Chairman Frank Lowy’s address to the annual general meeting of Westfield Holdings Limited
12 November 1998
You will probably have seen the message published in this year’s annual report honouring John Saunders who passed away last December.
I would like to take this opportunity to acknowledge his contribution to this company. As you may be aware, we were the co-founders of Westfield and together laid the foundations for its success.
John was also well well-known for his work in the community and played a major role in many charitable and community programs.
During his struggle with a heart condition, he displayed courage and calm. His humility and capacity for getting on with people will never be forgotten.
Like many of you here today, I was a friend and a colleague of John’s and I am sure you will join me in extending our best wishes to his family.
It now gives me great pleasure to address this Annual General Meeting at a time when the prospects for growth for Westfield Holdings are outstanding.
It is true that we are experiencing volatility in world financial markets, but the fundamentals of the retail property business in Australia, the United States, and New Zealand are very sound and the Westfield Group has created for itself a unique role within that industry. Our record of unbroken profit increases continued this financial year for the 38th year in a row, with profit after tax up 17% to $102.6 million – the first time profit after tax has exceeded $100 million.
Earnings per share increased 16% and the dividend payout for the year increased 16.3%.Taking a broader view, the company now has $15 billion of shopping centre assets under management in an international portfolio of prime regional shopping centres. The market capitalisation of the four listed Westfield vehicles (Westfield Holdings Limited, Westfield Trust, Westfield America Trust, Westfield America, Inc.) is $12.6 billion.
We have a total of 11,400 retailers in 79 centres in four countries, making the Westfield Group the 3rd largest owner and manager of shopping centres in the world.
Our future growth will come by increasing the quality and size of our asset base in existing markets and by increasing our geographic diversity by entering carefully selected new markets. In Australia, all facets of the business are strong. Our $2 billion redevelopment program is in full swing and the demand for space by retailers has kept occupancy levels at 99%.
More than 70% of Australians live within a 30-minute drive of a Westfield Shoppingtown and this year, in a further effort to build on that customer base, we launched an important, long-term initiative.
Westfield brought together the leaders in loyalty programs in Australia – the ANZ bank and Visa International – to develop the Westfield Loyalty Program, based on the Westfield Visa Credit Card.
As this program is introduced over the coming years, it will provide Westfield retailers with the potential to better target their marketing efforts and direct customers to their stores. It will open a range of promotional and marketing opportunities – all supported by Westfield, the ANZ and Visa.
This is yet another example of the value of our strong brand name which allows us to take marketing initiatives supported by all Westfield Shoppingtowns across Australia. It will also prove valuable in making Westfield more attractive to retailers who can use the loyalty program to achieve better retail sales and will complement our other marketing initiatives such as our Olympic Games sponsorship. In the United States Westfield America, Inc. continues to grow, having already increased the size of the business five fold over the past five years.
Westfield America, Inc. has almost completed the acquisition of the TrizecHahn shopping centres that it announced in April.
We have been managing the TrizecHahn centres for several months and we are even more confident about their potential. We look forward to them being a major driver of our profit growth in the U.S. in the years ahead.
By calendar year’s end Westfield Holdings will manage 39 shopping centres in the U.S.
Westfield America, Inc. will be the 3rd largest shopping centre owner in America and the largest in California with eight centres in San Diego, eight in Los Angeles and four in northern California.It will have a multiple presence in a further three major markets – St. Louis; Washington D.C. and Connecticut.
To give you some sense of the size of our business in the U.S. let me give you one simple statistic.Our shopping centres in the U.S. serve a combined trade area of 26.5 million people.This is certainly an impressive number next to Australia’s entire population of 18 million.
But it also underscores the potential for us to grow further in the U.S. where the total population is approximately 280 million.
As I said in last year’s address, the movement away from direct ownership of commercial properties – both by institutional investors and private individuals – towards the securitised real estate markets is well underway in the U.S.
As one of the leading Real Estate Investment Trusts in the U.S., Westfield America, Inc. is therefore well placed to grow as a result of this shift in the ownership structure. We are also exploring other ways to grow our core business and today it gives me great pleasure to announce that we have recently secured contracts to manage and develop the retail component of a further two major international airports in the US.
We already manage the retail component of the two airports in Washington D.C. and one terminal at Logan International in Boston and we have now taken over the retail management of Orlando airport in Florida and one terminal at Newark Airport outside New York. Another recent development has been Westfield Trust’s proposal to acquire a 47% interest in the St. Lukes Group shopping centre company in New Zealand.
Westfield Holdings was appointed manager and developer of the St. Lukes portfolio of 10 shopping centres in April 1997 and the Trust’s proposal to acquire a direct stake in the company should consolidate the Group’s position in the New Zealand market. The Kuala Lumpur City Centre retail project in Malaysia, in which Westfield Holdings has a 10% equity interest, was opened in May. Westfield has a management and leasing role in the project. I would like to take this opportunity to thank the members of the board for their contribution to the ongoing success of Westfield Holdings.
We are fortunate to have such a capable and experienced team to help guide our strategy and I look forward to working with them in what promises to be yet another exciting and challenging year ahead.
I would also like to acknowledge the contribution of our staff, here in Australia and in all the markets in which we operate, who have worked so hard to see that Westfield continues to be a world leader in the shopping centre industry.
Our reputation is extremely important and it is built upon and enhanced each day through the initiative and skill of our staff. They deserve our recognition and thanks. Westfield Holdings is well positioned for the future, given the strength of its underlying business, the geographic diversity of its asset base, and the prospects to further grow our business in new markets.
The new executive incentive schemes you will be asked to approve today will further underpin the company’s prospects by helping to motivate and retain our exceptional and dedicated management team, and to attract new, high quality executives.
I am sure you will have noted from my address to you today that we are confident about the company’s future and what we expect of ourselves in achieving that success.
I think shareholders will be pleased to learn that we expect profit growth in the current year to be in excess of 20% over last year and that there are also good prospects for further growth in the years ahead working off this higher base.
Our profits are growing for three main reasons:
Firstly, the underlying strength of our business is very solid. Retail sales in Westfield centres are strong and demand for space continues to grow.
Secondly, the substantial increase in the size of our business over the past few years has created economies of scale which enhances the margins we can achieve across our various activities.
Finally, we have introduced efficiencies into our day-to-day operations which, combined with the strong demand for space and economies of scale enables us to achieved solid profit growth.