Westfield spin-off Scentre Group has issued a statement to the Australian Securities Exchange confirming its focus on finding buyers to jointly own its shopping malls, following speculation it is mulling a sale of half of its $2.6 billion New Zealand portfolio.
The company is understood to be considering a partial sale of its nine shopping centres across the Tasman, either to pension funds or by way of an initial public offering on the local stock exchange, as reported in The Australian on Monday.
In response to the speculation, Scentre yesterday reiterated its strategy to sell part of its properties to joint-venture partners, with the proceeds from deals to be used to fund further shopping centre development.
However, it did not comment further about its New Zealand plans. “Should this strategy result in new transactions for the group, Scentre Group will advise the market,” the company said.
Shares in Scentre closed 6c higher at $3.49, amid gains across the sector.
Analysts and fund managers yesterday offered support for Scentre to partially offload its New Zealand property interests, saying the move would reduce the company’s debt.
It sits at 38 per cent and the company wants to reduce that to within its targeted range of between 30 per cent and 35 per cent, say JPMorgan analysts.
It is understood that Scentre received approaches from the Government Investment Corporation of Singapore and Canadian pension fund PSP about buying 50 per cent interests in nine Westfield centres in Auckland, Hamilton, Wellington and Christchurch.
Investment bank UBS is believed to be in talks with the company about a potential IPO option for the property interests, creating a New Zealand public company worth about $NZ1bn ($897 million).
They added it was among options being considered.
Sources yesterday said should the $18bn company proceed with the plan it could be sometime away, given Scentre was only formed in June and chief executive Peter Allen had been in the role only a matter of weeks.
Formed this year as part of Westfield’s radical overhaul of its $70bn global empire, Scentre Group controls 47 shopping centres worth $39bn in Australia and New Zealand.
Its share of the ownership of the assets is $29.2bn.
Moelis analyst Ben Rundle said in a broker’s note that the net income from Scentre’s New Zealand shopping centres was not as high as that from malls in Australia because of tax.
Such a deal would not only reduce debt, but also increase the company’s return on equity through more fees, with the proceeds spent on further development, he said.
JPMogan analysts identified eight centres worth $1.4bn that Scentre should sell to reduce debt, including its Glenfield, West City and Chartwell centres in New Zealand. JPMorgan’s Richard Jones said in the research that selling those properties would lower its debt levels to 34 per cent, but would be 2.5 per cent dilutive to its funds from operations.
“Scentre needs to sell assets to de-gear, in our view,” Macquarie analyst Paul Checchin said.