Anchors For London Westfield

Sydney Morning Herald

Saturday April 19, 2008

Carolyn Cummins

WESTFIELD Group has confirmed recent British media reports that all four major anchors have taken possession of shops at its #1.6 billion ($3.4 billion) Westfield London development, with the anchor retailers now fitting out their shops before the centre's opening on October 30.

Deutsche Bank's property team says Westfield is also preparing to hand over more than 40 major spaces for fit-out. "Positive news flow at Westfield London is significant, given the scale and history of the project, together with Westfield's broader ambitions in the UK (and potentially continental Europe)," the broker says.

"The news follows a recent successful issue of $US1.1 billion in 10-year debt, which we view as a sign of confidence in the capital structure, and a reminder of flexibility in funding capital requirements.

"Late in 2007 Westfield announced the opening of the #340 million Derby shopping centre. When combined with the successful establishment of a UK wholesale fund, we estimate Derby should crystalise a return of about 80 per cent on capital invested - a key milestone since establishing a UK office in 2000.

"We estimate that the UK development program will increase assets under management for Westfield in the UK by about $15 billion, taking the UK portfolio to #11 billion assets under management."

While Westfield is going strong, its shoppers at home are feeling the heat of high interest rates. Savanth Sebastian, an equities economist at CommSec, said consumers were responding to higher interest rates and keeping their debt levels in order, with the average credit card debt growing at the slowest pace in 13 years. On top of the rate hikes by the Reserve Bank, financial institutions had passed on the additional increases in the cost of wholesale borrowing, adding to the debt burden faced by consumers, Mr Sebastian said. Clearly, consolidating and refinancing debt had become a popular avenue.

More expensive forms of debt continue to be shunned, with credit card cash advances falling in annual terms for the past 10 months. It is likely that cash advances will continue to lose favour in coming months, as the effect of the March rate rise and the possibility of further rate hikes increase consumer awareness.

Figures released by the Reserve Bank show the average credit card balance stood at $3085 in February, up from $3031 in January. In trend terms (three-month average), the average credit card balance has risen by just 4.2 per cent over the past year, the slowest growth in the 13 years that records have been maintained.