Westfield has managed to again to ride out the credit crunch and economic slump in the US, UK, Australia and New Zealand that has ensnared its peers in the property sector.
That’s despite distinct slowdowns in retail spending in the US, UK and New Zealand markets, and the gathering slump in Australia.
And in a bit of corporate bottom fishing it has emerged with a 2.96% stake in rival UK shopping centre owner, Liberty International, where the Simon property group from the US (a big rival there to Westfield) has snapped up a 4.2% stake.
Liberty’s shares have fallen sharply this year as it has cut values on its UK shopping centres because of falling property values and declining retail sales.
So far Westfield, with one centre open and another big one in London to open in October, has avoided write-downs because of the UK slump.
Westfield said the Liberty stake was acquired "for investment purposes” but that’s what it said when it grabbed 5% of GPT in 2005 and frustrated an offer for its rival from Lend Lease (which used to control GPT years ago). Lowy sold out after Lend Lease failed and picked up valuable interest in a couple of Australian shopping centres.
It could very well be aiming to do that in any assault on Liberty by Simon: Liberty has major centres in London and in some regional centres.
It would be a very cheap way for Westfield to grow in the UK where the Westfield London is due to open in October and Westfield Stratford (next to the 2012 Olympic Games site) in 2011. It has a big centre open in Derby in the north.
Liberty is the biggest shopping centre owner in Britain.
The way retail sales are slowing in its major markets, Westfield might need a boost from the injection of new centres over the next year.
But it does have over $7 billion in liquid reserves to support any activity, as well as its big development plan which will see work start on the multi-billion dollar revamp of Sydney’s Pitt Street Mall area later in the year.
Westfield said it had a 14% rise in first-half operating earnings for 2008, thanks mainly to rental growth in Australia.
It said that operating earnings for the six months ended 30 June 2008 were $928 million, up 14.7% from the $844 million in the first half of 2007.
The group, which has 118 shopping centres in Australia, New Zealand, the United States and Britain, also reaffirmed it would pay a full-year distribution of 106.5 cents this year, with an interim payout of more than 53 cents a security.
"The amount available for distribution for the six months, arising from operational segment earnings and related income hedging, was $1,036 million of which $1,033 million will be distributed, representing 53.25 cents per security," the company said yesterday.
Including asset revaluations of $345 million (down from $902 million in the first half of 2007), net profit was $1.285 billion, down 35% on the $1.9 billion in total in the first half of 2007 because of the sharp fall in those revaluations.
The company said most of the higher valuations came in Australia and offset falls in NZ and the US.
Australia was the highlight, with retail sales from stores open more than a year up 5.6%, but there was a noticeable slowing in the six months to June and in the last month of the half, Westfield noted.
Growth the 6 months slowed to an annual rate of 4.9% and in the June quarter, it slowed again to 4.4%, with a sharp fall in sales growth for major retailers (such as Coles, Woolworths, Myer and David Jones).
In contrast, comparable store sales fell 1.9% in the United States and dipped 0.2% in New Zealand in the six months to June. UK sales also eased, although London was firm for most of the year.
Unlike most of Australia’s listed property real estate investment trusts (REITs), Westfield is trading above its net tangible asset backing. Its shares have fallen 20% so far this year, outperforming a 33% slide in the A-REIT index which it dominates.
Westfield securities traded at $16.10 at the close yesterday, down 56 cents, or 3.3%, after being as high as $16.95.
