A new record has been set, with Scentre Group selling off its Westfield Sydney office towers to US private equity giant Blackstone for $1.52 billion.
Scentre is Australia’s largest retail landlord and made the decision to offload the offices to alleviate disappointing sentiment surrounding falling share prices.
100 Market Street and 77 and 85 Castlereagh Street, have been acquired by Blackstone by way of a 299-year leasehold interest in the properties. The 2011 completed, 27-storey tower at 85 Castlereagh Street marks the key of the three, with banking giant JP Morgan signing on as the anchor tenant. Westfield Sydney and the Sydney Tower will remain in possession by Scentre.
Boost for share price
Scentre faced pressure to act swiftly after their stock price fell 9.5% over the past 12-month period. As a result of the transaction, Scentre will buyback $800 million worth of securities in an effort to increase its return on equity while maintaining a strong balance sheet, chief executive Peter Allen said.
“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,” Mr Allen said.
Analyst Grant Berry, portfolio manager at SG Hiscock, told The Australian Financial Review that he believed it to be a good move by Scentre – seizing a prominent opportunity to dispose of its office assets.
“We are at a very late stage in the cycle, the office market is very buoyant, capitalisation rates are lower and rents considerably higher than previous cyclical peaks,” Mr Berry said.
“The irony is that their own securities are trading at a discount so they can free up capital here, reduce their leverage and the excess capital, as they’ve flagged in their announcement today, can be redeployed into a buyback.”
Rather than cause for any concern, the sale has been remarked as strategic by much of the analytical and investment market.
2019 has already seen some big deals
Scentre’s deal with Blackstone marks the biggest property sale of the year, surpassing Dexus’ recent $1.476 billion acquisition of 80 Collins Street Melbourne in May.
The iconic MLC Centre in Sydney was picked up by Scentre earlier in the year for $800 million and were also involved in May Scentre also sold a half share of their shopping complex Westfield Burwood to Perron Group for $575 million.