Activist shareholders stir up Westfield owner AGM

Former Rothschild banker David Kingston took the Scentre board to task over its strategy and performance at the Westfield mall owner’s AGM.

Scentre Group, which owns Westfield malls, found itself under fire at its AGM on Thursday. Picture: NCA NewsWire/Bianca De Marchi

The usually sedate tone at the annual meeting of Westfield mall owner Scentre Group was upset on Thursday, as former Rothschild banker David Kingston broke with tradition and dramatically questioned the company’s strategy and performance.

The ex-banker and his son Charlie Kingston, both of K Capital, have become a feature of property meetings and have taken on boards at companies ranging from Dreamworld owner Coast Entertainment Holdings to funds house Charter Hall.

Mr Kingston questioned Scentre’s financial performance over the last five years, during which time it was hit by the Covid-19 crisis, and he said it lagged on key measures.

Addressing the meeting the ex-banker said he was surprised at the self-congratulation and “perhaps complacency” in the annual report after what he called Scentre’s underwhelming performance over the period.

“Over the last five years, the key metrics have fallen by 12 to 25 per cent. That’s a large fall, if you then take into account that that’s not inflation adjusted, it is even larger,” he said.

Mr Kingston also raised questions about the company’s debt position, calling it the “sleeping elephant” in the room, noting that the company carried substantial senior and subordinated debt, the latter of which would be expensive unless redeemed.

Scentre chief executive Elliott Rusanow. Picture: Britta Campion

But Scentre chief executive Elliott Rusanow defended the company’s structures which brought it through the pandemic and said there was opportunities to refinance.

He said that the company was generating record earnings before interest and tax and was aiming to get visitations back to pre-pandemic levels, noting that the company had positive earnings guidance against a tougher backdrop in the A-REIT sector.

Mr Kingston later said that local industry was a different “ball game” to the United States where malls are struggling. While Scentre has iconic malls, he said the financial performance had been poor over the period.

Mr Kingston said Scentre shares had sunk since Westfield co-founder Frank Lowy sold out at close to $4 a share in 2019. The shares bumped up to $3.30 on Thursday.

“This company has distributed income, but relative to Frank Lowy’s sale at $4 five years ago, it’s distributed a capital loss,” he said. The Westfield co-founder’s family sold out at about $3.96.

Scentre chair Ilana Atlas noted the heavy impacts of the pandemic, which are still rolling through the shopping centre industry. There is a series of sales being struck at discounted levels, including on malls that Westfield manages and co-owns.

Scentre chair Ilana Atlas. Picture: NCA NewsWire / Christian Gilles

The younger Mr Kingston queried the company’s ability to find up to $8bn to fund both its debt notes and proposed developments. The shopping centre company defended its position, noting it had flagged options including joint ventures and asset sales.

But the development of big malls has all but ground to a halt as building costs have soared and interest rates have risen, hitting the longer-term values of the centres. Mr Rusanow pointed to the value not only of the malls but also Scentre’s valuable land banks around the complexes.

The company’s remuneration report attracted a 27.76 per cent protest vote, giving it a strike against its remuneration. That came despite proxy houses ISS and CGI Glass Lewis supporting the resolutions.

Another protest was registered against the grant of performance rights to Mr Rusanow whose pay package drew a 26.55 per cent against vote.

Ms Atlas told investors she was “disappointed” that the property group’s pay practices have often come under scrutiny and it has changed since was hit with a strike in 2021.

“We are disappointed. However, we welcome and highly value feedback from securityholders and other key stakeholders and will certainly take these views into account before we come back to you next year with our remuneration report,” she said.

Scentre separately gave an upbeat outlook about the performance of its retail centres, which Ms Atlas said had seen “continued strong demand for what we offer in our destinations, given elevated inflation and moderating economic growth”.