Rocketing property values could prompt the Scentre Group to investigate putting the $1 billion office towers above Westfield Sydney on the block, with groups eager to secure the assets trying to line up meetings with the new group’s management team.
Westfield Sydney accounts for 12 per cent of the new shopping centre group’s portfolio and lessening this exposure is seen as logical, particularly at this heated point in the cycle.
One pointer is REST Industry Super’s coming purchase of 52 Martin Place from Queensland Investment Corporation for $555 million.
That will be the largest office tower deal of the year and, when completed, is to show a yield of about 5.5 per cent.
This is a much tighter level than an offer that REST made for the best two Westfield towers, at just over 6 per cent, in 2011, so Scentre may have the confidence it would now get the best pricing.
Global investors had resisted the previous owners’ stance — Westfield Group and Westfield Retail Trust were co-owners before Scentre’s formation — that the towers would only be sold if they were packaged together and bought at a sub-6 per cent yield.
Scentre will need to move quickly if it wants to kick off a sale process this year.
Buildings already on the market include GIC Real Estate’s 175 Liverpool Street, worth about $450m, and the Dexus Property Group and Perron Group co-owned 201 Elizabeth Street, at about $350m. But both are residential conversion plays.
CBus Property has $1bn worth of Melbourne towers on the market, Telstra’s proposed office tower may draw up $700m and Stockland and the Future Fund are to bring Brisbane’s $600m Waterfront Place to market.
Investors will have plenty of choice, raising questions about just how strong pricing will be on all these assets.