Australia and New Zealand Westfield owner & operator Scentre Group (ASX: SCG) is about to receive $575 million.
Scentre Group owns and operates 41 Westfield shopping centres in Australia and New Zealand, with Scentre’s interest valued at $39.1 billion, many of the shopping centres are owned in partnership with property investment institutions. According to Scentre Group, more than 535 million visits were made to its centres in 2018.
Scentre Group’s Huge Sale
Scentre said that Perron Group is going to buy a 50% stake of Westfield Burwood in Sydney.
The purchase price of this stake is $575 million, which actually represents a 4.1% premium to Scentre Group’s balance sheet value at 31 December 2018.
Scentre Group CEO Peter Allen said: “We are pleased to extend our long-standing relationship with the Perron Group into Westfield Burwood.
“This transaction highlights the value of Scentre Group’s extraordinary platform of 41 Westfield living centres. The proceeds will provide the Group with further capital to pursue our strategic objectives of creating long-term value for securityholders.”
Perron Group was obviously very attracted to the idea of investing in Westfield Burwood with more than 14 million visitors per year and total retail sales of $500 million.
What Are The Effects Of This Sale?
Initially, the proceeds of the sale will be used to repay debt.
But, in terms of FY19 it’s expected to reduce the net rental per share (FFO) in 2019 by approximately 0.2 cents per share. However, the forecast distribution of 22.6 cents per share remain unchanged.
Is Scentre A Buy?
Based on the estimated distribution, it has a yield of 5.9% with the share price down 0.5% in early trading.
Whilst that yield seems attractive I am not convinced that Scentre Group will be as good in the future as it has been in the past with the rise of online shopping. Shopping centres may not be as important in the future.
It depends how well Scentre Group can shift its ‘Living Centres’ to be truly less retail focused. Education and other activities like that could be very important. I would prefer to own the proven shares in the free report below over Scentre for the long term.
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