Westfield Group announces strong operational and development earnings
27 February 2007
The Westfield Group (ASX:WDC) today announced its full year results, reporting Operational segment earnings for the year ended 31 December 2006 of $1.65 billion, up 8.5% over the prior year (on a constant currency basis). This represents an increase of 6.0% on a fully diluted basis.
Net profit for the year was $5.58 billion, which includes property revaluations and mark to market adjustments. The distribution for the year was $1.87 billion representing 106.5 cents per security.
Assets were revalued during the year resulting in a $5.1 billion increase, which includes $950 million of development gains recognised in 2006 from developments completed during the year. The value increase across the balance of the portfolio was driven by increased income and yield compression.
Westfield Group Managing Directors, Peter Lowy and Steven Lowy, said This result highlights the strength of Westfields business model. The two key contributing factors to the overall result for the year were a solid operational performance across the global portfolio and the successful delivery of 12 development projects. We continue to operate in a solid retail environment in all markets with strong demand for retail space in both our existing centres and development projects.
In 2006 the Group completed $2.0 billion of development projects (Westfield Group investment – $1.6 billion) in the United States, Australia and New Zealand. These projects delivered significant investment returns, achieving a weighted average income yield of 9.6%, and development gain on completion of $1.1 billion.
Major development projects completed in 2006 include San Francisco Centre, Century City and Topanga in Los Angeles, Chermside in Brisbane and Liverpool and Parramatta in Sydney.
At year end there were 15 projects underway at a forecast investment of $6.6 billion, with the Groups share being $4.6 billion. This included $1.5 billion of developments commenced during 2006.
Highlights for the year include:
- Close to 100% occupancy in Australia, New Zealand and the United Kingdom. In the US, the portfolio was 94.5% leased at year end.
- Comparable shopping centre net operating income growth of 5.7% in Australia and New Zealand, 3.0% in the United States and 6.3% in the United Kingdom.
- Positive growth in specialty retail sales in the United States, Australia, New Zealand and the United Kingdom.
- Strong leasing activity with almost 4,000 lease deals completed globally, representing approximately 670,000 square metres of specialty store space equivalent to approximately the specialty area in 18 to 20 super regional malls.
- The execution of new major store deals in Australia with Coles, Myer and David Jones; in the United Kingdom with John Lewis, House of Fraser and Debenhams; and in the United States with Federated, Nordstrom, Target and JC Penney.
- The acquisition of $1.3 billion of property interests including a 50% interest in Cairns Central in Queensland; the remaining 75% interest in Stratford City in London; and the ground lease for Westfield Southcenter in Seattle, Washington.
- The disposal of 8 non-core assets in the United States for US$550 million.
- The raising of approximately $2.6 billion from the sale of a 50% joint venture interest in the Merry Hill shopping centre, United Kingdom to Queensland Investment Corporation for 524 million and the issue of $1.25 billion of Property Linked Notes (settled post balance date).
The Group has interests in 121 shopping centres across Australia, the United States, the United Kingdom and New Zealand with a gross value of approximately $60.7 billion and encompassing 22,750 retail outlets. The size and quality of the portfolio with its geographic diversity, combined with the Groups intensive management, continues to provide the foundation for sustainable income and capital growth.
Focus will remain on the Groups development program, with the scheduled commencement of $1.5 – 2.0 billion of new development projects in 2007 of which approximately $1 billion has already commenced, and the efficient recycling and use of capital to fund this investment, Mr Lowy said.
The distribution for the 2006 year included a capital component for the first half of $128 million. In accordance with the Groups Distribution Policy, the Group ceased to distribute these project profits from 1 July 2006.
For 2007, the Group is targeting a distribution of 106.5 cents per security which will be met by an increase in operational segment earnings.
The Westfield Group (ASX Code: WDC) is an internally managed, vertically integrated, shopping centre group undertaking ownership, development, design, construction, funds/asset management, property management, leasing and marketing activities and employing in excess of 4,000 staff worldwide. It has investment interests in 121 shopping centres in four countries, with a total value in excess of A$60 billion and is the largest retail property group in the world by equity market capitalisation.