The Australian-based global shopping centre developer says the Milan site has planning approval to develop a world class iconic regional shopping centre similar in scale and quality to Westfield London. 

Westfield Group founder and chairman Frank Lowy said: “Today’s announcement is another significant step in the expansion of our business globally. It follows our announcement regarding the World Trade Centre opportunity in New York recently and our entry into Brazil earlier this week.

“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.” 

Milan, located 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.

Co-CEO of Westfield Group, Steven Lowy, said the opportunity leverages the capabilities the company has created in the UK and in particular at Westfield London and the soon to be opened Stratford City. 

“It represents an exciting opportunity to utilise our expertise in creating another truly iconic shopping centre in one of the world’s great cities. 

“Milan is the dominant retail city in Italy for luxury brands and is the headquarters of many major retail chains including Giorgio Armani, Prada and Versace.” 

The 60ha site, adjacent to Milan’s Linate airport, is being acquired in joint venture with Gruppo Stilo (GS), an Italian based developer and owner of major retail brands, owned principally by its founder Antonio Percassi.

“Mr Percassi has a long and successful history in the operation of major retail brands in Italy as well as significant experience in retail development. Culturally our two organisations are closely aligned”, said Steven Lowy.

Percassi said: “We are delighted to have formed this joint venture with Westfield, a world leader in major shopping centre development, management and ownership. I am confident Westfield will bring its global expertise and experience to create the premier mall in Continental Europe.”

MD UK/Europe and new markets for Westfield Group, Michael Gutman said: “Milan’s strong consumer demographic and very low penetration of shopping centre space provides an exciting opportunity to develop a unique shopping centre of similar quality and scale as the Group’s other major iconic centres in Europe, principally Westfield London and Stratford City. Accordingly, we will utilise our London based capabilities in the development and ongoing management of our Milan shopping centre.”

“The Milan trade area has a population of approximately 5.4 million people and our analysis highlights that the spending potential for the trade area is higher than at Westfield London where we expect to achieve retail sales of almost £1bn this year.”

WDC will invest €115 million (A$160 million) in two stages to acquire a 50 per cent interest in the joint venture, with €65 million (A$90 million) invested initially, and a further €50 million (A$70 million) to be invested when the development commences. The group expects to commence the development in 2012/2013 with a view to project completion coinciding with the Milan World Expo in 2015.

WDC expects the 170,000sqm project would represent a total investment in the range of €1 billion – €1.25 billion with a target yield in the range of seven to 7.5 per cent and an unlevered internal rate of return of between 12 to 15 per cent on the capital invested. 

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

WDC expects to invest a further €20 million in acquiring additional development rights, which will be payable when a second stage project of approximately 60,000sqm commences in the future.