Sparks fly at Westfield owner’s annual meeting over share price

The shopping centre giant came under attack from K Capital for not generating sufficient long-term growth for shareholders.

Hornsby Westfields on the Pacific Highway. Picture: AAP/Image Matthew Vasilescu

Shopping centre giant Scentre, owner of the local Westfield empire, has come under attack from shareholder activist David Kingston for its lacklustre performance over the last decade, with the listed company’s chairman Ilana Atlas defending its record at its annual meeting in Sydney.

Mr Kingston, a former Rothschild banker who had targeted the company last year as he took on underperformance across the real estate sector, again questioned the company’s strategy and its inability to generate long-term value for shareholders.

In a lively meeting, marked by spirited debate, Mr Kingston and his son Charlie, both of K Capital, took on the board over the company’s longer-term failure to lift its share price, the high valuations of its shopping centres after rivals traded some assets cheaply, and plans keep its debt in check.

While Scentre dodged a second strike over its pay practices as proxy houses backed its changes to incentive structures, it was under fire from the K Capital father-son duo.

Mr Kingston questioned whether enough value was being wrung out of Westfield’s iconic malls. But the company insisted it was on the right track as it investigates building apartments above and around its complexes at sites like its Hornsby centre in Sydney.

Mr Kingston said that his main issue was the absence of long-term capital growth.

“If we look at it objectively, Scentre really is an iconic group of assets, fantastic assets,” he said. But he stopped short of praising the company’s management beyond calling out a well-timed issue of hybrid notes ahead of the market turmoil. Mr Kingston said that while Scentre’s distributions were OK, long-term capital growth had been “totally absent” once the impact of the coronavirus crisis was removed. The stock – trading around the $3.30 mark – is below the Lowy family’s exit at close to $4 in 2019.

Mr Kingston said most Australian and global REITs were not delivering capital growth. “They’re paying their distributions. That’s all the investors are getting,” he said.

He argued that with rising inflation, replacement costs and rents, Scentre should have delivered capital growth in its security price.

“Why has this iconic entity not delivered any capital growth? In fact, it’s delivered over 10 years a capital loss,” he said.

Ms Atlas said that there had been capital growth last year as the share price recovered. “And we would think that by continuing to control what we can control, which is operating our destinations excellently, and by continuing to sweat those assets as much as we can, we will continue to improve that share price,” she said.

Ms Atlas said the company had positioned itself well during the pandemic and it had managed to absorb those interest rate costs and invest in its assets, citing works at Adelaide’s Tea Tree Plaza.

Mr Kingston said that despite these positives – the recent debt deal prompted analysts to lift earnings forecasts – the REIT was still not delivering any capital growth and he questioned the $16.7bn load of debt and notes.

Ms Atlas noted that Scentre had flagged opportunities to bring joint venture partners into some assets.

“That’s certainly something we consider,” he said.

“However, this isn’t something that needs to be done at any time, at any price. And so the question is when is the right time and who is the right joint venture partner, but I know that this is something that’s very much on our agenda.”

Originally published as Sparks fly at Westfield owner’s annual meeting over share price