Westfield Retail to Borrow to Develop as It Pays Out All Profits

Westfield Retail Trust (WRT), Australia’s second-biggest property trust by market value, will take out loans to fund A$1.2 billion ($1.2 billion) of redevelopments as it pays out all its earnings to shareholders.

The company will start work on two malls in New South Wales and Queensland states as part of a plan to undertake about A$200 million of redevelopments a year on existing properties, Domenic Panaccio, the trust’s managing director, said. It can “comfortably” boost its debt to 28 percent of equity, from 20.7 percent as of Dec. 31, he said.

“Our balance sheet is very strong and we have low gearing, so we can afford to provide higher cash returns and still continue to execute our strategy,” Panaccio said in a telephone interview from Sydney. “We have lots of capacity to fund projects.”

Westfield Retail, the Australia and New Zealand-focused company spun off by Westfield Group, today reported a 2 percent increase in distributable earnings to A$572.6 million in the 12 months to Dec. 31. It will pay out the full amount in dividends, equating to 18.75 cents a share. The company will continue to pay out all its distributable earnings in 2013, which it forecasts to be 19.85 a share, it said.

The shares rose 1.6 percent to A$3.19 as of 2:17 p.m. in Sydney, extending this year’s gain to 5.5 percent. That compares with a 0.7 percent advance in the benchmark S&P/ASX 200 Index (AS51) today.

Increases in the ratio of debt to equity may be offset by the rise in values resulting from the redevelopment of its malls, Panaccio said.

Westfield Retail and its manager and joint venture partner Westfield Group (WDC) last year completed the development of a new mall in Sydney’s city center. They also finished the redevelopment of the Westfield Fountain Gate shopping center in Melbourne, which resulted in a A$107 million increase in the mall’s value for the trust.

Westfield Group today reported an 18 percent increase in profit to A$1.72 billion, driven by real estate management fees and development income, and a recovery in the U.S.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net