SHOPPING centre giant Westfield will slash $3 billion from the value of its shopping centres after being burnt by the free-falling US and British economies.
The hefty writedown prompted analysts to warn that other companies in the already battered property sector could chop asset values.
Westfield's writedown represents about 7.1 per cent of its $42.1 billion in assets, based on figures reported by the company in November.
The company, backed by billionaire Frank Lowy, reassured investors yesterday it would pay a 106.5 per security payment for 2008.
However it warned it was likely to cut its dividend this year by as much as 9 per cent.
In a statement to the stock exchange filed after the close of trade yesterday, the company blamed "higher finance costs and the deterioration of retail fundamentals in the United States, United Kingdom and New Zealand" for the bleak news.
"It is expected that the group's IFRS result for 2008 will include a reduction of approximately $3 billion in the value of the group's shopping centre assets due principally to an upward movement in capitalisation rates," Westfield said.
"However the total value of the group's assets as at December 31, 2008 is anticipated to exceed the $50.4 billion reported as at June 30, 2008, primarily as a result of the effect of the strengthening US dollar on the value of the group's US assets."
Westfield's gearing, which was at 32.9 per cent at the end of June, has risen steadily.
As at the end of June 2008 the company had available liquidity of $7.3 billion.
By the end of the third quarter gearing had risen to 36 per cent with available liquidity falling to $5.8 billion.
Westfield said yesterday its gearing was about 40 per cent as at the end of December, and it had $5.5 billion in available liquidity.
It is believed gearing has increased as the company draws on its lines of credit to fund new developments.
UBS analyst Stephen Rich said balance sheets of other property sector companies were likely to continue to come under pressure as asset values deteriorate.
"Valuations began to come under considerable pressure through last year," he said.
Mr Rich said this year he expected to see falling revenue start to hit property values.
"Westfield's performance over the past month suggests there was an expectation of negative newsflow both from an earnings guidance and valuation perspective."
Westfield said yesterday its 44 Australian centres continued to deliver good results.
Westfield is heavily exposed to the slumping North American economy, with 55 of its 119 shopping centres in the US.
Another eight centres are in Britain.
Westfield shares, which are yet to trade on the news, ended 14, or 1.2 per cent, higher at $12.10.
Share this article What is this? Add to MySpace Digg it Post to del.icio.us Post to Newsvine Post to Facebook Add to kwoff Stumble Upon
CNP Price at posting:
7.8¢ Sentiment: Hold Disclosure: Held
