Westfield Trust – chairman’s address to unitholders’ information meeting

15 November 2001

Countries: Australia

Good afternoon ladies and gentlemen, this is the first of theinformation meetings we are going to hold each year. We havemeetings for all Westfield entities today because many of you haveinvestments in the various vehicles and I think this is a veryefficient way of giving you the opportunity to attend them all ifyou wish.

I would like to begin with a summary of the period to 30 June, thendeal with more recent events and our prospects for the yearahead.

If you have attended the earlier meetings there will inevitablybe some repetition.

For the period to 30 June 2001, we announced a distribution of$214 million, up 16% on the corresponding period last year,representing a distribution of 11.4 cents per unit – up 4.1%. Thisgrowth in distribution resulted from a combination of factors -existing centre income growth, contributions from recentlycompleted developments and transactions, including the amalgamationlast year of the St Lukes Group with Westfield Trust in NewZealand.

This was a solid result and reflects the strength of theWestfield Trust in a difficult retail trading environment which wasexacerbated by the introduction of the GST, the Sydney Olympics andthe slowing economy.

Retail trading conditions in Australia were softer in the 12 monthsto 30 June than at any time in recent years. Despite this, both thedemand for space and new developments continue to be solid with theoccupancy levels in existing centres remaining above 99%.

Retail sales in the Trust’s Australian centres totaled $8 billion,up 0.5% on a comparable basis, while in New Zealand sales increased1.1% to NZ$1.3 billion.

The September quarter figures initially showed signs ofimprovement, with sales growth of 0.6% for July and 1.6% forAugust. However, not surprisingly, in September sales were down -minus 2.9%.

As of this month, vacancies have increased marginally but theoccupancy level remains high at more than 99.0%.

Despite the current economic conditions, Westfield Trust remainswell placed to continue its strong performance.

Since the formation of the Trust in 1982, I have seen economiccycles come and go. Westfield Trust has always emerged from thesedownturns stronger than it entered them.

Compared with our peers, or against the industry index,Westfield Trust has performed consistently well over the short,medium and long term, as you can see from the table on thescreen.

We have been able to achieve these results for a number ofreasons.

The strength of our business lies in the fact that shopping centrescan create a franchise in their particular trade area, if they arewell managed.

The high quality shopping centres Westfield Trust acquires are notsimply a commodity, like some other forms of real estate. Ourcentres are “living assets” which are constantly being redevelopedto adapt to changes in consumer tastes and this provides theopportunity to continually improve the property and increase itscapital value and its retail sales potential.

The Trust’s rental income stream is underpinned by the 7200 leasesin our Australian and New Zealand shopping centres. These leasesare medium and long-term, at least 5 years, with many at 10 yearsor more.

This situation works to absorb many of the shocks felt in otherbusinesses that are more susceptible to short-term economicfluctuations, although obviously we are not completely immune tolong-term economic downturns.

You can see how resilient our business is by looking at the slideon the screen now.

This is a chart prepared by the Property Council of Australia andits shows how regional shopping centres generate relatively highreturns with low volatility over the long term compared to othertypes of investment.

It is also worth noting that periods of slower growth also provideopportunities to make important acquisitions, as properties thatwould not otherwise be available come to market.

An example was in the mid-90s. Retail conditions were soft and mostpeople were not looking to buy shopping centres. But we look beyondthese cycles and used the opportunity to acquire six properties for$775 million and these have proven to be very valuable additions tothe Trust portfolio.

The centres were Carousel, Galleria and Innaloo in Perth,Chermside in Brisbane, Northgate in Sydney and Fountaingate inMelbourne.

Most of these centres have already been expanded and redeveloped,making them even more valuable to the Trust, and boosting retailsales significantly.

Our redevelopment program is continuing. Late last year we openedthe $300 million Burwood centre in Sydney and completed a $235million redevelopment of Chermside in Brisbane.

Since then, we have successfully completed two further developments- the $360 million Hornsby project in Sydney and the $190 millionproject at Fountaingate in Melbourne.

Notwithstanding the softer economic conditions, I am pleased to saythat we were able to lease 317 specialty shops at Hornsby and 232at Fountaingate – a total of nearly 550 new specialty stores.

In fact, we were able to lease 72 shops to retailers who hadnever had a shop in a Westfield centre before – 47 at Hornsby and25 at Fountaingate.

To achieve these results in a difficult environment demonstratesthe quality of these assets and the desire of the retailers to belocated in a Westfield centre.

They, like us, are setting themselves up for the inevitablerecovery.

In New Zealand, we opened the redeveloped Glenfield Shoppingtownlast year, and Westcity Shoppingtown in July 2001, which featuredWestfield’s entertainment and leisure precinct, The Street, whichhas proved highly successful in Australia and is a first for NewZealand.

Ladies and gentlemen, you will be aware of the strong corporategovernance regime that is part of the Westfield Truststructure.

Until last year this was overseen by a Trustee which wasresponsible for ensuring that interests of unitholders wereprotected.

When the Government introduced the new managed investmentsregime in April 2000, we introduced a Compliance Plan that weregistered with the Australian Securities and InvestmentsCommission.

This plan continues to be monitored by a separate ComplianceCommittee which comprises a majority of external members and whichreports independently to the Board.

This Compliance Committee operates in addition to the continuingrole of the separate Audit & Compliance Committee set up by theBoard to ensure that an adequate compliance and control frameworkexists for the Trust. This committee also maintains regular contactwith the Trust’s external and internal auditors and also reportsdirectly to the Board.

I explained in the previous meeting that following the merger ofWestfield America Inc. and Westfield America Trust, which wascompleted on October 1, we propose to adopt a board and corporategovernance structure for Westfield America Trust along the lines ofthat which applied for Westfield America Inc., the main feature ofwhich was a majority of external members on the Board.

Given this change, we propose also to establish a similar regimefor Westfield Trust and we intend to introduce the new structure inthe coming months.

I am very proud to report that last month, the manager of theWestfield Trust, Westfield Management Limited, was named theProperty Investment Research Trust Manager of the Year.

The award is independently judged on a range of criteria -including corporate governance, investor returns and earningsgrowth; and an assessment of management skills by a panel ofinstitutional investors and brokers.

Even though we take great satisfaction in the investment returns weproduce, it is nice to have that performance recognised in this wayfrom time to time.

Finally, I’m very pleased to be able to conclude this meeting onanother very positive note.

This week Westfield Trust has announced an in-principleagreement with AMP on a $555 million, 3-property transaction.

This will expand and strengthen the Trust’s portfolio with highquality assets in a transaction that is accretive tounitholders.

In short, Westfield Trust will acquire the Centrepoint complex inthe Sydney CBD. This is one of Sydney’s best located propertiessituated between the main CBD stores of Grace Bros. and DavidJones, fronting Pitt Street Mall, and Castlereagh and MarketStreets.

AMP will sell its 50% interest in the Bondi Junction centre toWestfield Trust. As you would be aware, a major redevelopment ofthe centre is expected to get underway next year and the new centrewill become a top-class property for the Westfield portfolio.

AMP will acquire a 50% interest in Westfield Liverpool in Sydneyand Westfield Trust will retain a 50% interest in the centre.

The total capital required for Westfield Trust as a result ofthe three transactions, including costs, will be approximately $210million. This has been funded by an equity issue to institutions of$200 million, and the balance by debt.

This is another example of the strength of our long-termrelationship with institutions like AMP in that we were able todiscuss our respective strategic interests and arrive at a mutuallybeneficial result.

Given the uncertain outlook it is difficult to forecast with anyaccuracy global economic activity.

However, for the reasons I outlined above – the underlying strengthof our business and opportunities for further growth – WestfieldTrust is well placed to continue its strong performance.

Despite the prevailing economic conditions, we can reconfirm thatthe distribution per unit will meet the consensus forecast for thisyear, and we expect distribution growth per unit next year ofapproximately 2%.

Thank you.

I now welcome any questions.