Scentre Group, the $20 billion mall owner born out of the restructure of Westfield Group, has fast-tracked the sale of four centres in New Zealand that have a combined value of $NZ760 million ($731.6m).
Scentre has appointed agents Colliers International to manage the sales campaign and has started putting the assets to institutional buyers.
Scentre chief executive Peter Allen told The Australian last week that the group was looking to sell the entire centres, either singly or in a portfolio transaction, rather than half stakes.
By selling the entire centres, Scentre would probably hand over the management rights for the malls to the purchasing party. It would put the proceeds back into its high returning development pipeline.
Mr Allen told analysts last week that the potential New Zealand mall sales were not accounted for in the group’s guidance for 2015.
CLSA analyst Sholto Maconochie said the sale of the four centres could crimp the company’s earnings this year, predicting funds from operations per share growth could reduce to 2.1 per cent, from 3.9 per cent, based on the current portfolio of properties, though he added that the four centres were the company’s lowest-performing malls.
He said he expected the sale to come through in the second half of calendar 2015 or it could stretch into 2016.
“Despite dilution, we believe selling these remaining four assets is a positive as proceeds can be used to pay down debt or can be used to fund the higher returning and net tangible assets and earnings per share accretive $1.3bn development pipeline,” Mr Maconochie said.
In November, Scentre offloaded half stakes in its five best malls in New Zealand to Singapore’s Government Investment Corporation for $NZ1.04bn ($1bn).
Up for grabs this time around are its four remaining wholly owned centres, which are all on the country’s North Island.
Westfield Queensgate in Lower Hutt is the largest centre being sold by the company, spanning 51,300sq m and valued at $305m. It houses 183 tenants and recorded specialty sales per square metre of $7197 for the year to December 31.
Also being sold is Westfield Chartwell in Hamilton, which comprises 129 tenants over 29,000sq m and carries a price tag of $177m, reflecting its lower specialty sales per square metre of $5665 for the past year.
Westfield WestCity in Waitakere is valued at $170m, houses 145 tenants over 36,300sq m and recorded specialty sales per square metre of $6375 for the 12-month period.
The fourth centre Westfield Glenfield is in Auckland and is valued at $108m. It spans 30,500sq m, houses 118 tenants and notched up specialty sales per square metre of $5163 over the year to December 31.
The market capitalisation for the four centres ranges from 7.25 per cent for Queensgate and 8.25 per cent for WestCity and Glenfield.
Citi analyst Adrian Dark wrote that the four NZ assets were likely to be sold outright, given their low sales productivity, more limited development potential and the prior sales of similar assets by predecessor funds Westfield Group and Westfield Retail Trust.
Mr Allen told investors that Scentre was still working on a review of its overall portfolio and was going to be opportunistic in assessing the returns it could achieve when selling centres.
Rather than being guided by book values, Scentre would look at what potential sales processes produced. Mr Allen also cited the demand from institutional investors for quality retail real estate.
This article was first published on The Australian Business Review.