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Published 01 March 2013 10:43, Updated 06 March 2013 12:11
Frank Lowy’s latest sale of Westfield shares may be part of a long-term process to take his family’s fortune private. From left to right David, Frank, Peter and Steven Lowy Photo: Andrew Quilty
Frank Lowy’s decision to sell his family’s entire stake in Westfield Retail Trust for $664 million has the market asking a very good question: What have the Lowys seen that the rest of us haven’t?
While the official line from the Lowy family is that the decision has been made to help “diversify its investments internationally” the rich are notorious for selling well before the market turns.
Adding to the nerves of investors is the retail environment and outlook, which was encapsulated by the profit result delivered by Westfield Retail Trust just a day before the share sale
But there were some concerning signs in the result. Growth in rents from speciality shops with Westfield’s malls increased just 2.5 per cent, the lowest growth in a decade according to analysts from JP Morgan. Growth is expected to drop to between 1.5 and 2 per cent in the coming year.
And the power balance between retailers and landlords appears to be tilting back towards the nation’s shopkeepers; new tenants are paying about 2.5 per cent less than older ones, as landlords offer discounts and incentives to keep the malls full.
A further shadow being cast over Westfield and indeed all retail landlords is the rise of online shopping. As bricks and mortar retailers continue to see their sales fall, the value of retail property will come under increasing pressure.
But the reasons for the Lowy family’s sale may have more to do with the Lowy family’s lengthy transition from a public business empire to a very private one, and less to do with any major cracks in the shopping centre business model
The process arguably started as far back as 1998, when the Lowy family sold a $400 million stake.
That sale certainly wasn’t about trying to pick the top of the market – after selling the stake at $7.70 a share, the stock price jumped to $16 by 2004.
Instead, the proceeds were ploughed into what would eventually become the Lowy Family Group, the private vehicle that is run by Frank’s son David.
While Peter and Steven Lowy have a strong public profile as joint CEOs of Westfield Group, David is a more behind-the-scenes player.
But his influence over the family’s fortunes has arguably become greater than that of his brothers as the size of the Lowy Private Group has grown.
BRW estimates that the sale of the stake in Westfield Retail Trust pushes the value of Lowy Private Group towards $3 billion, meaning that the private business now easily accounts for the largest proportion of the family’s fortune.
Not a lot is known about how the group invests, although its aim is diversification across asset classes and geographies. The idea of the group is to provide for the wider Lowy family.
“I have 10 grandchildren coming up through the ranks and they may want to pursue other opportunities,” Frank Lowy said back in 1998.
A similar rationale appears to be behind the latest share sale. The last few years have seen Frank move from executive chairman to chairman, allowing Peter and Steven to take the limelight as the heads of Westfield Group. Even the splitting of Westfield Retail Trust from the wider Westfield Group provided a way for the family to focus its involvement.
The Lowy family isn’t done with retail – far from it. Westfield’s portfolio is the best in Australia and should do well when retail sales improve.
But the passage of time and the rise of new generations is changing the Lowy family’s fortune – and turning once very public money private.