Executives
Steven Mark Lowy - Joint Chief Executive Officer and Executive Director
Peter Kenneth Allen - Group Chief Financial Officer and Director
Analysts
Simon Wheatley - Goldman Sachs & Partners Australia Pty Ltd, Research Division
Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division
Stephen Rich - Crédit Suisse AG, Research Division
Unknown Analyst -
Rob Stanton - JP Morgan Chase & Co, Research Division
Ei Phyu Lwin - Macquarie Research
John P. Kim - CLSA Asia-Pacific Markets, Research Division
Sarah Cooper - BofA Merrill Lynch, Research Division
Westfield Group (WFGPY.PK) Q3 2011 Earnings Call November 7, 2011 5:00 PM ET
Operator
Welcome to the Westfield Group 2011 Third Quarter Update, connected on Tuesday, 8th of November 2011 at 9 a.m. Australian Eastern Daylight Time. [Operator Instructions] I would now like to advise that today's conference is being recorded. I would now like to introduce the presenter for today, Mr. Stevens Lowy. Mr. Lowy, please go ahead.
Steven Mark Lowy
Good morning, ladies and gentlemen, and thank you for joining us for our third quarter update. With me presenting today is Peter Lowy and Peter Allen.
The September quarter has been a very exciting period for the Group with the immensely successful opening on September 13 of Westfield Stratford City, the largest urban shopping center in Europe, and the recent completion of the GBP 1.75 billion joint venture of the center with APG and CPP, the proposed $1.3 billion joint venture on the development of the retail component of the World Trade Center in New York, our expansion into Newmarket with our entry into Brazil and acquisition in Milan, with good progress to date on integrating these new opportunities into our group, as well as the sale of our 50% interest in Cairns Central in Queensland, $261 million on a cap rate of 5.2% representing a 16% premium to book value and an unlevered internal rate of return of 15.2% on the group's investments.
This all bodes very well for asset value particularly considering this shopping center was ranked 33rd out about 44 centers in our Australian portfolio. We also continue to pursue our strategy of disposing of noncore assets across the Group.
Now turning to the operations.
Overall, our business continues to be in solid shape. In Australia, total sales for the rolling 12 months were $21.5 billion, up 0.1%. For the 9 months to September, comparable Specialty retail sales were up 1.1%. From a regional perspective, Queensland and Victoria posted strong sales results relative to performances in New South Wales and Western Australia. For the year to date, we have seen a shift in market share away from the majors, particularly the department stores and the discount department stores. The productivity of our portfolio continues to be very high with Specialty sales of over $9,700 a square meter. This is up 1.1% on a comparable basis to the same time last year and takes into account sales for the 3-month period to September, which were down 1.4% compared to the same period last year.
As we head into the Christmas period, the recent announcement regarding a reduction in official interest rate in Australia can only be seen as a positive for consumer sentiment. In Australia, comparable Specialty sales for the year-to-date was up 0.7% and flat for the quarter. This excludes our center at Riccarton and Christchurch, which I'm pleased to report is now trading very strongly since the earthquake late last year and earlier this year.
Average Specialty rents for the portfolio grew by 3.8% from September last year. For the 9 months to September, new leases in Australia were signed at rents 1% higher than expiring rent. As rents are also inflation indexed in Australia -- excuse me, as rents are also inflation indexed every year, this can be seen as a solid result in this environment. Earlier in the year, some high profile administration occurred, including Borders, Angus & Robertson in Colorado, where around 80 stores closed. In a matter of months, almost all of these lease-up is now complete. This clearly highlights the strength of our portfolio and the underlying demand for space.
If we were to exclude the impact of these administration, then new leases in Australia for the 9 months were signed at rents 1.9% higher than expiring rents, which includes growth on retailers renewing their leases at 3.2%.
At the end of September, average Specialty occupancy cost for the portfolio was 18.6%. Whilst market sentiment towards retail in Australia has been subdued over the course of this year, our portfolio remains in very good shape with near full occupancy, positive rent growth on renewal, high Specialty sales productivity and solid demand for space in both existing centers and new development, such as Fountain Gate and Carindale in Australia. Given this consistent performance of the portfolio for the 9 months, we expect to be at the higher end of our comparable NOI growth forecast for this year of around 4%.
Now turning to the United States portfolio.
Specialty retail sales for the rolling 12-month to September totaled $6.9 billion. Specialty sales were $433 per square foot. This is up 5.9% for the 9 months. Particularly pleasing this quarter was the continuation of strong sales performance across all categories, and we have seen this trend continue into October.
From a center perspective, our top-tier centers continue to post strong sales growth above the portfolio average, where our top 20 centers are now achieving Specialty sales of $566 a square foot.
With the continuing strong growth in sales, Specialty occupancy cost at September 30 have fallen another 20 basis points to 15.5%. At the end of September, the portfolio was 92.5% leased, ahead of the level of June and 80 basis points lower than September last year.
This movement from September last year has been impacted by the closure of Borders, which reduced our overall occupancy by 140 basis points. I'm pleased to report that half of this space has now been leased and committed.
On the leasing front, we have been incredibly active, completing over 1,300 deals representing around 3.4 million square feet of space, being some 50% more area than we leased in the 9 months last year. This increased volume is not at the expense of pricing as we remain very focused on rental growth. In line with this, we have seen a 3.3% increase in average specialty store rent for the portfolio, now at $60.48 per square foot.
Specialty shop total rents achieved for all deals represented growth over expiring rent of around 10%. We also continue our focus on adding a diverse range of products, services and food to our mall. As part of this, we are reconfiguring department store sites that we acquired several years ago. Currently, 19 of the 22 federated Mervyn's and Dillard's stores acquired are now either opened, under construction or leased to a variety of retailers, including Nordstrom Rack, Target, T.J. Maxx, Costco, Wal-Mart, Best Buy, Forever 21 and also a number of grocers, fitness centers and theaters.
As a result of this strategic re-merchandising effort, we believe this will drive approximately $800 million to $1 billion of incremental sales in our centers through a combination of higher productive new retailers, as well as increased traffic and sales across the entire center. At this stage, we expect to be at the higher end of our comparable NOI growth forecast range for the year of 1% to 2%.
Now turning to United Kingdom.
Our key highlight this quarter was the hugely successful launch of our major project at Stratford City in East London on September 13. This, the largest urban center in Europe, is anchored by flagship John Lewis, Marks & Spencer and Waitrose stores, Vue Cinema, Aspers Casino, which will open in December, and over 300 shops. Westfield Stratford City represents the latest evolution of our thinking and skills in design, retail and leisure mix, technology and sustainability. And the consumer has embraced the project enthusiastically. We are immensely proud of this world-class shopping center, which was delivered on-time on-budget and over 95% leased at opening. The launch highlighted the strength of the transport infrastructure, particularly the rail network, which performed superbly and augurs well for the huge crowd that are expected in the lead up to the London 2012 Olympics game in only 8 months' time.
In the 8 weeks since the opening, an astounding 6.5 million customers have visited the center with more than 1 million visitors in the first week, by far, the biggest center opening in our company's history. The visitation is well ahead of the same opening period at Westfield London, and I'm pleased to report that sales in this short period are also ahead of expectation.
At Westfield London, sales for the year-to-date were up 16% and up 9% for the quarter, with the center continuing to perform strongly, and in its third year of operation now ranked #1 shopping center in the U.K. by Javelin Group, one of the country's major independent retail research houses.
Some recent releasing at the center has seen the introduction of new global retailers, which is Urban Outfitters, Banana Republic, Coach, Michael Kors, DKNY, Aquascutum, Juicy Couture and True Religion. This reflects a further strengthening of our mix and demand for space at the center with the center now 100% leased. At the end of September, the overall U.K. portfolio was 98.5% leased. This is consistent with the level of June.
With the continuing strong performance of Westfield London, our comparable U.K. portfolio net operating income growth forecast for the year remains in the range of 7% to 8%.
Now turning to Brazil.
Since announcing our entry into this new market, we've been very active in establishing and integrating our team. We are well down the track on this, and I'm pleased to report that 3 of our senior executives, all of which are long serving executives of the Group, will shortly be in place for the CFO, Director of Leasing Management and Marketing, and the Director of Development, Design, Construction relocating from our U.S., U.K. and Australian operations, respectively.
At this stage, we expect to incorporate the Brazilian operating performance into the Group numbers in our first quarter next year. Before turning to our global development activity, I'll briefly comment on our global digital strategy.
During the period, we continue to focus on developing web, mobile and social channels designed to attract and engage shoppers online and drive them into our centers. As part of this strategy, on the 1st of November, we launched the first stage of our global mobile website platform allowing shoppers to search and find our centers, retailers and office from wherever they are.
In Australia, we continue to build our online transactional platform enabling Westfield to deliver a multichannel retail experience by providing shoppers with the ability to shop at Westfield, both on and offline. We've grown our online stores to over 160 and have recently opened our Australian Designer Collection. In the coming months, we will be launching several important new initiatives, including an exclusive online shopping and flight rewards partnership with Velocity, Virgin Australia's frequent flyer program, online redemption of the Westfield gift card, and in the first quarter of next year, an enhanced mobile website platform with transactional capability.
Westfield will continue to grow and integrate its digital channels with its physical assets in order to drive online and offline sales to our retailer.
Now turning to our global development activity.
For the 9 months to September, work has commenced on some $750 million of new projects, including the $320 million redevelopment at Fountain Gate at Victoria, the $250 million of smaller projects across all markets and the U.S. $180 million first stage expansion at UTC in San Diego, which commenced this quarter and is our first major project to start in the United States since 2007. This project is expected to generate a third-party project yield of 7% to 7.5% and an economic yield for the Westfield Group of between 8% to 8.5% with an unleveraged rate of return of between 12% and 15%.
UTC is one of our top-tier centers that serves the high-income demographic regions of central and north coast of San Diego County. We are excited about this redevelopment, which includes the addition of new GLA, reconfiguration of existing department store space, as well as the complete renovation of the existing center and the addition of new enhanced entertainment and dining experience. The project is scheduled for completion in late 2012 and is the first phase of UTC's broader redevelopment plan to expand the center by up to 750,000 square feet.
In addition, construction and leasing is also progressing well on the $300 million expansion at Carindale in Brisbane, which commenced at the end of last year. Currently, $2.5 billion of projects are under construction with WDC share of this being $1.4 billion. The reduction in work in progress this quarter reflects the completion of Stratford.
At Westfield Sydney, the final phase of works is underway, with the project expected completion in April of next year. Since its first stage retail opening in October last year, the center continues to perform well and, in particular, the luxury fashion, food on five and restaurant precinct. On current performance, the center is achieving on an annualized basis the highest Specialty sales productivity in our portfolio. This is particularly impressive given the staged openings during the year with the majority of retailers yet to experience their first Christmas trading period at the center.
During the quarter, we announced new iconic development opportunities for the Group at World Trade Center in New York, as well as Milan. At the World Trade Center in New York, we have agreed in principle to joint venture the retail premises with the Port Authority of New York and New Jersey. The Group will invest USD $612.5 million for 50% share of the 365,000 square foot retail center. And we're responsible for the leasing of the new center and ongoing property management. We expect to finalize the transaction this quarter and open the initial phase of the project in early 2015.
At Milan, the Group has acquired a joint venture interest in what we believe to be the best major retail development site in continental Europe, adjacent to Milan's Linate Airport. Together with our partner, Gruppo Stilo, we continue to advance predevelopment work on this 60 hectare site which has approval for 170,000 square meters of retail space. We anticipate that our Westfield Milan development will be of a similar scale and quality to our other major iconic centers in Europe, such as Westfield London and Stratford City.
Currently, WDC's identified pipeline of future development work is approximately $11 billion. Forecast development starts for 2012 and 2013 remain on track at $1.25 billion to $1.5 billion each year, with WDC's share of this being $500 million to $700 million per annum. At the stage, we have a high degree of confidence with near-term project commencement at Miranda in Sydney, West Lakes in Adelaide and World Trade Center in the United States. As you can see, we are very active and very active this quarter in positioning the Group for long-term growth. We look forward to another exciting chapter for the Group, as well as establish and expand our business franchise and knowledge in the existing and new markets around the world and create long-term value for our investors.
Finally, I'm pleased to reconfirm our 2011 full year FFO forecast of between $0.64 and $0.65 per security and our distribution per security for the year of $0.484.
Ladies and gentlemen, that concludes our business review for the 2011 third quarter, and I'd now like to open the call up for any questions.
Question-and-Answer Session
Operator
[Operator Instructions] Your first question comes from Sarah Cooper of Merrill Lynch.
Sarah Cooper - BofA Merrill Lynch, Research Division
I was having a look at the funding environment in the states at the moment and was introducing Boston Property unsecured deal last week up signed from 400 to 850 at frequent [ph]. I was just wondering if you can share your views on the funding environment for retail asset especially in the U.S.?
Peter Kenneth Allen
Yes, Sara, it's Peter here. I think from a retail asset point of view, given the strengths of the assets, particularly in the United States since how well they've performed during the GFC that there is still substantial funding available for all those quality assets, both from banks in terms of lending direct unsecured assets, as well as those other CMBS programs in the United States.
I think from Westfield's perspective, and I think when we look at the way we fund our business, we've typically fund ourselves unsecured. And what we've done since January of this year, we've completed over $2 billion of our new financings or refinancings, which is some $1 billion worth of bond facility which we -- U.S. bond 144 bond we did back in May of this year. We look at our maturity schedules going forward in terms of next year in 2013. We've got about $2.3 billion maturing in 2012. All that, we've received some $1.3 billion coming in from Stratford. We anticipate to receive $1.4 billion from Westfield Retail Trust in April of this year, which we'll fully be able to repay those maturing facilities. And then looking forward to 2013, we are currently in process of extending and renewing our U.S. syndicated facility, which matures in late 2013. So from a funding point of view, I think that Westfield is very comfortable in its position in terms of being able to continue to fund the business.
Sarah Cooper - BofA Merrill Lynch, Research Division
I guess I was thinking more about the -- of those assets that you might be looking to sell. Any view on -- as you move down the, I guess, from prime to base asset?
Peter Kenneth Allen
Sarah, it's Peter here. I'll tell you with the sales, we're progressing quite well with the sale of those noncore assets. At the moment, we are dealing with about 4, 5 parties. And we'll either deal with the assets either in one off sales of some of those assets or portfolio sales. And I think when you look at it, we'll probably expect to have some of those transactions finished by the end of the year with the balance of that going to first quarter or next year. And as it moves along, we'll make some more announcements. I do think those environment is in position at the moment where those assets can get funded. And there is -- not so much for the CMBS market because they don't come back that much, but there is quite a lot of money getting around in bank balance sheets waiting to be deployed and also in insurance companies, the more traditional first mortgage assets.
So we are seeing money around for that at the moment, and I just think there is quite good demand for assets that have strong cash flows, good operators and a lot of leverage. [ph]
Sarah Cooper - BofA Merrill Lynch, Research Division
Very helpful. And then just one more question. Again, maybe for Peter Allen. Do you see any change in or have you had any change in thinking regarding domicile strategy or capital management in light of recent performance?
Peter Kenneth Allen
In terms of where the group is, domicile, we are very comfortable in terms of being domiciled in the Australian market. I think that when you look at our ability to raise capital whether its equity capital which we don't intend to raise, given the funding which we've got all debt capital, we're very comfortable in terms of the position where at today. It has no impediments on us.
Operator
Next question comes from John Kim of CLSA.
John P. Kim - CLSA Asia-Pacific Markets, Research Division
Steven, if I heard you correctly, the U.S. releasing spreads were about 10% during the period, which would suggest the rent signed was about $50 per square foot, and that would be 17% lower than the average Specialty rent that you have in your U.S. portfolio. Can you just provide some commentary on what kind of space this is? Why is this leasing at a lower rate than the rest of your portfolio in the U.S.? And compare that versus expiring rents in the U.S. in 2012 worth $51, should we be expecting positive or negative releasing spreads then?
Steven Mark Lowy
Well, I think just overall, John, you've got to compare what you're releasing to what came out. And we are clearly doing -- overall, we are doing better. I mean, our overall average is up over 3% and the releasing spreads are around 10% now. So I think it's a bit of apples and oranges question you're asking, but I think that we're expecting to also -- to be in a position next year as well, where we are in a position to release particularly in a better sense, on long-term deals with rental growth. And particularly with good sales growth now in the United States, and again that is heavily focused on the better assets in the better markets. And also I think you need to look in the context of what space you're actually leasing. And I can assure you that we're moving into a better environment.
Peter Kenneth Allen
And, John, it's Peter here. Just to add one thing to that, you know that a large number of leases that we're signing and the leases that we have going now have yearly increases in them. So over time, you're going to find those leasing spreads decreasing. So instead of having flat rents 15 years or having rents step every 2, 3 or 5 years, we are now getting yearly increases. So I think the thing, the issue of people releasing spreads will become similar to where we are in Australia rather than where they've been historically here.
John P. Kim - CLSA Asia-Pacific Markets, Research Division
Okay. And then as far as pursuing the sale of noncore assets within the group, now that you've sold 50% of CAM at a 16% premium to book value, are there other opportunities to sell non Westfield-managed centers in Australia, in particular the AMP managed centers?
Steven Mark Lowy
Well, we're not -- this is not something we're looking to do. I mean I think if the opportunity arise as it did in Cairns, that was really a specific situation with the dispute between the owners as to the management of that asset. And ultimately, it was agreed that that asset would be sold and went out to the market, and you know the result. It was a very pleasing result for us. So I think it would depend on the specific centers that you're referring to. But whilst we have a number of, in Australia, joint ventures where AMP is the manager, we are not in a similar situation that we were on Cairns. If that were to occur, that would be just a discussion between us, but it's not imminent here.
John P. Kim - CLSA Asia-Pacific Markets, Research Division
I've noticed on one the centers managed by AMPs, Macquarie, that had fallen off your list of potential redevelopments, can you just provide some more commentary on that?
Steven Mark Lowy
Well, I think that Macquarie is clearly an opportunity. It's a center in Sydney with approval in place to expand the building of which we own 50% of, and we are currently in discussions with AMP about how best to pursue that. But we felt that given the status of those discussions, we didn't want to give the impression that it was a near term start from an investment perspective of either Westfield Group or WIC [ph] for that matter. So it's one of those centers that still has an opportunity, but we felt it best to remove it from what we regard as this one near-term. But discussions are ongoing between us and AMP about how to best pursue that.
John P. Kim - CLSA Asia-Pacific Markets, Research Division
Okay. And can you remind us on Macquarie, would you be earning management fees on the developments of that asset or does that go to AMP?
Steven Mark Lowy
Well, the arrangement is currently in place, and you're assuming that the development goes ahead would be -- design and construction fees would come to WDC, and development fees would come to AMP. But this project is under discussion between AMP and ourselves now. And as we have more to bring to the market potential, we'll do that in good time.
Operator
[Operator Instructions] Your next question is from Ben Yang of KBW.
Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division
I do have a question about the noncore assets out in the U.S. Just wondering if you can offer any indication in terms of expected pricing. I mean, it seems it has taken a little longer than I think most people would have anticipated. And so I'm just curious, is it possible you can sell those assets below appraised values on your books or are appraisals typically maybe a floor selling price when you think about asset sales in general?
Steven Mark Lowy
Ben, it's Steve here. I'll do that 2 ways. One is, I'm not going to talk about pricing because we're negotiating -- in the middle of -- with a bunch of guys at the moment. But a couple of things. I think these asset sales gives us between $1 billion and $2 billion of asset sales, and these things don't happen overnight. I think the market expectation of when we talked about doing them in the first quarter that they'll be done in 20 minutes is just way ahead of where the world really is. And it takes time to do this. It takes time to do them correctly. We've had quite volatile markets during the year, and so they'll be done in an orderly manner at the right time and at the right price.
The other thing I have also said, which I've said last call in the last 6 months that the company is under no pressure to do this. So we're going to do this over -- due time to make it very orderly. On the other side, the valuations that we get to the assets are pretty close to their value. But I don't think they'll trade much away from those or much under them or much above them. And with having these valuations on every year, they're pretty much where the assets trade, I think. And if you look at the trades that have been going on in the U.S. just this year, whether they be A class or B class centers, I think the values of these centers are pretty close to where the book values are.
Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division
Okay, that's helpful. And then also I think you mentioned that your top 20 U.S. malls do about $556 a square foot in sales. I was just wondering if you can comment on what the U.S. portfolio looks like following the noncore assets sales in terms of sales, rent, occupancy costs. I assume it's better, but just curious how much better those metrics will look next year after you sell those 17 assets?
Steven Mark Lowy
Well, we actually got through it. As to what assets we'd sell, how we do that, over what period of time, it's too early to go through that for you at the moment, Ben. And when we have something to announce and we have some deals done, what we'll do is we'll announce those and then we'll redo the statistics following what's been solved.
Operator
The next question comes Yua [ph] Lwin of Macquarie.
Ei Phyu Lwin - Macquarie Research
Just 2 for me. Firstly, just on the releasing spreads that you mentioned, particularly in Australia. If I recall correctly, those spreads 12 to 18 months ago were about 8% and then they were 6% to 7%. And as a result they were 3.5%. And if I heard you correctly today, you were talking about 1% to 1.9%. Does that trend concern you at all?
Peter Kenneth Allen
I think just to be specific on renewals, it's 3.3% -- 3.2%. Overall, it's 1.9%. If you take into account all the stores we get back as well. It doesn't concern me. It's clearly, I think, reflective of the environment that we're in. I would suggest though that, and to remind everybody that these -- all of these are inflation indexed. And so each year, you're receiving, in this case, inflation plus 2% across the portfolio, which drives a lot of growth. And I think in this environment, clearly there is subdued consumer sentiment, there is some concern out there in the marketplace, and that's clearly reflected in the capital markets as well. To the extent you can get growth, it's still a good result. We are very, very focused on our retail perspective of having very good mix of retailers and having a very good merchandise environment for the consumer. And I think a better reflection is, of the 80 stores we got back, which is probably the largest, I can remember in the REDgroup and the Colorado chain, that almost all of those have gone very swiftly. So I think it's clearly a trend that has occurred over the last couple of quarters of flowing [ph] growth on the renewals, but I think that's probably understandable in the environment that we're in.
Ei Phyu Lwin - Macquarie Research
So does it's implied then that you think that's a cyclical issue rather than a structural change?
Peter Kenneth Allen
I think it's definitely a cyclical issue. We've seen this before in weaker consumer sentiment markets.
Ei Phyu Lwin - Macquarie Research
Yes. Okay, my follow-on question then, I suppose, is in terms of those fixed CPR plus 2 increments. Are you seeing any pushback at all from tenants on that front?
Peter Kenneth Allen
Well, I think it needs to be blended with the whole commercial negotiation that takes place with the retailer. And I think given where there's always discussions that take place on rents and growth rates, this is part and parcel of the business, and you would expect in a most subdued consumer environment for that to be more elevated. But we are achieving that and our centers are almost full, and there is good demand for the new developments, as well as the existing centers. So I think overall, one needs to take into account the enormous productivity of these malls, the demand for the space and also the margin improvement that's taking place over the last number of years, which has to do with technology, currency, efficiencies that retailers now conduct themselves. So the overall occupancy cost that the centers are able to achieve are higher than they used to be because there has been some structural change to margin and productivity.
Operator
The next question comes from Rob Stanton of JPMorgan.
Rob Stanton - JP Morgan Chase & Co, Research Division
Just a couple of questions on the development front. I think you mentioned West Lakes. What's happening there?
Steven Mark Lowy
We have a large program in Australia that I think its circa $5 billion of the work that we have, some of which is underway at Carindale and Fountain Gate that have got going recently. And we have this rolling program, which would include Miranda and West Lakes and expansion of that center was particularly a target and a number of shops. But it's just part of our overall program well that is well understood. And I've seeing some commentary lately regarding a slowdown, a possible slowdown of that development program, and I can assure you that we are on track to deliver that program as per our expectation.
Rob Stanton - JP Morgan Chase & Co, Research Division
One the -- to John's line of questioning on Macquarie, does that mean that, that center impact there isn't in this forecast of start for '12 and '13, that gross number?
Steven Mark Lowy
That's correct. They're not in those numbers of $1.25 billion to $1.5 billion each year. But I did mention before that we are in discussions with AMP on both of those centers to determine the best way forward. So I think you can just wait for a better advise from us as that plays out.
Rob Stanton - JP Morgan Chase & Co, Research Division
And Miranda -- I think the last number was around the $400 million mark?
Steven Mark Lowy
Yes, in that order.
Rob Stanton - JP Morgan Chase & Co, Research Division
Okay, and West Lakes is similar?
Steven Mark Lowy
No. It's a lot smaller. Kind of $100 million to $150 million in that range. Miranda, we look at Miranda as, again, one of our best centers in Australia. And it's last development was 1992. So there's very strong pent-up demand in that market, and we have the opportunity now with a plan approved in place to significantly upgrade that center to the quality of Doncaster, Bondi Junction, and you have to think about it in that vein.
Operator
The next question comes from Stephen Rich of Credit Suisse.
Stephen Rich - Crédit Suisse AG, Research Division
Most of my questions have been answered. But just one quick one on Brazil. One of the development assets was due to complete in the fourth quarter of 2011. Just wondering if we can get an update on that and your potential development product going forward out of the Brazilian market?
Steven Mark Lowy
Steven here, Stephen. The extra that you were referring to is called DNS, and it is a staged opening that's taking place, part of which will be complete by the end of this year, which will include actually a new Wal-Mart that is under the trading name of Big. And that will open in December, and the balance of the center will actually be complete most likely in the first half of this year with lease-up following that. On the broader, we're really getting our hands around Brazil. I mentioned that we've got 3 executives, very senior, all more than 10-year executives with the company, Head of Finance, Head of Projects and Head of Operations will be there on the ground shortly. I think you need to give us a little bit of time to get our hands around it. But looking at the macro issues, we remain excited about that. This is a meaningful but relatively small investment by our company to get understanding of what the opportunities are. From a macro perspective, we remain excited. From a development perspective, we are already working with our partner on not only completing the current development, but also on new opportunities. And you can imagine the size of that market. These opportunities are popping up all the time. So give us a little bit of time, and we will share with you what we believe is a really exciting journey there.
Stephen Rich - Crédit Suisse AG, Research Division
Right. And just one more, in terms of the trajectory of releasing spreads in Australia going forward, you do [indiscernible] a little bit on that 3.2%. Are you seeing a reversion in terms of Specialty occupancy costs achievable or is that structural shift you're talking about that enables higher up costs, something that you expect going forward and with the recovery in retail sales, you'd expect releasing spreads to start to recover from here?
Steven Mark Lowy
Definitely. I think that we've been -- we need to look at Australia. And we're talking trend perspective has been very muted sales growth really since the second half of 2009. In the first half of 2009, you obviously had the stimulus package. And since that period of time, it has been fairly muted at best, actually, throughout the country. And I think within that couple of years of performance now, you've seen, I would believe, excellent operating performance out of our assets. And I think that's because of 2 things really, the productivity that comes out of these very high performing assets. But more importantly, the structural change in -- I think we have in our mind historically that 14%, 15%, 16% occupancies were high. And I think that has structurally changed, particularly with the higher productivity malls and the efficiencies that retails were able to produce in their margins. That's I think, at the macro level, that clearly as -- as sentiment improves, then we would expect that trend to improve as well. You are saying though, the one thing that we fail to see here and we just look at these average stats is some other structural issues had taken on in the country. And that as a demand from foreign retailers that has come into Australia, which is completely new demand for us. You've seen it with Zara and Wall Street [ph] -- you've seen it with Apple. You've seen it now with the Gap. There are other international retailers: Forever 21, H&M, Uniqlo. These are all global retailers that are looking at entering our market. And our job right now is not only to release the existing centers, but to make space for these global powerhouses, and we're really excited about that. So I think you'll see some changes taking place in the malls as space comes up, and we configure it to make room.
Now, we did it many years ago, when the mini majors came into place. JB Hi-Fi, Toys "R" Us, the Big [indiscernible]. All of these things, we acted swiftly to provide opportunities for them to come into our malls, so they didn't locate themselves elsewhere, and I think you'll see us doing the same thing. So I think there's a very -- whilst we are in a subdued environment, there's a lot of exciting things to talk about here, particularly with these new retails coming to the country.
Operator
Your next question comes from Frederick LaShawn [ph] of Greenstreet Advisors. [ph]
Unknown Analyst -
In regards to the temporary leasing in the U.S., I've noticed a pickup there by about 100 basis points over the last year. Have you changed strategy a little bit to add to the temp leasing or is it just seasonality at this point?
Steven Mark Lowy
I think it’s just seasonality at this point. Overall, we've got temp leasing that obviously improves, increases, leading into the Christmas time period, which you're seeing now. And the other issue is from a few years ago with our short-term leases, where we came to fill space from a merchandising perspective and went out doing a lot more longer term deals now than we were in the past. In fact, the short term deals are a minority now. So I think it's more seasonality that you're seeing.
Unknown Analyst -
In terms of the rent spreads you get on the short-term deals versus the long-term deals, are you able to quantify a little bit where the gap is?
Steven Mark Lowy
Well, really, it's difficult to average that. It really depends where it is. Short term deals will put in place, the plughole, in a better sense as we're getting good rental growth in. And in some cases, in the lesser centers, you either need to continue it or not get much rental growth at all. So I think it's difficult to give you a quantifiable figure. But definitely, they are reducing immensely.
Unknown Analyst -
Okay. And so I think you've been investing obviously in Brazil and you've announced a few new development project. When you think about the capital allocation menu that's in front of you, what are those share buybacks [ph]?
Peter Kenneth Allen
It's Peter here, Frederick. I mean, we've said this at the last call, and we've been telling investors this. It's our preference as a company to invest in our product and increase the business, increase the return on equity by developing and growing the business. If you have a look at what we've done over the last year or so, we've done major changes in where we are going, in the way the company is structured. And if I just take you through that a little bit, that was end of last year, we returned $7.3 billion of capital to shareholders with the establishment of WIT [ph]. We now have Stratford and Sydney both completed and opening and producing income. We've joint ventured Sydney and Stratford, as Peter said. We have $1.3 billion coming in or came in from the joint venture at Stratford. We got $1.4 billion coming in April that came from the Sydney development. We've announced a restructure of debt book, we've decreased our liquidity needs, and we've totally derisked our balance sheet by opening up the developments and having them produce income. And 1 year or 2 ago, we were holding some $4 billion of none producing -- non-income producing assets on our balance sheet. We also changed the way we did our dividends last year where we have retained earnings that meet the majority of our future capital expenditures.
When you put all that together and you look at where we're investing, we have now invested capital in Brazil to expand the business. We did the World Trade Center. We're doing Milan. So what we're really doing is we are producing capital out of the business or out of our current business to reinvest in the business. And what -- it is our preference to be reinvesting to grow the business rather than to make the business smaller. Again what I did say, though, is that if we can't find the place or the opportunity to place capital and allocate capital, then we would look at buying stock back. But it is not our preference.
Operator
The next question comes from Simon Wheatley of Goldman Sachs.
Simon Wheatley - Goldman Sachs & Partners Australia Pty Ltd, Research Division
Interested to know, obviously, there's very little vacancy there at the moment. But I was interested to know what the downtime is in terms of any vacancies that do come up and whether the tenant retention rates has dropped a little bit, i.e. whether there's more tenants deciding to vacate upon lease expires?
Steven Mark Lowy
Simon, Steven here. Which market are you referring to?
Simon Wheatley - Goldman Sachs & Partners Australia Pty Ltd, Research Division
The Australian market.
Steven Mark Lowy
No. Tenant retention is about the same. The renewal rate is about the same. It's been fairly consistent over a number of years. What was the other part of the question? Can you repeat it?
Simon Wheatley - Goldman Sachs & Partners Australia Pty Ltd, Research Division
If there was -- just what the downtime is on any vacated is pushing a little out to the cost of vacancies going on?
Steven Mark Lowy
Sure. I mean, I shared with you the experience of the 80 shops coming back from Borders and now Colorado, and they're pretty much done. And that's in a matter of months. So I mean, it’s clearly a subdued environment out there, so I wanted to recognize that. But within that environment, it's not a train smash. We've all been working very, very hard. And to the extent we have very, very high productive malls, where there is still demand there -- and there is demand from retailers that were not there before. We've just got a number of new Apple deals, and we had 2 before. I think we've got 5 or 6 now and more coming. We obviously have real desire [ph] in the city, and we are in discussions with them and others about new space. So it's a -- this is a living, breathing environment and beast we're talking about, and it's our job to create and enhance the demand whether it's, cyclically, a very good time or, cyclically, a very difficult time. And I think that we are really pleased with how the Australian centers are performing in this subdued environment.
Simon Wheatley - Goldman Sachs & Partners Australia Pty Ltd, Research Division
Okay, great. And just on another angle, obviously, there's not a great deal if duration here in terms of the internet side. But just interested in your initial commentary on whether you're seeing any trend takeaways in terms of internet penetration from your possessions of your unit exposure and whether it's still inconsequential in terms of income and sales as a proportion of the Australian business?
Steven Mark Lowy
It is, from a Westfield perspective, it is early days, it is inconsequential, in terms of sales and income that you report to. But it's very important that in the direction and the thought process that the company's taking. And clearly, there is an increase in other penetration of the internet, whether it's by mobile or other means. And we need to recognize that, and we do recognize that. In many ways, we're using that to the benefit of the existing centers because you can look at it as a threat or an opportunity. From an opportunity perspective, we are using it to drive traffic to the malls. I mean, I'll share with you in the last -- at Westfield London, we have near 150,000 Facebook users for one shopping center. That as much as Harris and [indiscernible] and other major leading brands you're talking about in the U.K. Westfield Stratford already has 50,000 Facebook users. So we're communicating with these people. We are using this technology to drive -- I use that an example, but we're doing that all over the place, in America or in Australia. And from an online perspective, it's very early days for us, but we see that as an opportunity for us as well. Overall, this is a trend we need to get -- we need to get on this train because it's already left the station. But we can see it being a great positive. Within this environment -- I'll just sort of remind us for a minute, because within in this environment, in London within 3 years, we would've put on the ground 2 buildings that will have more than 50 million customer visits and do GBP 2 billion of sales. This is in an environment where the internet is obviously exploded. The same thing in downtown Sydney with the new building that we put there. We expect that to be enormously successful. So I think you can work within this environment's physical assets and using technology, and it's our job to do that. I suppose we wanted to give the impression here that we're working very hard on that, but it is very early days.
Operator
I would like to advise that there are no further questions, and I'll now hand the conference back to Mr. Lowy for closing remarks.
Steven Mark Lowy
Ladies and gentlemen, thank you. It's a pleasure talking to you again today for this third quarter results. And as usual, we appreciate the attendance and the questions, but if you like to follow up, our Investor Relations team or any of us will be pleased to do that. Thank you very much.
Operator
Thank you, ladies and gentlemen. This concludes the Westfield Group 2011 Third Quarter Update. You may now disconnect.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!