Newly minted Westfield spin- off Scentre Group will consider asset swaps and could create new unlisted funds as chief executive Peter Allen moves to review the $28.6 billion portfolio.
In his first interview as head of the Australian and New Zealand retail behemoth, Mr Allen, who spent 10 years as Westfield Group chief financial officer, told The Australian each of its 47 centres would be examined in a bid to better returns.
“It’s a bit early (to talk about asset sales), we still haven’t had our first board meeting,” Mr Allen said.
“Should we retain the ownership percentage in those assets or should we redirect capital into other opportunities?
“It really comes down to the total returns we will get.”
The strategy would be discussed at next week’s board meeting.
Scentre was born out of a $70bn restructure of the Westfield empire into the Peter Allen-led Australian group and Westfield Corporation, which is focused on its international operations.
“There are some assets which are going to have a higher degree of risk in terms of long-term returns, on that basis we should be looking at selling those assets,” Mr Allen. said.
“Others are delivering returns, but to be able to finance our business going forward in terms of new opportunities, we may be able to get a better return by redirecting our capital to something else. And for those better assets we would look at bringing in joint venture partners.”
Mr Allen, who established Westfield’s business in Britain in 2000, acknowledged that some of the same global pension funds that invest alongside the group there could be tempted to Australia to partner in Scentre assets.
Among Westfield’s joint owners in Britain are German bank Commerzbank’s property fund manager Commerz Real AG at Westfield London and at Westfield Stratford, APG of The Netherlands and the Canada Pension Plan Investment Board.
While there has been speculation Scentre may sell stakes in its New Zealand centres — which represent about 10 per cent of the total portfolio — Mr Allen ruled out any full asset sales. Scentre had a very strong position in New Zealand which would be impossible to replicate, he said.
Mr Allen said all options were on the table for the portfolio including developing apartments as part of mixed-use projects and looking at how office buildings, such as the towers at Westfield Sydney, fit into the portfolio. “Should we be the long-term owner of those office assets is a question I have posed myself, and I will be responding to the board.”
However, Mr Allen said sales had ramifications. “If we sell out an interest in an office asset, what impact does that have on the balance of the real estate, on the future development opportunities, and also on management opportunities, or how strata would work in terms of a split between office and retail? Its something we are looking at.”
Westfield last developed apartments in Australia 20 years ago, though residential has been part of the mix in London.
Scentre had identified sites where apartments could be built and was going through the approval process, Mr Allen said, but declined to name the sites.
“We certainly have the expertise and capability to deliver that, and if that is the maximum return, then we should be doing that,” he noted.
However, he added that it may be better to gain approvals and move on.
Scentre, which owns properties such as the massive Westfield Bondi Junction and Westfield Sydney, also has an eye on the greenfield sites of the future, looking for opportunities in the growth corridors of the capital cities.
“Going back to where Frank (Lowy) was, going around with Coles in the 60s in terms of highlighting areas where growth would come from — how do we find those opportunities today in cities like Melbourne, Sydney, Brisbane, Perth?” he said.
Would Scentre look at a takeover or platform of properties? “We have to be open, but careful and selective,” Mr Allen said.
“It would make no sense to buy something that is $5bn worth of value if you only want $100 million of the assets,” he said, largely ruling out corporate activity. “At this stage, no.
“If you look at the investments we have in the 47 centres in Australia and New Zealand, the prime objective is to maximise the return from those.”
Mr Allen also ruled out a near-term share buyback. “To me share buybacks are not on the table at this point,” he said. “Any capital we do raise we would reinvest into our redevelopment pipeline. We are looking at starting $700m of projects a year for the next three years — its about $2bn.”
Scentre has expansions under way with first-stage openings this year at Miranda in Sydney and Mount Gravatt in Brisbane.
Next year Scentre would look at starting redevelopment work at Warringah Mall and Chatswood in Sydney, Mr Allen said.