If you look deeper into Westfield they do not just own and operate Shopping Centres. They also design, develop and construct shopping centres. If you look at some of the recent writings on Westfield they have liquid funds of more then $7B which is way ahead of the some of the other companies like Centro who do not have such funds. Therefore no margin and anything bad could tip them over at any time.
Westfield seem to look for good properties with good demographics, locality and with greater opportunity for expansion. They develop, construct and fully lease these premises turning their values far greater then its original worth. Their are several teirs of profits before the centre starts to make profit from tenants.
Imagine if you purchase an under developed empty/occupied building for the price it is worth and then start to expand and carve up and then encourage tenants to invest money into it.Before you know it you would have transformed it into a money making monster. Once this has been completed try revaluing the property?
They have also mentioned that the $7B was raised by selling off some of their assets but retaining managing and naming rights. So I am assuming that after redeveloping these centres they would have made a decent profit from selling off portions of each centre. This would share any exposure with the other owners. By doing this any Westfield branded centre today could fool you as being their centre when they could only be managing it?
This is not to say that WDC is bullet proof but it could be looked at from a different point of view. They have an adavantage with a buffer of $7B to obsorb any bad turns, but they also have the opportunity to pounce on other undervalued properties with greater potential.
They could use this opportunity to buy up steady shopping centres for decent prices and then wait for the ecomony to turn again?
Look back 5-6 years ago when home loans were 4.99% int. You didnt think that one day the rates wouldnt go back up? For the banks they probably didnt make much profit at the time but within those periods they managed to lure and secure alot more homes loans? Probably explains why most banks shares have done so well over the past few years?
All I am suggesting WDC may be hit in some areas but for the long term they could be solid and if played right it could be to their advantage.
Just my opinion.
WDC Price at posting:
$13.86 Sentiment: None Disclosure: Not Held
