir Westfield

Takeover changes A-REIT landscape

Unibail-Rodamco’s $32 billion takeover of Westfield and the subsequent creation of a new foreign company listing on ASX to replace Westfield will transform the Australian listed property landscape. According to research from Macquarie the new listing will make up 10.65% of the S&P/ASX 200 A-REIT Index.   

However, the new foreign entity will not enjoy the income tax advantages that investors in Westfield including funds that passively track the S&P/ASX 200 A-REIT Index have traditionally enjoyed.  Some of the tax differences in holding Unibail-Rodamco in place of Westfield are:

• French withholding tax of 15% will be deducted from dividends

• Tax deferred and tax exempt income components will no longer be available

• Discounted capital gains tax will no longer be available on the sale of underlying assets

The new foreign entity will not qualify for inclusion in the MVIS Australia A-REITs Index (MVA Index) because the new foreign listing is not an A-REIT. So when Westfield shareholders receive their cash and CDIs in the new ASX listing, MVA, which tracks the MVA Index, will still have a portfolio with all the benefits of 100% exposure to A-REITs without CDIs.

The charts below show the current sector breakdown of MVA and the S&P/ASX 200 A-REIT Index.    

A diversified exposure: VanEck Vectors Australian Property ETF (MVA)

The MVA Index, and therefore MVA, includes only the largest and most liquid ASX-listed REITs with a maximum individual holding at each review date of 10%. 

With its capped exposure to larger property securities, MVA can help former Westfield security holders significantly reduce retail concentration risk and get a more diversified exposure to the listed Australian property market while retaining the tax benefits A-REITs offer relative to a CDI in a French company.

Potential tax benefits

Compared to other funds that would continue to hold the Unibail-Rodamco securities following the takeover, MVA offers investors:

• No French withholding tax deducted from dividends

• Greater tax deferred and tax exempt income opportunities

• Discounted capital gains tax on the sale of A-REITs’ underlying assets

The index MVA tracks boasts a 16.6% cumulative absolute differential

The MVA Index has demonstrated long term outperformance against the S&P/ASX 200 A-REIT Index since it was launched in January 2007

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