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Redevelopment is the key to Westfield Retail Trust’s earnings

Last week, Westfield Retail Trust (ASX: WRT) reported a 3.6% fall in half year profits which it blamed on “difficult” retail conditions. It will now hope to grow future earnings through its various redevelopment projects.

Like its affiliate company Westfield Group (ASX: WDC), the trust is focused on redeveloping its better performing centres as a way to strengthen its asset portfolio. Currently, the trust has three of its malls under redevelopment which are expected to cost around $332 million. According to The Australian Financial Review, these are due to deliver a 12% return and are part of a five- to seven-year redevelopment pipeline involving 13 centres between Australia and New Zealand.

The subdued economic environment has taken its toll on consumer confidence, however, slight growth in specialty sales have boosted the confidence of the trust’s managing director Domenic Panaccio – although he still remains cautious of the retail outlook. Over the last 12 months, specialty sales have grown 0.9% as compared to 0.4% in the previous 12 months.

Other key results for the trust’s half-year included:

  • Revenues gained 3.4% from $531.7 million in 2012 to $549.6 million
  • Confirmed its full-year dividend distribution forecast of 19.85c per share – up 5.9% from last year
  • 99.5% of the portfolio remained  leased
  • Re-leasing decreased by 6.2%

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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