Scentre Group (ASX: SCG) today announced that it has disposed its Sydney CBD office towers to certain funds managed by Blackstone (Blackstone) for $1.52 billion and announcing a $800 million security buy-back program. Scentre Group will retain ownership of Westfield Sydney and Sydney Tower.
Scentre Group CEO Peter Allen said: “We are pleased to have concluded this transaction with Blackstone. Together with the recent joint venturing of Westfield Burwood, Scentre Group has now released $2.1 billion of capital to further pursue our strategic objectives, creating long-term value for security holders.”
“As a result of these transactions the Group is also announcing today its intention to commence an $800 million buy-back of SCG securities. This will allow the Group to enhance its return on equity while maintaining its very strong balance sheet position. Our development of the Sydney Office Towers in 2011 and ongoing investment until now has created significant value for security holders. The transaction price represents almost $800 million in additional value created compared to our investment cost and has generated an unlevered internal rate of return of over 16% per annum for the Group.” said Allen.
The disposal will be effected by way of the Group granting a 299-year leasehold interest to Blackstone over the office components located at 100 Market Street, and 77 and 85 Castlereagh Street.
Artist’s impression: view looking at Corner of Market and Castlereagh Street Sydney
Scentre Group has an extensive development pipeline including the NZ$790 million (SCG share: NZ$400 million) redevelopment of Westfield Newmarket in Auckland which will be completed in late 2019 and will create the leading lifestyle and fashion destination in New Zealand, and Perth developments Westfield Whitford City and Westfield Stirling. Most recently the Group received approval for the masterplan of Westfield Doncaster for a $500 million redevelopment.
Westfield Newmarket –Artist’s impression
The proceeds from today’s transaction will initially be used to repay debt. The transaction is expected to be dilutive to Funds From Operations (FFO) in 2019 by approximately 0.4 cents per security. This dilution does not take into account the redeployment of capital, including the $800 million security buy-back program.
The forecast distribution for 2019 remains unchanged at 22.60 cents per security.
The security buy-back program will commence post the 2019 Half Year Results announcement, which is expected to be on 22 August 2019.
About Scentre Group
Scentre Group was established in 2014 and our purpose has remained constant ever since: ‘creating extraordinary places, connecting and enriching communities’.
Our extraordinary platform of 41 living centres is valued at more than $54 billion and generates $24 billion of annual retail in-store sales across 11,500 outlets representing a diverse range of more than 3,500 brands.
We own 16 of the top 25 centres in Australia, and four of the top five centres in New Zealand. More than 35% of our portfolio generates annual retail sales of greater than $1 billion, and more than 80% generates annual retail sales of greater than $500 million. More than 7% of all retail sales in Australia occur in Westfield living centres. Our annual customer visitation is more than 535 million.
During 2018, we introduced 437 new brands and 317 existing brands grew their store network with us.
