Frank Lowy believes he has been vindicated for pushing through the controversial restructure of the $70 billion Westfield shopping centre empire.
Four months after he narrowly won a shareholder vote to split the retail property giant into local and international arms, Mr Lowy reveals he was surprised it had been so difficult. “Despite all the hoohah that went on, it was a very good move for the companies and paid off very well for shareholders, and we have been vindicated for pushing the separation through,” he tells The Australian.
The recasting of the group faced defeat in June, when shareholders Westfield Retail Trust looked set to vote against the restructure, arguing they had been saddled with a poor deal, including the high cost of the management rights and a heavy debt load.
Weeks of intense lobbying saw a yes vote returned at a second Westfield Retail Trust unitholders meeting with the group rebirthed as Westfield Corporation, which owns and manages $27.7bn of malls mostly in the US and Britain, and Scentre Group with 47 Australian and New Zealand properties including flagships Westfield Sydney and Bondi Junction, worth $39.4bn.
“I am chairman of both companies and I can see both managements are a lot lighter and more free to concentrate on areas that need a lot of focus,” he says.
“I think the growth of both companies separately will be a lot more than under one umbrella.”
Mr Lowy, who as Football Federation Australia chairman watched the unitholder vote from Brazil during the World Cup, has been back in Australia since August. Shrugging off the frenetic pace, he says his non-executive Westfield roles require less of his time than previously.
“I’m still very active and I like it that way,” Mr Lowy says. “To produce is a stimulating thing. I’m productive in a different way than I was 20 years ago and I feel good about that.”
Mr Lowy, who turns 84 next week, will not be drawn on his term as chairman. However, he acknowledges age brings limitations. “Age brings a different perspective. Some things are easier, some things are better,” he says. “It’s not an advantage to be old as against being young, there is no question about that. But if I didn’t enjoy it I wouldn’t be here.”
He rejects speculation that the restructure positions the Lowy family for an eventual exit from one or both companies. Mr Lowy and two of his sons, Peter and Steven, are directors, he says.
“My term is limited whether I like it or not,” he says, making light of his age. “Peter and Steven’s commitment to Westfield is total. If their commitment is total, so is the family’s.”
Mr Lowy sees opportunities around the world and does not rule out another tilt at Asia — in 1995 Westfield took a 10 per cent stake in the $475 million Kuala Lumpur City Centre in Malaysia, but Mr Lowy says “we didn’t know enough about Asia to able to stay there and grow”.
“These iconic malls have a special place in economies,” he says. “We will be there when we think it’s right for our type of development — not less than five years, maybe closer to 10 years.”
The focus for Westfield is mature international cities with well-to-do residents and tourists willing to spend.
Westfield has two mammoth centres in London — Westfield London and Statford City — and plans for a $1bn joint venture development at Croydon. In August, Westfield increased its stake in a $2bn Milan project to 75 per cent, and has shown interest in France.
“Whether we will succeed to put a stake down (in France) remains to be seen,” Mr Lowy says. “We have a few irons in the fire. It’s Europe-oriented rather than specific countries, we are developing positions in a number of countries,” he adds, clarifying that no new sites had been purchased.
“Each move is billions of dollars, the size of the buildings are very big, they don’t happen overnight.”
Mr Lowy acknowledges the hot Australian property market, but rejects the idea that there is a commercial property bubble. “If too much money chases too little product there is a problem, but we are not there yet,” he says.
On the residential market, Mr Lowy says Australian housing is more expensive than it need be. “We should not allow this (housing market) to boil over.”
However, he disagrees with the use of macroprudential levers such as limiting investor loans, saying state governments’ release of more land would make housing more affordable.
“These types of brakes go against the nature of investment,” he says. “We should provide more land for housing and try to moderate house prices that way rather than putting artificial impediments in place — which can only last for a short time — and today may look to be an advantage, but tomorrow may be an absolute disadvantage”.
He shrugs off last week’s low growth forecasts from the International Monetary Fund, saying Europe’s troubles are well known. “A big part of Europe will not set the world on fire, growth will be low to medium low. While Europe will be slow-growth ... there are pockets of Europe that will be very profitable for us,” he says.
“I don’t know as much as the IMF does, but I am a businessman who is basically optimistic in nature, otherwise I wouldn’t be a businessman these days.”
Mr Lowy says he is optimistic about the outlook for the US. “I have a very high regard for America because they can solve problems. Look what happened to the American car business, and where it is now 10 years after that.”
Westfield has 38 malls in the US, including the retail portion of New York World Trade Centre due to open next year.
“The New York World Trade Centre is very, very exciting, as is the third opportunity in the UK at Croydon in London,” he says.
Under the new structure, Westfield is continuing its strategy of developing flagship malls and selling out of secondary properties. But Mr Lowy says market speculation that it will undertake yet another spin-off — listing a company of regional US malls — is not correct. “That’s not on our agenda. We have made a very big decision and that is to separate the Australian business from the overseas business.”
Mr Lowy rejects critism of Australian business as being too battle-scarred from the GFC to expand offshore. “It’s not a matter of timidity, it’s a matter of opportunity and, from an internal point of view, your company’s position.”
And there are opportunities in Australia. “The budget is under pressure, but we are much better off than most other countries in the world. I have faith in Australia,” he says, also stating his pro-immigration views.
Westfield’s Australian malls, now under the banner of Scentre, are expected to benefit from the wave of overseas capital looking for Australian investments.
Scentre was working on the commitment to reduce its 37.6 per cent gearing level. “There were commitments made with regards to leverage ... and that will take time to resolve and we will keep the commitment that was made,” Mr Lowy says.
This article was first published in The Australian Business Review.