Westfield Seeks Development Partners, Explores New Markets

Westfield, Co- CEO Peter Lowy
Peter Lowy, co-chief executive officer of Westfield Group. Photographer: Ian Waldie/Bloomberg

Westfield Group, the world’s biggest shopping mall operator by assets, is seeking joint-venture partners for developments and expansion in Brazil and Asia after a 69 percent surge in project income helped boost first-half earnings.

Westfield’s net income jumped 31 percent in the six months ended June 30, the Sydney-based company said in a statement to the Australian stock exchange. The company is looking for more partnerships for developments and plans to earn about A$200 million ($209 million) a year managing the projects, Peter Lowy, co-chief executive officer of Westfield, said.

“We’re concentrated on bringing in joint venture partners, decreasing the amount of capital we have in the assets,” Lowy said in a telephone interview in Sydney today. “We see opportunities to grow in western Europe, South America and Asia, to do projects of the caliber of Westfield London, the World Trade Center in New York, Sydney central business district.”

Westfield in 2010 shifted its focus to higher-return activities including development after spinning off the domestically-focused Westfield Retail Trust. Peter and Steven Lowy, who took over the helm of the company from their father Frank in May 2011, have since announced moves into New York city, Brazil and Milan, in partnership with local companies and started joint ventures with groups including APG Algemene Pensioen Groep NV and the Canada Pension Plan Investment Board.

New Malls

Westfield Group shares climbed 0.5 percent to A$9.63 at the close of trading in Sydney today. They’ve jumped 23 percent in 2012, compared with a 5.5 percent gain in the benchmark S&P/ASX 200 index.

Westfield is looking at using its venture in Brazil, where it owns 50 percent of mall operator Almeida Junior Shopping Centers SA, to expand further in the country, Peter Lowy said today. It is also considering moving into Asia and developing individual malls in European cities, he said, without providing further details.

“You could see us just have the mall in Milan, or a mall in Paris or in Germany,” Peter Lowy said. “Just one mall, a site-specific strategy, not a country strategy.”

Westfield today said net income rose to A$800.1 million in the six months ended June 30, from A$608.7 million a year earlier. Funds from operations rose to A$751.2 million, compared with a forecast of A$760.3 million, according to the median of three analyst estimates compiled by Bloomberg News.

‘No Surprises’

Westfield’s net property income in the U.K. grew 15 percent, driven by strong performance at its Stratford City center, adjacent to the site of the London Olympics, Peter Lowy said. In Australia, property income increased 4 percent and in New Zealand, income climbed 6 percent.

“Westfield’s result was in line with expectations,” Winston Sammut, managing director of Maxim Asset Management, said in an e-mailed response to questions. “No surprises, and guidance for the full year is unchanged, and development starts are on track.”

Westfield Group expects to start more than A$500 million of projects in the second half, of which the company will fund between A$100 million and A$200 million, it said.

Westfield Retail

Westfield Retail Trust reported a 5.3 percent drop in net income to A$416.9 million. The trust, which owns interests in Westfield’s Australian and New Zealand malls, reported first-half distributable earnings of A$282.7 million, compared with A$274.9 million a year earlier. The forecast was for A$286.7 million, according to the median of four analyst estimates compiled by Bloomberg News.

The shares slipped 1.3 percent to A$2.99, paring its advance this year to 20 percent.

Westfield Retail will pay out all its distributable earnings for the full year in a dividend of 18.75 Australian cents a share, it said.

The trust, which plans as much as A$300 million in developments a year, will fund them by raising gearing -- the proportion of debt to equity capital -- from its current 21.8 percent, managing director Domenic Panaccio said in a telephone interview from Sydney. It will also sell some assets, he said, declining to identify potential divestments.

Capital Recycling

“Our strategy is to recycle capital, to continually improve our existing portfolio and get incremental returns,” he said. “Given our strong balance sheet and low gearing, we have plenty of capacity to maintain our distribution.”

Westfield Retail will pay 9.25 cents a share for the half, it said. Westfield Group will pay a dividend of 24.75 Australian cents a share for the half, and expects funds from operations in the year ending Dec. 31 to be 65 cents a share, it said.

Westfield Group and Westfield Retail Trust this week said they’re in talks with AMP Ltd. on a possible restructure of their joint venture, following a report in the Australian newspaper on Aug. 10 that they will divide up about A$6 million of jointly-held malls in Sydney, Melbourne and Brisbane. Peter Lowy declined to comment on the talks with AMP.

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