Lowys in Scentre for the long haul
The Lowy family has tried to allay concerns about its commitment to the newly-created shopping mall business Scentre, rejecting suggestions they could secretly walk away from their investment.
Scentre was formed in June after a controversial vote by Westfield investors on a $70 billion transformation of the shopping centre giant’s global business.
The restructure involved Westfield Retail Trust (WRT) merging with Westfield Group to create Scentre, which will manage the Australian and New Zealand shopping centre business.
Westfield’s international interests, including a portfolio of 44 shopping malls in the US and United Kingdom, are now managed by the new Westfield Corporation.
But some investors fear that because the Lowy’s family stake in Scentre is less than five per cent, stock market rules would allow them to sell out of the company without anyone knowing.
The Lowys sold their entire seven per cent stake in WRT for $663.7 million in February 2013, three years after the domestic retail real estate investment trust was created.
Proxy advisory firm Institutional Shareholder Services (ISS), says now the Westfield restructure has gone ahead there is nothing to stop the Lowys from walking away from Scentre, such as a standstill agreement preventing them from selling their shareholding.
“This manifests in the interplay between the lack of standstill agreement and lack of substantial security holding by the Lowy family,” ISS said in a report.
“The Lowy family could conceivably liquidate its position immediately after the restructuring.”
The ISS report said Scentre investors would have “no visibility on such a scenario” because the Lowy family’s pro forma stake in Scentre was below the five per cent substantial shareholding threshold that requires disclosure to the ASX on material changes to security holding levels.
“In other words, the Lowy family would have the ability to sell down their stake in Scentre without worrying about the signal that would send to the market,” the report said.
“Such arrangements cast doubt on the ongoing commitment the Lowy family has to the Scentre business.”
But Frank Lowy, who as Australia’s fourth richest man is worth $7.16 billion, and his two sons, Steven and Peter, say they are committed to Scentre for the long haul.
“The Lowy family has said it is committed to the success of Scentre Group and intends to maintain its investment,” a Westfield spokesperson told AAP.
“It does not believe so-called standstill provisions are useful given they merely invite greater speculation up to and beyond the expiration of any such provisions.”
The spokesperson said ISS had overlooked the reporting requirements that apply to the Lowys as a consequence of Frank and Steven Lowy being on the Scentre board.
“As long as they are Scentre Group directors they will be required to report every trade (buying or selling) in Scentre Group securities within five days of that trade,” the spokesperson said.
ISS said the Lowy’s holding in WRT contrasted with the substantial 8.4 per cent stake they held in Westfield Corporation.
It said as a result, Westfield Corporation security holders have full transparency on any material changes to the family’s stake and thus commitment to the business.