Westfield Corporation (ASX:WFD)

Steven Lowy & Peter Lowy
Co-CEOs
Market Cap (AUD): 18.37B
Sector: Real Estate
Last Trade (AUD): 0 +0 (+0%)
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1. About

Westfield Corporation is a publicly-listed stapled group consisting of Westfield Corporation Limited and America Management Limited as the responsible entity for WFD Trust and Westfield America Trust. Westfield Corporation has operations in Australia, the United Kingdom, and the United States. The group is headquartered in Sydney. The Company creates flagship retail destinations in London, New York, San Francisco and Los Angeles among our portfolio of 35 centres. The Company manages every aspect of its portfolio - from design, construction and development to leasing, management, and marketing. Westfield began with one shopping centre in the outer suburbs of Sydney, Australia, and has grown to become one of the world’s largest shopping centre owners and managers, playing a major role in changing the way the world shops.

 

2. Business model

 

The Group operates in following divisions:[1]

 

Divisions

Revenue ($M)

% of Revenue

% of Profit (before Int & Tax)

Profit drivers[2]

Property investment

$1,315.7

62.5%

97.8%

Property revaluations of $596.8 M have arisen during the year, driven by the value created from the Group’s completed developments and revaluations from the Group’s flagship assets.

Property and Project Management

$789.4

37.5%

16.8%

Management and project income was $33.1 M for the Financial Year. This includes income from managing centres held in joint ventures and airports; and project income including developments at UTC and Valley Fair

Corporate

N/A

N/A

(14.6%)

N/A

3. Strategy

 

  • Documentation for the proposal is expected to be sent to securityholders in April with the vote and implementation expected to occur later in the first half of 2018[3]
  • WFD has $6.1bn of future retail development projects including Westfield Milan and Croydon in South London. At Westfield Milan, to be anchored by a Galeries Lafayette department store, pre-leasing is progressing well and works have commenced on necessary highway infrastructure. We expect to be in a position for the project to commence later in 2018
  • WFD continues to progress residential rental projects across the US and UK. During the year we commenced the 300 apartment project at UTC in San Diego and we expect to be in a position for the 1,200 apartment project at Stratford to commence later in 2018  
  • Westfield remains confident in the future outlook for its business, which is underpinned by the quality and strength of its Flagship portfolio, and the $8.5bn development program
  • For 2018, WFD’s earnings will be positively impacted by the stabilisation of recently completed development projects including Century City and UTC together with the completion of the expansion of Westfield London
  • Given the proposal to combine Westfield and Unibail-Rodamco, there will be no FFO or Distribution forecasts for 2018

4. Markets

 

The Group operates in the following industries:[4]

 

Industry

Industry Revenue (2017)

Growth Rate

Shopping Centre Operators (Australia)

$8 billion

1.9% (annual 13-18)  

Shopping Mall Management (US)

$16 billion

 (0.8%) (annual 12-17)

5. Competition

 

Major competitors Include:[5]

 

  • Vornado Realty Trust (NYSE:VNO)
  • GGP Inc (NYSE:GGP)
  • Simon Property Group Inc (NYSE:SPG)

6. History

 

1959[6]

The first shopping centre opened in Blacktown

 

1960   

Gone public on the Australian Stock Exchange

 

1961   

The first purpose-built centre, funded by the recent float, opened at Hornsby at a cost of £345,000

 

1966   

Burwood opened, it was praised as one of the most beautiful indoor shopping centres in the world

 

1970   

Opened new office at Westfield Towers

 

1975   

By continually fine-tuning its financial strategy, Westfield's profit before tax from income-producing properties rocketed to 85 per cent

 

1977   

Entered the US market

 

1979   

Westfield remodelled its capital structure with the establishment and listing of Westfield Holdings  Limited and Westfield Property Trust to meet changing trends in the capital market

 

1980   

Acquired three new centres in the United States

 

1982   

Westfield Trust was floated on the Sydney Stock Exchange

 

1985   

In a series of firsts, the Group undertook a major redevelopment at Westside Pavilion, Los Angeles, after demolishing most of the existing centre

 

1986   

Westfield made business headlines when it outbid other parties to successfully acquire three prestigious centres in the Macy's transaction

 

1994   

Westfield tripled the amount of space it managed in the United States with the US$1 billion CenterMark transaction, which saw the Group acquire 19 centres across America including Topanga, and Plaza Bonita in California and Annapolis in Maryland

 

1996   

Westfield America Trust was listed on the Australian Stock Exchange

 

1997   

Entered into New Zealand

 

1998   

Westfield acquired the US$1.4 billion TrizecHahn portfolio adding a further 12 properties to the Group's Californian portfolio, making it the state's biggest shopping centre operator

 

2000   

Entered the United Kingdom with the acquisition of a centre in Nottingham

 

2001   

The Group acquired Sydney's Centrepoint shopping centre - the home of the iconic Sydney Tower and site of the future Westfield Sydney City

 

2002   

Nine shopping centres were acquired in the United States with the US$756 million Richard E Jacobs transaction

 

2003   

Westfield acquired the $1.9 billion AMP Shopping Centre Trust, adding interest in a further nine high quality shopping centres

 

2004   

Birth of Westfield Group

 

2008   

The United Kingdom's largest urban shopping centre opened at Westfield London

 

2011    

In 2011 Westfield announced the Group’s first iconic project in Europe. A joint venture with Stilo Immobiliare Finanziaria

Expanded into Brazil establishing a joint venture, Westfield Almeida Junior Shopping Centers S.A

 

2012   

The gateway to the London 2012 Olympic Games, the £1.75 billion Stratford City opened with 175,000 square metres of retail, commercial, entertainment, and leisure space serving a catchment of more than 4 million people

 

2014   

Westfield Corporation was created in June 2014 through a restructure of Westfield Group and Westfield Retail Trust

 

2016   

Westfield Labs evolved to become Westfield the world's leading brands and retailers to give consumers innovative digital and physical commerce experiences

Westfield World trade center - Westfields most ambitious project to date in the united states, the $1.5 billion World Trade Center, opened in August 2016. This new New York city experience brings together commerce, community and culture in the spectacular Santiago designed Oculus

 

2017   

Unibail-Rodamco And Westfield Corporation announce the creation of the world’s premier developer and operator of flagship shopping destinations

7. Team

 

Supervisory Board[7]

 

Colin Dyer – Chairman of the Supervisory Board and Chairman of the Governance, Nomination & Remuneration Committee

Philippe Collombel – Member of the Supervisory Board

Jill Granoff – Member of the Supervisory Board

Mary Harris – Member of the Supervisory Board

Dagmar Kollmann – Member of the Supervisory Board

Peter Lowy – Member of the Supervisory Board

John Mcfarlane – Member of the Supervisory Board

Roderick Munsters – Member of the Supervisory Board

Sophie Stabile – Member of the Supervisory Board

Jacques Stern – Member of the Supervisory Board

Jacqueline Tammenoms Bakker – Member of the Supervisory Board

 

Advisory Board

 

Sir Frank Lowy, AC – Chairman of the Group Advisory Board

 

Management Board

 

Christophe Cuvillier – Group Chief Executive Officer

Jaap L. Tonckens – Group Chief Financial Officer

 

Senior Management Team

 

Christophe Cuvillier – Group Chief Executive Officer

Jaap L. Tonckens – Group Chief Financial Officer

Astrid Panosyan – Group Chief Resources Officer

Olivier Bossard – Group Chief Development Officer

Jean-marie Tritant – President US

Peter Huddle – Chief Operating Officer United States

Gerard Sieben – Chief Financial Officer, WFD Unibail-Rodamco N.V.

Michel Dessolain – Chief Operating Officer Europe

Peter Miller – Chief Operating Officer UK/Italy/Benelux

Fabrice Mouchel – Chief Financial Officer Europe


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8. Financials

 

2017 Full Year Results Presentation

 

Financial Year 2016/17 (ended 31 December):[8]

 

Divisions

Revenue ($M)

% Change

Profit (before Int & Tax) ($M)

% Change

Property investment

$1,315.7

10.8%

$802.7

8.4%

Property and Project Management

$789.4

29.3%

$138.1

9.5%

Corporate

N/A

N/A

($119.9)

(3.3%)

Total

$2,105.1

17.1%

$820.9

9.4%

9. Risk

 

Major risks include:[9]

 

Capital Risk Management

The Group seeks to manage its capital requirements to maximise value to members through the mix of debt and equity funding while ensuring that Group entities:

  • comply with capital and distribution requirements of their constitutions and/or trust deeds;
  • comply with capital requirements of relevant regulatory authorities;
  • maintain strong investment grade credit ratings; and
  • continue to operate as going concerns.

 

Financial Risk Management

The Group’s principal financial instruments comprise cash, receivables, payables, interest-bearing liabilities, other financial liabilities, other investments and derivative financial instruments.

The Group manages its exposure to key financial risks in accordance with the Group’s treasury risk management policies. These policies have been established to manage the key financial risks such as interest rate, foreign exchange, counterparty credit, and liquidity.

 

Interest Rate Risk Management

The Group is exposed to interest rate risk on its borrowings and derivative financial instruments. This risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate interest-bearing liabilities. Fixed rate debt is achieved either through fixed rate debt funding or through the use of derivative financial instruments approved by the Board. These activities are evaluated regularly to determine that the Group is not exposed to interest rate movements that could adversely impact its ability to meet its financial obligations and to comply with its borrowing covenants.

 

Exchange Rate Risk Management

The Group is exposed to exchange rate risk on its foreign currency earnings, its distribution, its foreign currency denominated shopping centre assets and other assets. The Group manages these exposures by entering into foreign currency derivative instruments and by borrowing in foreign currencies.

 

Credit and Liquidity Risk Management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. Credit limits have been established to ensure that the Group deals only with approved counterparties and that counterparty concentration risk is addressed and the risk of loss is mitigated. Counterparty exposure is measured as the aggregate of all obligations of any single legal entity or economic entity to the Group, after allowing for appropriate set-offs which are legally enforceable. A maximum credit limit is allocated to each counterparty based on its credit rating. The counterparty credit risk associated with investment instruments is assessed based on its outstanding face value. At 31 December 2017, the aggregate credit risk in respect of cash and cash equivalents is $143.7 million (31 December 2016: $140.2 million). At 31 December 2017, the aggregate credit risk in respect of derivative financial instruments is $16.3 million (31 December 2016: $52.8 million). In accordance with the Group policy, credit risk is spread among a number of creditworthy counterparties within specified limits. The Group had 100% of its aggregate credit risk spread over two counterparties each with an S&P long-term rating of A+ or higher. The Group undertakes active liquidity and funding risk management to enable it to have sufficient funds available to meet its financial obligations as and when they fall due, working capital and expected committed capital expenditure requirements. The Group prepares and monitors rolling forecasts of liquidity requirements on the basis of expected cash flow.