It seems the Lowys have sold out of Scentre Group (ASX: SCG), is the share price a buy?
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.
Is The Scentre Share Price A Buy?
According to Australian Financial Review reporting last night, the Lowy family sold its $815 million stake in the local Westfield business yesterday.
UBS was the lucky broker who was in charge of the transaction, who told potential fund buyers that the seller was selling its full holding.
The sale price was apparently $3.956 per share, which was only a 1.3% discount to the actual share price of $4.01.
Who were the new buyers? Institutional investors, a small group of new and existing shareholders. It was only a year and a half ago that the Lowys sold Westfield to Unibail-Rodamco-Westfield (ASX: URW).
What Does This Mean?
Well it seems that the Lowy family are wanting to step away from physical shopping centres. We also heard yesterday that Scentre’s Chief Operating Officer (COO) is going to retire next year after 23 years at the business (which likely has nothing to do with the Lowys, just an interesting coincidence).
There has been a growing belief that online shopping was going to disrupt the importance of brick and mortar stores. There’s no doubt that millions of people will keep visiting local Westfields.
But in a world where Amazon is growing and every major retail business is trying to increase its online presence, I think it’s clear that the future growth prospects for Scentre are not as promising as the past.
If we want our wealth we need to find businesses that are growing. Plenty of retailers like Premier Investments Limited (ASX: PMV) are complaining that rents are too high, which could indicate Scentre’s like for like rental growth is going to be (at best) slow going from here.
But I will give Scentre credit for trying to change the focus of its locations into ‘living centres’ with things like education.
Is Scentre Good Value?
If the Lowys are happy to sell at this price, I’m not sure it’s a great buy price. The share price is at around a 10% premium to the net assets at 30 June 2019 with a distribution yield of 5.6%. If I were wanting to buy a real estate investment trust (REIT) I’d rather buy Vitalharvest Freehold Trust (ASX: VTH).
But even better than that could be reliable shares in the free report below which have long histories of earnings growth and sound dividends.
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Disclosure: Jaz owns shares of Vitalharvest at the time of writing, but this could change at any time.
