Scentre sell estimated at $1.4bn

The analysts have also floated the idea that Scentre’s nine New Zealand properties could be demerged into a company listed on the NZ stock exchange or held in an unlisted fund.

The $29bn Scentre Group was created out the restructure of Westfield Group last month, which also saw the formation of a new overseas-focused Westfield Corporation.

Scentre owns 47 malls in Australia and New Zealand, with 26 of those properties wholly owned. Unlike Westfield Corporation, Scentre is under pressure to reduce its gearing from 37.3 per cent — the highest gearing for an major Australian property trust.

“Scentre will most likely be a net seller of assets. To get back to the mid-point of its target gearing range implies $2.1bn of asset sales,” said analyst Richard Jones in a note to clients.

Mr Jones said that while there was merit in the argument that Scentre could sell stakes in its prime malls, the company might also pursue the sale of some of its lower-grade malls as well as stake sales in its prized centres.

However, the sales would also reduce funds from operations, with the sale of the eight non-core malls estimated to shave about 2.5 per cent off the underlying earnings metric.

“It would, however, improve portfolio quality and growth prospects, and we believe it is a better alternative than bringing in JV (joint venture) capital on the best assets,” he said.

He added that it was likely that Scentre would pursue a little of both strategies. The non-core malls are all viewed by the broker as being “C” grade assets that are remnants of a strategy to reduce competition in areas where Westfield has another larger mall.

The sites include Scentre’s properties at Strathpine in Queensland, Mount Druitt, North Rocks and Warrawong in NSW and Airport West in Victoria. Three centres in New Zealand — Westcity and Glenfield, both in Auckland, and Chartwell in Hamilton — are also ripe for divestment, according to JPMorgan.