Another red ink day for Australian property with a trio of companies reporting losses totalling more than $5.5 billion.
Centro Properties chalked up $2.4 billion, Lend Lease almost $590 million and Westfield around $2.2 billion.
An outbreak of reality at Westfield with the shopping centre group deferring all new projects.
That should put an end to the company’s claims of being well placed to ride out the crunch.
Some analysts suggested the company faces more downward revaluations this year because of the crunch.
Like the media, oil and mining companies and all of its tenants, Westfield is no more capable of riding out an economic storm of this current intensity, than Frank Lowy is of flying to the moon.
And, yet that’s been the spin from this company: rather than look at the implosion of the poorly run, more highly geared Centro Properties group and take lessons from that, Westfield has been ploughing on.
Centro told us early that debt was out and there would be a hit from the sliding level of activity in the US.
For too long the Lowys had claimed their malls were doing better in America and Britain than the competition, while all that was happening was that they were catching up to the overall slide in retail activity.
The US is now in the red, the UK is and so is New Zealand. Only Australia is still positive.
And that’s the way the company is looking at 2009 with Australia the only region expected to return positive growth: both the US and UK will again be negative.
The market liked this new ‘reality’ at WDC its shares jumped 5% or 50c to $10.25, the best day’s performance for more than a month.
So Westfield will defer all new developments this year as it battles against the weakening US, British and New Zealand economies.
This will not include the $860 million redevelopment of Sydney’s Pitt Street Mall, work on which is well under way.
It will continue with its big new centre for London, to be built opposite the Olympic site at Stratford. Developments at Bradford and Guilford in the UK have been put on hold for this year at least.
"There are seven projects currently under construction at a forecast investment of $4.7 billion (WDC share – $4.6 billion), including Stratford in London ($3.0 billion) and the recently commenced Sydney City project.
"The five smaller projects under construction, representing a Group investment of $700 million, are expected to complete during 2009 and 2010," Westfield said.
"The Group is not planning to commence any large project during the remainder of 2009."
Westfield’s formal results followed updates earlier this month for a big cash raising of $2.9 million and for an early assessment of the write down in asset values.
It posted a loss of $2.2 billion for the year to December 31, 2008, after a series of non-cash items, including a $3.3 billion write-down in asset values.
It also confirmed the likely distribution for the 2009 year will be between 94c and 97c down from 106.5 cents for 2008.
Joint managing director Steven Lowy said that as at December 31, $1.6 billion had been spent on the projects under construction with the balance of $3.0 billion to be incurred over the next four years.
But the Group is not planning to commence any large project during the remainder of 2009.
"Our development activity is concentrated in Sydney and Stratford, the gateway to the London 2012 Olympics.
"These two projects, located in some of the best retail locations in the world, are of the highest quality and are expected to create significant long term value,” Mr Lowy said.
Hopefully by the time these projects are ready to open, we will have passed through the crunch is what he is saying.
The statutory result prepared under AIFRS was a loss of $2.2 billion and includes noncash mark to market adjustments of financial instruments of $(1.3) billion and asset revaluations of $(3.3) billion, the latter principally due to an increase in capitalisation rates.
These asset revaluation adjustments were offset by currency gains of $4.7 billion as a result of the appreciation of the US dollar that are shown in the balance sheet rather than the income statement, as required under Australian accounting standards.
"In the four and half years since the Group’s merger in July 2004, the Group has achieved cumulative asset revaluation gains of approximately $9.9 billion, inclusive of the 2008 revaluations.
"Total assets of the Group were $57.7 billion at 31 December 2008, with gross property investments increasing to $53.4 billion from $48.5 billion at 31 December 2007. The Group remains focused on prudent capital management.
”Since the beginning of 2008, the Group has issued $1.6 billion of new debt, extended $1.5 billion of facilities and raised over $3 billion in equity capital. Facilities maturing in 2009 total $1.4 billion. Group gearing is currently 34.6%, with available liquidity of $8.7 billion.
"For the 2008 year, comparable shopping centre net operating income for the portfolio grew by 2.8%, driven by growth in Australia and New Zealand of 4.7%, growth in the United States of 0.5% and a decline of 1.8% in the United Kingdom."
"For 2008, retail sales for the Group’s centres in: –
• Australia were solid, with total sales growing by 7.1% and up 3.7% on a comparable basis;
• New Zealand total sales grew by 8.2% and declined 1.2% on a comparable basis;
• The United States specialty store sales were US$437 per square foot, a decrease of 6.8%.
"In the United Kingdom, industry statistics showed compara
