Westfield Retail Trust
Westfield Retail Trust’s recent annual meeting was a surprisingly positive affair considering the wider concerns about Australian retailing and property prices. The trust’s portfolio of 54 Australian and New Zealand shopping centres is practically full, rents have increased 3.1% over the past 12 months (to 31 Mar) and speciality retailers increased sales by 1.2%. Furthermore, the trust remains eager to increase earnings with a $1.3bn pipeline of new developments over the next 5-7 years. Recently completed projects include the flagship Sydney centre in Pitt Street Mall and Belconnen Mall in Canberra.
As Australian retail rents remain some of the highest in the world, future income growth will be hard won (see Reassessing Westfield—Part II from 30 Jan 12 (Hold – $2.52)), which is why the trust trades at a 15% discount to net tangible assets. The discount provides a margin of safety for existing investors, but with the security price increasing 11% since 14 Mar 12 (Hold – $2.50) and the forecast yield falling to 6.7%, Westfield Retail Trust remains a HOLD.