Westfield Corp Ltd (ASX: WFD) shares have risen 5% following the company's 2017 third quarter trading update released on 9 November. Average specialty store rents across the portfolio increased 8.4% year-on-year, driven by solid sales growth from flagship retailers.
Regional shopping centres haven't performed quite as well, though these assets comprise just 17% of Westfield's portfolio.
Shopping centre stocks like Scentre Group Ltd (ASX: SCG) on the ASX, including Westfield, have been under pressure in 2017 due to soft retail conditions and the threat of online shopping.
I believe these issues may have a greater negative effect on main street retailers, while consumers will continue to enjoy shopping at large centres with many premium brands under the one roof. 83% of Westfield's portfolio are "flagship" assets, where retail sales increased 3.6% for the three months to 30 September.
Besides its two flagship centres in London, Westfield's existing assets are spread along the east and west coasts of the United States. The company is developing new flagship sites, with the $1 billion centre at Century City, Los Angeles set for completion before the end of the calendar year. Redevelopment of Westfield UTC in San Diego will also finish around the same time.
Looking further ahead, Westfield World Trade Center is expected to open in 2019, the same year Westfield expects major expansion work at its Valley Fair centre in San Jose to complete.
Outside of the US, Westfield London is currently undergoing a £600 million expansion, and operations will expand to Milan, Italy, upon completion of the country's largest retail and leisure centre in 2020.
Westfield has also begun developing residential projects adjacent to existing retail assets, thereby maximising land use and generating additional customer visits. 300 apartments are being built at the redeveloped centre in San Diego, while construction will begin on 1,200 apartments at Stratford City, London in 2018.
I have previously written that investors should seek at least some exposure to offshore earnings for their portfolio, and Westfield could be a decent option. Investment bank Morgan Stanley believes the Australian dollar will fall to USD $0.65 in 2018, which would significantly inflate US dollar earnings once converted to our currency.
Furthermore, Westfield appears reasonably priced at roughly 9x 2016 earnings and pays a dividend yield around 4%.
