06 May 2009



It gives me great pleasure to welcome you today to this Annual General Meeting of the combined Westfield Group.

I have been informed that a quorum for each meeting is present, and I formally declare each of these meetings open.

It is my pleasure to welcome the members of the Westfield Group Board attending today, including Lord Peter Goldsmith, who is based inLondon. He joins us for the first time via video conference from our New York office. Welcome Peter. Unfortunately, for personal reasons, Mr Roy Furman is now not able to attend the meeting today.

I would also like to welcome Mr Dean Wills who as you know retired from the Board last year. Its good to have you here today, Dean.

We are obviously in the midst of very challenging times. The most challenging in the Groups experience.

Despite this, Westfield continues to exhibit the hallmarks that have served it well over its 49-year history. Over that time, we have built a company which is a leader in its market not just in Australia but globally. Whether times are good, or tough, as they are at present, our focus is on making decisions which position us for long term success.

There is much hard work ahead and difficult times to work through but at Westfield, we fully expect that we will emerge from current economic conditions even stronger than before.

I say this because Westfield has a strong Board, a proven executive team and a business model that is founded on a strong balance sheet and sound operating performance. This company is built to last.

Our underlying business is proving resilient, and our geographic spread has meant that in 2008, when most companies failed to meet their financial forecasts and cut distributions, we actually delivered the increase in operating segment earnings we forecast early last year.

For the year, operating segment earnings were up 10.4% to $1.94 billion on the previous year, and we distributed 106.5 cents per security, the same as in 2007.

That is a remarkable achievement when you consider what was happening in the global economy throughout 2008.

We could achieve that result for several reasons.

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.

They have become part of the fabric of society. Today, people use them more often, and for more things than just shopping.

And most of our shopping centres are of the highest quality.

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%; New Zealand was down 1.2% and US specialty store sales were down 6.8%. In the UK, retail sales in London grew 3.8% but fell 0.7% nationally.

In summary, the solid performance of Australia has offset the challenging conditions in US, UK and NZ.

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.

The Groups global portfolio is 96% leased, down from 97.1% in December, with an increase in store closures in both the US and UK during the quarter.

While the global economy was slowing last year there was still plenty of activity within the Westfield Group. During 2008, we successfully leased and completed 9 major developments at a cost of $5.6 billion.

In October we opened Westfield London in the UK, and the redeveloped Doncaster in Melbourne.

Just as our centre at Bondi Junction set a new standard for shopping centres when it opened several years ago, Westfield London has raised the bar yet again.

It features retailers never before seen in shopping centres anywhere in the world, and its design and facilities have drawn universal praise.

Since it opened in October last year Westfield London has traded well with solid customer traffic and retail sales.

In its first six months of operation, there have been almost 12 million customer visits to the centre. Thats 12 million visits to a centre that simply didnt exist six months earlier. More than 20 million customers are expected to visit the centre in the first year.

We were told that this is not the time to open such a centre on the eve of a recession.

My answer is that we build our centres for the long term, not one or two years. We have opened plenty of centres in tough times. Parramatta and Miranda here in Sydney are just two examples and both are now powerhouse shopping centres.

There is no doubt that Westfield London will become a landmark retail destination for London, and a beacon of the Westfield brand not just in the UK, but globally.

It was especially pleasing for me that the Group was able to relaunch the new Doncaster because that centre has a special place in my memory.

It was one of the first centres we built in Melbourne at the time in the middle of apple orchards and farms.

Today, it has more than doubled in size and serves a high-income population with a variety of retailers and specialty food stores that are beyond anything we could have imagined back in the 1960s.

Although we have historically, and will continue, to mark ourselves against our own objectives and standards I am pleased to say that the Groups performance when compared with its peers was also commendable.

Since the start of 2008 until now, while the Groups share market performance has been negative, we have outperformed the Australian Listed Property Trust Index by 19%, no small feat given that we now account for over 50% of that index.

We also outperformed the Global REIT index by nearly 3%.

We have also outperformed most of our listed peers both in Australia and globally.

You might be asking yourself at this point how is it that with this strong performance and balance sheet the Group managed to record a fall in profit in 2008 the first in our 48-year history.

The answer is that a few years ago when Australia adopted new accounting standards it required companies to attribute rises or falls in asset revaluations to the income statement.

This meant in years when revaluations went up the reported profit was abnormally high.

Indeed, during these years we very consciously focused on and spoke about our operational earnings in other words, our cash profits – rather than the superficially more positive number produced by the new accounting standards.

In 2007 for instance, assets were revalued upwards by $5.1 billion and our new accounting profit for that year was $5.5 billion. But we chose not to promote that number. Instead, we focused on our operational segment earnings of $1.8 billion.

To us, that was the relevant figure and the true measure of our performance.

This year of course it went the other way and we saw a reduction of property values of $3.3 billion. Although our operational segment earnings were up 10.4%, the result prepared under the new system was a loss of $2.2 billion.

In my view, this new accounting approach does not provide investors with an accurate and relevant measure of our companys performance.

The ups and downs of property revaluations from year to year have little short-term relevance to a Group like ours because we dont treat our shopping centres as trading stock.

The real profit we make and distribute to shareholders depends on how well we operate our centres on what we earn in rent and other income, as well as providing services to our partners.

That real profit has nothing to do with short-term movements, up or down, in the value of our property portfolio.

Looking longer term, as we do, despite the drop in values this year, since the merger in 2004, the Group has achieved cumulative asset revaluation gains to 31 December 2008 of nearly $10 billion.

So in recent times, you can see that our assets have grown in value far more than they have fallen in the short term in response to the global financial downturn.

And when they start to recover that value in the future, be assured that we will still be talking to you much more about the operating side of our business.

The speed and depth of the global recession has devastated global share markets; it has destroyed many companies, and the governments of the world are taking unprecedented action to minimise the losses and restore confidence.

When share markets collapse on this scale they do not discriminate.

Solid companies with good prospects are punished along with companies that are overburdened with debt or badly managed.

No company is immune from this downturn.

Westfield is also not immune. But, as I hope you can see from what Ive said, we are different.

We have always managed for the long-term, looking ahead, anticipating events and planning accordingly.

This episode we are living through now is no exception.

In the good times, we took steps to prepare for the bad times.

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.

We took steps to strengthen the balance sheet, with a clear strategy to own the best shopping centres in the best markets.

To that end we sold 14 shopping centres outright, a move which was dilutive to our earnings at the time and which was queried by many in the market.

We sold shopping centres when others were buying.

The sale of those assets, along with joint ventures and the issuing of equity, raised $10.5 billion. And then the balance sheet was further strengthened this year when we raised a further $3.2 billion.

Over the past couple of years we also had opportunities to buy many new centres, but we passed them up, believing they were too expensive.

Management and the board maintained its financial discipline and retained our capital, and avoided paying prices that were too high.

Today, we can all be very glad we took that disciplined approach. Sometimes its not so much what you do, but what you dont do.

The net result of this long-term planning is that we have relatively low debt, with a gearing ratio of around 35% and over $7 billion of liquidity.

All these things were achieved through careful planning and looking ahead.

And right now we are looking ahead again, planning and positioning the Group for the recovery when it comes.

We are under no illusions about the tremendous challenge facing all companies, including Westfield, right now.

To navigate our way through this period of uncertainty will require all our resources. It will require an extraordinary effort by all of us.

But the board, our executives, me we are all committed to doing just that, and I would like to thank the board and our executive team for their efforts in these difficult times.

In fact, Im delighted to welcome to the meeting today our entire senior management team, our managers from around the world, who are meeting here in Sydney this week.

We are 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.

We have therefore reviewed the timing of our redevelopment program and we are continually looking at ways to reduce the cost of our operations.

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.

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.

Despite holding back on the start of many projects, we are continuing with our pre-development work so that these will be ready to go when the time is right.

We are also moving ahead with our two biggest developments at Stratford in London adjacent to the Olympic site, and at Centrepoint here in the Sydney CBD.

I believe that when they are ready for opening they will catch the wave of the recovery and prosper.

I have seen this many times over our 49-year history. Shopping centres were built in a downturn but they were finished, and leased up and ready to go when the cycle turned.

In addition to these development projects we should also remember that other opportunities should come our way during this downturn.

Again, this has been the case in the past, and because we entered this downturn from a position of relative strength we are well placed to take advantage of these opportunities, if they make sense for us.

We want to be in a position not just to survive, but to thrive, when the cycle turns.

I ask for your support as we face this challenge, and thank you for your continuing faith in Westfield.


We now move to the election of Directors.

We have three directors seeking re-election today Mr Roy Furman, Mr Stephen Johns and Mr Steven Lowy.

The Notice of Meeting includes a brief background note on each of these directors, so I do not propose to expand much more on this. Each of the candidates for re-election today has the full support of the Board.

Before I move to the election of directors I would like to speak in general terms about our Board and governance arrangements.

I would like to thank the Board on its significant contribution to the Groups business. The relationship between the Board and management has been a key to Westfields success over many years.

The Board allows management to run the business day to day. In return, it expects – and gets – the best and most current information management can provide. We try to identify opportunities and issues and discuss them with the Board well in advance of any decision being required. The Board is then involved in setting strategy and in making all major decisions affecting your interests.

A successful Board always involves a bit of a balancing act. You need experienced Directors with an understanding of Westfields past as well as new directors with fresh ideas and new ways of looking at things. You need Executive Directors with a deep knowledge of how the business runs and Non Executive Directors with broad experience in other industries or different markets. You need a Board with a broad cross section of skills.

And the Board should constantly be looking to improve itself and its processes.

In 2004, the Board commissioned an independent assessment of its own capabilities and effectiveness. Cameron Ralph, a firm specialising in corporate governance, found the Westfield Board demonstrated superior capabilities across a broad range of categories.

Cameron Ralph noted the strong mix of skills amongst the Directors, the disciplined decision making processes which focus on the big issues, the strong influence of the Non Executive Directors on management proposals, and most importantly, the highly successful group dynamic that allows vigorous debate at the Board table, yet fosters respect and trust.

Finally, they observed that although some directors had been on the Board for a lengthy period, and Ill quote them here there was evidence of sustained diligence and highly independent thought and action on the part of those directors.

Cameron Ralph also made recommendations for improvement every one of which was implemented immediately. Those recommendations were fully disclosed in our annual report back in 2004 so I wont go over each one.

One of the recommendations dealt with the make up of the Board. Cameron Ralph highlighted the need to continue regeneration and renewal of the Board. They recommended the appointment of an additional independent director. That appointment was made immediately.

But we have gone well beyond that. In the same year, we restructured the Board in conjunction with the merger.

Over the past 18 months we have added John McFarlane, Judith Sloan and Lord Peter Goldsmith to the Board and today you will consider the appointment of Brian Schwartz. These appointments are part of that process of board renewal.

We now have Non Executive Directors who are resident in the United States and the United Kingdom, two of our most important markets. Roy Furman is a New Yorker and Peter Goldsmith lives and works in London. Their local perspective on those markets is an important element in Board discussions and decisions.

The Board today strikes a balance between new and long serving Directors.

Of the Non Executive Directors, Fred Hilmer and David Gonski definitely qualify as long serving.

I have heard the suggestions from some commentators that Fred and David are no longer independent because of the length of their service. I can only say that these are observations based on a governance formula which takes no account of the continuing contribution of these two Directors. Both have long and distinguished careers in business and in public life. Both have long been recognised as leading contributors to the debate on commercial and governance issues in this country.

Most importantly, Fred and David continue to make an enormous contribution to the business of the Westfield Group Board. From the date of their appointment until today, that contribution has been made in an open, frank and independent way. That is the standard we expect from all Directors whether they have been on the Board for 1 year or for 20.

To those who say that Directors should retire when they achieve a certain length of service, I say that we need and want experienced Directors on the Westfield Board. For so long as Directors continue to perform their role with the necessary enthusiasm, commitment and skill, we will not seek to replace them simply to satisfy arbitrary governance principles.

Whether or not we classify directors as independent for governance purposes, my expectation of every Director is that they will contribute to the Board debate in a frank an independent way, which gives the Board the benefit of the experience and skills which each director brings to the Board table. And that applies equally to all members of the Lowy family who sit on the Board. Each of myself, David, Peter and Steven frequently express different points of view at meetings. The Lowys do not speak with one voice and the Board would be a less dynamic forum if we did.

Of course Peter and Steven as Group Managing Directors and myself as Chairman are deeply involved in the day to day running of the business. Steven and I live and work in Australia and Peter has lived in America for quite a while. We all travel extensively in each market where the Group operates and we visit other markets as well. We like to think that we bring to the table a wealth of operating experience, built up over many years together at the coal face.

David Lowy brings a different perspective to the Board. For 13 years he served as Managing Director. In the year 2000, he became a Non Executive Director when he left his executive role with the Group to manage the Lowy Family Group of companies. These days David thinks more like an investor than an operational executive. He asks the questions that shareholders would ask if they were in the room. He has his finger on the pulse of equity and capital markets around the world and has access to the thoughts and opinions of many of the worlds leading investors, fund managers and advisors.

David is also the Group’s Deputy Chair and Chairman of the Board Risk Management Committee. His contribution to the Board, like that of Steven, Peter and each and every Director who sits on the Board, is both valuable and unique.

I will say a bit more on the topic of independence when we deal with the resolution for the re-election of Stephen Johns.

Before moving to the formal resolutions, I would like to acknowledge today the contribution of Carla Zampatti to the Westfield Group since she was elected a director in 1997. Carla has announced her intention not to stand for re-election today.

Carlas achievements in the retail and fashion industries are legendary, and because of this she was always able to bring a unique and highly valued perspective to the deliberations of the board.

But Carla is not only an accomplished businesswoman. She is a pleasure to work with: always gracious, always charming, and she will be missed by us all.

Thank you Carla.