April 9, 2014 / 12:06 AM / in 4 years

Fitch: Westfield's Development and Construction Add to Cash Flow; Risks are Managed

(The following statement was released by the rating agency) SYDNEY, April 08 (Fitch) Fitch Ratings says that Westfield Group (WDC, A-/Stable) has increased its exposure to development and construction to boost its cash flows but the risks associated with this strategy are well managed. As WDC divests properties to joint ventures (JV), they retain development and management rights which provide the business with a steady pipeline of work. WDC has maintained project starts at approximately AUD700m since 2004, with 100% of development and construction being conducted on a fixed price lump sum basis. Property development income increased by 81% to AUD762m in FY13, up from AUD452m in. WDC has AUD4.7bn in projects under construction, with projects yielding 8.8% in returns and unlevered internal rates of return (IRR) for WDC ranging from 12% to 15%, which WDC is able to achieve by charging its JV partners' development and asset management margins. Construction services are now being expanded outside WDC's portfolio. WDC is now providing development and construction services to AMP Capital investors at Macquarie Centre, Pacific Fair and Booragoon, assets that were previously jointly owned by WDC and AMP Capital investors. CONSTRUCTION RISK WELL MANAGED WDC's construction arm is the fourth largest in Australia after Brookfield Multiplex. Scale is a natural diversifier of risk in construction with larger contractors working on several projects and being able to negotiate better risk/return contract outcomes. Development and construction contracts with third parties such as AMP Capital are on the same basis as they are with joint venture partners such as Westfield retail trust, offering WDC protections from liquidated damages and risks such asbestos or mercury related claims. Contacts: Johann Kenny, CFA Director +61 2 8256 0348 Fitch Australia Pty. Ltd., Level 15, 77 King Street, Sydney NSW 2000 Vicky Melbourne Senior Director +61 2 8256 0325 Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326, Email: iselle.gonzalez@fitchratings.com. Additional information is available at www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

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