Westfield’s Steven Lowy ‘bullish’ on UK centres

Shopping centre giant Westfield Corporation is not expecting any adverse impact from Brexit on its London centres.

Steven, Frank and Peter Lowy at the New York launch of Westfield World Trade Centre. Picture: Leandro Justen

Global shopping centre giant Westfield Corporation is not expecting any adverse impact from Brexit on its London centres with joint chief executives Peter and Steven Lowy also saying the group’s $US9.5 billion ($12.4bn) development program would fuel future earnings.

The retail landlord, which oversees $US29.3bn of malls in the US and Britain, yesterday posted funds from operations — a key performance measure — of $US342 million for six months to June, an increase of 3.1 per cent on the June half last year, but pulled back its guidance after the Brexit-induced fall in the British pound. It now forecasts FFO of US33.7c to US34c a security for the full year.

“The offset of a lower currency is it attracts more tourism, particularly Westfield London more than Stratford,” Steven Lowy said, noting July had been the strongest trading month for Westfield London for some time.

However, the negative impact of the lower currency was earnings and asset values were slightly less, he said.

“In the long term we are incredibly bullish about London, it’s a very special city. Nothing has changed with our investment philosophy with regards to London,” Mr Lowy said.

Mr Lowy, who with his father, Westfield chairman Frank Lowy, and brother Peter, last week opened the $US1.5bn Westfield World Trade Centre in New York, said US sales had slowed to 2-3 per cent growth, which was in line with the economy.

“The US economy is incredibly robust. We see the fundamentals remaining very strong. Gasoline prices very low, interest rates (are low), there is low unemployment, and there is positive wages growth now, but GDP growth has slowed in the US, it has a strong currency and that has its impact,” Steven Lowy said.

Analysts were also expecting a slowing in earnings over the next year as stores closed in major redevelopments.

CLSA analyst Sholto Maconochie said that while Westfield’s operational metrics such as comparable net operating income had eased slightly, they were in line with peers.

“But you have to look past that to the development uplift in the longer term.

“They are future-proofing the business for the digital age,” Mr Maconochie said.

Across its 35-shopping centre portfolio, Westfield saw specialty sales growth for the year of 4.6 per cent on the $US23.8bn worth of flagship malls and a 0.3 per cent increase for the $US5.5bn of regional centres. The group has $US2.6bn of developments under way with its partners — Westfield’s portion accounts for $US1.9bn — including the £600m ($1.03bn) expansion of Westfield London and the $US950m redevelopment of Century City in Los Angeles where Mr Lowy said two-thirds of the existing store had closed while building work was under way.

Another $US6.9bn of projects are planned — Westfield’s portion is $US3bn — including the $US1.1bn expansion of Valley Fair at San Jose. Peter Lowy said the expected yield on the developments was 7-8 per cent.

Steven Lowy said the group’s €1.4bn ($2.08bn) project in Milan would likely start next year, ahead of its third London centre at Croydon with that £1.4bn redevelopment likely to break ground the following year.

Westfield is also planning up to 10,000 apartments on or around its malls and is most advanced on more than 3000 apartments on the three London centres, Mr Lowy told The Australian after the result announcement.

Westfield posted a statutory half-year net profit of $491m, up 5 per cent on last year.

Funds from operations were US16.5c per security for the half, a 3.1 per cent rise.

The company expects to pay a full-year distribution of US25.1c a security.

Westfield shares closed yesterday at $10.48, down 12c.