Westfield Trust slips after Lowys' exit

INVESTORS in Westfield Retail Trust have marked down the stock after the surprise exit of the Lowy Family Group, the family's private investment fund, with some saying it was an indication that growth prospects for the vehicle lay outside Australia.

The co-chief executive, Peter Lowy, held a briefing at the UBS offices in Melbourne on Friday, where he suggested that if sales growth in Australia did not pick up, rents might have to fall.

A fund manager who was present and declined to be named, said the feeling was that the group now appeared to be indicating its overseas businesses were offering better growth in the future, given the flat retail environment in Australia.

At Westfield's full-year results on Wednesday, the other co-chief executive, Steven Lowy, said the Australia and New Zealand malls' net operating income growth would be between 1.5 per cent and 2 per cent, lower than last year's figure of 2.9 per cent.

As a result, the group said new leases were being signed with rents 4 per cent to 5 per cent lower than previous expiries across about 15 per cent of the tenants in Australia . Close to 60 per cent of Westfield's revenue is generated from its development and management of malls across North America, London and the new joint-venture investments in Milan and Brazil.

The retail behemoth has a development pipeline of $1.25 billion to $1.5 billion for this year, with its share being about $500 million.

The financing will come from asset sales, cost cutting and "redeployment of capital".

The group is also using capital for its share buyback program.

Paul Checchin, of Macquarie Equities, said while the retail environment in Australia was showing signs of improvement, the Lowys' exit at this point in the cycle raised concerns about the extent of deterioration yet to occur.

"Again, we have for some time been expecting a downward structural reset in the retail sector to occur through higher vacancy rates, negative rental reversions and lower development volumes," he said.

The managing director of Maxim Asset Management, Winston Sammut, said Peter Lowy had reiterated the company's commitment to continue with the share buyback.

"The exit of the LFG [Lowy Family Group] was a surprise, however it is an investment decision made independently by the manager of the LFG, David Lowy," Mr Sammut said.

After the close of trade on Thursday, the Lowy Family Group sold 218 million securities in Westfield Retail Trust at a price of $3.09 per share. A majority of the securities were placed with institutions.

The sale was completed at the same time a majority of the real estate investment trusts paid out about $2.3 billion in cash for distributions as part of the profit season, giving investors firepower to buy the shares.

Westfield Retail Trust shares finished 4.09 per cent lower at $3.05.