Steven Lowy: Reacting to tough times. Photo: Sasha WolleyTough times for retailers have forced Australia’s biggest shopping centre operator, Westfield, to slash rents to attract new tenants.
Unveiling its full-year results on Wednesday, the group, which is controlled by the Lowy family, revealed new tenants are enjoying 6 to 7 per cent lower rents than tenants looking to renew contracts.
With consumer sentiment remaining stubbornly low, rent reductions have become the standard tactic for attracting new tenants, replacing free fitouts and other incentives used in the past.
Another sign of tough times has been the discussion of a merger between department stores Myer and David Jones, which anchor most of Westfield’s Australian malls.
Westfield’s co-chief executive, Steven Lowy, refused to comment on the merger speculation, but said that if it took place, the group would ”assess any impact on us”.
”We have a long relationship with both entities. In my opinion department stores are robust and, at the margin level, Myer and David Jones have some of the best stores in the world,” Mr Lowy said.
”But, as has happened elsewhere, if space becomes available we can re-lease it.”
The improving consumer sentiment in the US has reversed the situation for Westfield’s American malls, where new tenants are paying 11 per cent more than old ones to secure floorspace. Overseas properties contribute more than 60 per cent of Westfield Group’s total earnings.
Analysts say the disparity in new lease rents between the two markets helps explain why Westfield is splitting its business into northern and southern-hemisphere operations.
For the full year Westfield booked an after-tax profit of $1.6 billion, down 6.7 per cent on its 2012 full year.
But, amid the proposed de-merger and improving overseas operations, the executives have taken a pay cut for the 2013 year.
According to Westfield’s annual report, also released on Wednesday, total remuneration for the company’s top two executives, brothers Peter and Steven Lowy, fell by $1 million in 2013.
In the 2013 year Peter Lowy, who is paid in US dollars, received $US8.15 million ($9 million), down from $US8.9 million in 2013, while Steven Lowy, who will be chief executive of the new Westfield Corporation, was paid $A8.6 million in 2013, down from $A9.4 million.
In a statement, the brothers said no changes were being made to the restructuring proposals.
”Our Australian business and platform has proved highly resilient, due to the high quality of the portfolio with excellent sales productivity, almost full occupancy and continued growth in average rents and net property income,” Steven Lowy said.