While the global economy was slowing last year there was still plenty of activity within the Westfield Group, as it leased and completed nine major developments at a cost of $5.6 billion.
However, Frank Lowy, chairman of Westfield acknowledges these are very challenging times and there is much hard work ahead and difficult times to work through, but he expects Westfield to emerge from current economic conditions even stronger than before.
“Firstly, even though we are living through an unprecedented economic downturn, we should remember that shopping centres are irreplaceable components of urban and suburban infrastructure.
“It means they are attractive to retailers and shoppers and continue to perform well relative to lesser assets, even when times are tough. They outperform in good times, and are resilient during economic downturns.”
Last year, Australian retail sales were solid, up 3.7 per cent; New Zealand was down 1.2 per cent and US specialty store sales were down 6.8 per cent. In the UK, retail sales in London grew 3.8 per cent but fell 0.7 per cent nationally.
“These trends have continued for each market in the first quarter of this year, with some tentative signs of improvement in retail sales in the UK,” said Lowy.
The speed and depth of the global recession has devastated global share markets. It has destroyed many companies, said Lowy and no company is immune from this downturn.
“Westfield is also not immune. We have always managed for the long-term, looking ahead, anticipating events and planning accordingly.
“We have no crystal ball, but it was clear to us some time ago that the days of cheap, easily available capital and unrealistic asset prices would not last forever.
“We began to re-position the company, starting several years ago with the merger in 2004 and took steps to strengthen the balance sheet, with a clear strategy to own the best shopping centres in the best markets.
Westfield is currently taking a very conservative approach given the economic climate.
“The reality is that many of our retailers are under pressure; it is difficult to maintain the high occupancy rate we have enjoyed historically in some of our shopping centres; the leasing environment is undoubtedly tough."
The group’s global portfolio is 96 per cent leased, down from 97.1 per cent in December, with an increase in store closures in both the US and UK during the quarter.
“We expect that our net operating income for the year ahead in the US and UK will decline. New Zealand is also expected to be a challenging market while Australia currently shows signs of proving more resilient," said Lowy.
“We took all this into account when we made our forecasts earlier this year and our performance in the first quarter is consistent with those assumptions.
“Accordingly, I can reconfirm our February forecast that operational earnings, and distribution, will be in the range of 94-97 cents per security for 2009. That assumes no material worsening in global economic conditions.”
Lowy said that despite holding back on the start of many projects, pre-development work is still continued, so that these will be ready to go when the time is right.
Westfield is also moving ahead with its two biggest developments – at Stratford in London adjacent to the Olympic site, and at Centrepoint here in the Sydney CBD.