Shopping center owner Westfield Group sees bottom
Peter Lowy, managing director of the world's largest owner of shopping centers, Westfield Group, told Bloomberg in a TV interview that property values in the U.S., U.K., Australia and New Zealand have bottomed out, and his company won't need to raise new capital by selling shares of stock. He said that he expects stabilization in all the markets in which Westfield operates, and that the company has the resources for future needs from its own sources. That's good news because many economists have been indicating the commercial marketplace isn't yet near the bottom.
Westfield raised $3.3 billion in equity and $3 billion in debt since the start of the year to beef up its balance sheet after $2.9 billion in asset writedowns in the first half of the year. Westfield owns 55 shopping malls in the U.S., where commercial properties lost 27 percent this year through June, according to Moody's Investor Services.
Westfield's net less for the first half of 2009 was $708 million, compared to a profit of $1.29 billion a year ago. This included asset writedowns and a mark-to-market gain of $932 million on financial instruments. Westfield said banks agreed to extend its deadline on $1.4 billion of the company's debt, so the company will not be selling additional shares. But the company will cut its dividend payments by 70 percent to 75 percent of operating earnings to retain about $500 million a year.
Westfield earns more than one-third of its revenue from shopping malls in the U.S., where it has seen sales drop 6.2 percent. Australian centers posted the biggest gain in any of its markets, rising 5.1 percent. Australian consumer confidence jumped this month to the highest level in two years.
Let's hope Lowy's optimism does prove to be true for the commercial markets they serve. It will mean that the global economy has avoided an even greater financial catastrophe, such as another Great Depression. That would match expectations of Fed Chairman Ben Bernanke, who told people participating in the Fed's annual retreat at Jackson Hole, Wyoming that, "Prospects for a return to growth in the near term appear good." He did also indicate that "critical challenges" remain.
Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies.