Westfield America Trust increases profit by 65.3% to $269.6 million
13 August 2003
Countries: United States
Westfield America Trust today announced a profit after tax for the 6 months ending 30 June 2003 of $269.6 million. This result is an increase of 65.3% on the same period last year, which is primarily due to the impact of the Rodamco North America (RNA) and Jacobs acquisitions together with income growth from existing assets.
The Trust’s first-half distribution per unit of 7.60 cents represents an increase of 3.4% on the distribution for the same period last year, which included a capital payment.
The Directors are pleased with the result, which was achieved in tough trading conditions.
* All amounts in the media release are in Australian dollars, unless otherwise stated
New Acquisition – The Shops at North Bridge, Chicago, Illinois
Westfield America has agreed to acquire a 33% interest in a major shopping centre on Chicago’s “Magnificent Mile” known as “The Shops at North Bridge”, for US$105 million. The property is valued at US$315 million and consists of 64,000 square metres of leasable area including Nordstrom as the anchor tenant. The specialty shops have average sales per square foot of US$507. The property is located in the prime retail area in downtown Chicago with frontage on North Michigan Avenue which is a world class retail destination benefiting from Chicago’s convention, visitor and tourism trade. This acquisition is expected to close in the third quarter at which time the centre will be branded Westfield Shoppingtown North Bridge.
As at 30 June 2003, the Westfield America portfolio maintained the 93% leased level achieved at June 2002.
“While trading conditions in the United States continue to be soft, there remains good demand for quality space, and this demand provides the longer term foundation for the Trust’s ongoing investment program,” said Westfield Managing Director Peter Lowy.
Retail sales totalled US$6.4 billion during the half year to 30 June 2003, an increase of 2.1% on the same period last year. For the six months to June 2003, specialty store sales totalled US$2.6 billion and comparable specialty store sales per square foot decreased 0.5% against those recorded in the six months to June 2002.
“For the first time since September 2001, sales in the Trust’s centres are showing positive momentum. This is reflected in comparable specialty store sales per square foot for the June 2003 quarter increasing by 1.3% over the second quarter of 2002.” Mr Lowy said
Palm Desert and Great Northern
Two projects were completed during the six-month period. The US$35 million construction, fit-out and renovation of Westfield Shoppingtown Palm Desert in Palm Desert, California was completed in June. The project is currently 85% leased with further lease-up to occur prior to completion by Sears of its department store in the fourth quarter of 2004.
The US$16 million project at Great Northern in Cleveland, Ohio, was underway when the centre was purchased from RNA in May 2002. The project was successfully completed and opened in March 2003 and is currently 91% leased.
Since acquisition of the Jacobs and RNA portfolios in 2002, the Trust has been concentrating on opportunities to invest in the expansion and improvement of both its pre-existing and newly acquired properties. Plans have progressed significantly since the Trust’s last earnings report in February 2003. Since that time the total value of investment projects underway or significantly progressed has increased from US$880 million to US$1.3 billion, of which US$475 million is currently underway including the following major projects:
The Trust’s US$142 million redevelopment of Westfield Shoppingtown Oakridge, in San Jose, California, includes the addition of a 20-screen Century theatre, a new Borders Books and Music, Linens ‘N’ Things, a food court, restaurants, 90 specialty stores and a renovation of the existing centre. The project is expected to be completed in the fourth quarter 2003, six months ahead of schedule.
The US$113 million redevelopment of Westfield Shoppingtown Franklin Park, in Toledo, Ohio, is under way. The project includes the replacement of a vacant Jacobson’s department store, with a new 16-screen National Amusements theatre, a Galyan’s (active lifestyle retailer), expansion of the existing Dillard’s department store and the addition of a mini-major and 25 new specialty stores. The project is expected to be completed in the second quarter of 2005.
The Trust has commenced the US$111 million redevelopment of Westfield Shoppingtown Wheaton, in Wheaton, Maryland. The project includes a new Macy’s department store, up to 50 additional specialty stores and parking, as well as a comprehensive renovation of the existing centre. This project is expected to be completed in the first quarter of 2005.
The US$98 million redevelopment of Westfield Shoppingtown Santa Anita in Los Angeles, California is under way. The project includes a relocated food court, the addition of a new 16-screen AMC theatre, Borders Books and Music, Sports Chalet, restaurants and approximately 30 new specialty stores. The development is expected to be finished in the second half of 2004.
Westfield America Trust’s forward investment pipeline includes the following projects, which are expected to commence later in 2003 or early 2004:
Construction is expected to begin prior to year-end on Westfield America and Forest City Enterprises’ US$390 million redevelopment and expansion of the San Francisco Centre and the adjacent former Emporium department store. Upon completion, the centre will include the largest Bloomingdale’s department store outside New York and the largest Nordstrom department store outside Seattle and is expected to be one of the pre-eminent retail destinations in the US. The project is expected to be completed in 2006.
Construction is also expected to commence shortly on four major expansion projects at Westfield Shoppingtowns Century City (US$95 million) and Topanga (US$230 million), both in Los Angeles, California, Parkway (US$25 million) in San Diego, California and Connecticut Post (US$100 million) in Milford, Connecticut.
Other Property Purchases and Sales
In March Westfield America sold its investment in the Pirelli site in New Haven, Connecticut. The sale price of US$19.8 million, was in line with book value.
In June 2003, the West Valley Partnership, which owns a major 36.4 acre site connecting Westfield Shoppingtowns Topanga and Promenade in Los Angeles California, sold a portion of land for US$19.1 million. The Trust’s 42.5% share of the gain on sale was US$3.8 million (A$6.1 million). Subsequent to this transaction, Westfield America purchased the remaining 57.5% in the West Valley Partnership for US$20.4 million. This acquisition will facilitate the longer-term development of this parcel, creating a unified retail and commercial hub for the San Fernando Valley market.
Taubman Centers, Inc.
In January this year Westfield America and the Simon Property Group made a joint offer to acquire the common stock of Taubman Centers Inc. for US$20 per share. The offer expires on 29 August 2003.
The Taubman portfolio comprises 21 super regional and regional malls located in nine US states. The Taubman board and the Taubman family have rejected the offer but on February 14, approximately 85% of the common shareholders tendered their shares.
The matter has been subject to litigation and while the initial ruling was in Westfield and Simon’s favour, the decision is being appealed.
World Trade Center
The insurance claims and future planning issues relating to the World Trade Center are progressing and will still take some time to resolve. The Trust remains confident that the property insurance policies are adequate to protect its investment.
The underlying US dollar earnings were converted into Australian dollars at an average exchange rate of US$0.5558 which reflects the impact of currency hedging.
During the period the Trust raised equity capital of $414 million comprising $258 million through the Dividend Reinvestment Plan and $156 million on the conversion of the final instalment of the Partly Paid Units.
During the six-month period 11 shopping centres and certain sundry properties were revalued resulting in a revaluation surplus of US$102 million. At 30 June 2003, the Trust had total assets of US$10.2 billion (compared with assets of US$9.3 billion at June 2002) with a leverage ratio of 45.7%.
During the 6-month period to 30 June 2003, the net tangible assets per unit of the Trust increased by 3.2% in US dollar terms from US 94 cents to US 97 cents. As a consequence of the appreciation of Australian dollar the net tangible assets per unit decreased in Australian dollar terms from $1.66 to $1.45 at 30 June 2003.
The Trust has hedged approximately 95% of its expected US dollar profit for the year to 31 December 2003. Barring unforeseen circumstances, Directors are confident of achieving consensus broker forecasts for a full-year distribution of 16.1 cents per unit providing the Australian dollar exchange rate remains around current levels.
The longer term growth prospects of the Trust continue to be strong, underpinned by a high quality portfolio and a substantial development project pipeline.
Westfield America Trust (ASX: WFA) with gross assets of $15.3 billion and a market capitalisation of $7.5 billion is the 2nd largest property trust listed on the Australian Stock Exchange. WFA owns a majority interest in the Westfield America portfolio of 63 centres, branded as Westfield Shoppingtowns. Westfield Shoppingtowns are home to more than 8,400 specialty stores in California, Colorado, Connecticut, Florida, Illinois, Indiana, Maryland, Missouri Nebraska, New Jersey, New York, North Carolina, Ohio and Washington.