We’ll win on Westfield: Lowys

 Stephen and Peter Lowy in the Westfield offices yesterday. Picture: Sam Mooy Source: News Corp Australia

Stephen and Peter Lowy in the Westfield offices yesterday. Picture: Sam Mooy Source: News Corp Australia

THE Lowy family has defied investor opposition and vowed to push ahead with plans for the sweeping overhaul of the $70 billion Westfield shopping centre empire on its terms, amid concerns the founders will abandon the Australian arm and concentrate on global expansion.

“What we were very clear about today is that we are pursuing the proposal outlined in December and we absolutely believe it is in the interests of both the shareholders. The boards are unanimously in favour of it,” said Steven Lowy, co-chief executive of Westfield Group, which his 83-year-old father, chairman Frank Lowy, co-founded 54 years ago.

Westfield Group reported a 6.7 per cent fall in its annual net profit to $1.6 billion after selling at least $3bn worth of property interests in the 2013 calender year.

Operating profit, known as funds from operations, gained 2.3 per cent to 66.5c per security on the back on improving US retail conditions.

Under Westfield’s proposal, the group’s Australian and New Zealand shopping centres business would be merged into Westfield Retail Trust to form a new listed company called Scentre Group.

WRT was spun out three years ago as the listed owner of 50 per cent interests of Westfield’s Australian and New Zealand shopping centres.

WRT shareholders have voiced opposition to the latest restructure, threatening to vote down the proposal and calling for more favourable terms for WRT. They had hoped the proposal would be sweetened at yesterday’s profit result.

There have also been concerns that the Lowy family may sell its 4 per cent interest in the newly formed Scentre Group, a Westfield company that for the first time would not run be by a member of the Lowy family.

The family sold its $665m interest in WRT last year.

The remainder of Westfield Group would be renamed Westfield Corporation and run by Steven Lowy, with the company owning global properties in iconic locations such as London, New York and Milan. The Lowy family would hold 8 per cent.

Despite investor cynicism that the Lowy family was betting on the international side with its stronger growth prospects, Steven Lowy yesterday reaffirmed the family’s support for the Australian arm and the company as a whole.

“We have a serious amount of wealth tied up in Westfield Group, which currently has investments in the US, Australia and Europe,” he said. “In the new entities, it has been decided that my father will be chairman of both companies. My family has made a statement to maintain its holding in that company and be a long-term investor in Scentre Group.

“I am not sure how much more confidence we need to give to the market about commitment to this company and both companies.”

Both Peter and Steven Lowy took a pay cut in 2013, receiving $US8.15 million ($9.03m) and $8.658m in total pay, respectively, compared with $US8.9m and $US9.4m in 2012.

Steven Lowy also moved to offer some hope on the domestic retail outlook after limited sales growth in recent years, saying operating income last year grew 2 per cent. “Overall, rents are still going up,” he said of Australian operations.

“The fourth quarter was probably the best quarter in a long time and continued to flow into January. I’m not suggesting a structural shift, but certainly I’m suggesting it is better than it was.”

Once investors received the independent report and other legal documents about the deal, he believed they would see the proposal in a better light and would vote in favour of the proposal in late May.

Under the restructure, Westfield Retail Trust shareholders receive $285 cash plus 918 securities in the new Scentre Group for every 1000 Westfield Group units held. The cash payment will be effected through an $850m capital return, equivalent to a pro-rata buyback of WRT securities at $3.47 per security.

Westfield Group shareholders would receive 1000 securities in the new Westfield Corporation and 1246 securities in Scentre Group for every 1000 Westfield Group securities held. Yesterday, Westfield reported comparable property net operating income growth in its US shopping centres of 4.7 per cent, in Britain 4.3 per cent, and Australia 2 per cent and 0.3 per cent in New Zealand.

The company’s distribution per security rose 3 per cent to 51c per security.

Westfield Group offered two sets of guidance to account for the new proposal: Westfield Corp’s guidance is US39.8c per security and Scentre 21.5c per security.

Mr Lowy remained bullish about the prospects of its US properties, which included the lucrative World Trade Centre development. He described WTC as “probably one of the highest productive (properties) in the world”.

“We want to own the best assets in capital cities around the world and we are doing corporate restructuring for the best structure to own and grow those assets.”

Mr Lowy said while the company would consider acquisitions on a case-by-case basis, the company’s main source of growth would be through its development program, with $4.9bn worth of Australian and New Zealand projects and an international pipeline worth $US9bn.

“I think you need to appreciate the Westfield Group has been at a strategic repositioning at the corporate and at the asset level,” he said.

Westfield Retail Trust posted a 6.5 per cent fall in its annual net profit to $777m, but the group’s funds from operations gained 0.9 per cent to $596.8m, or 2.5 per cent on an earnings per security basis at 19.85c.

The distribution was 19.85c per stapled security, up 5.9 per cent, in line with its forecast.

Westfield Group shares closed down 29c to $10.39 and WRT shares closed steady at $3.15.

Source: The Australian

 

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