$3 billion NZ shopping mall stake could be sold

Proposed expansion of Westfield 277 Broadway Newmarket.
Proposed expansion of Westfield 277 Broadway Newmarket.
New Zealand's biggest and most valuable collection of shopping malls might be on the market with all nine malls controlled by a new owner.

Shane Solly, an Auckland-based director, portfolio manager and research analyst with institutional investor Harbour Asset Management in the ANZ Centre, said this morning Scentre Group -- the A$17.3 billion shopping centre trust born out of the controversy of the Westfield restructure -- might quit all its New Zealand shopping mall portfolio.

"There's a lot of options being considered and this is just one of them," he said of the business which controls nine malls here including Christchurch's Riccarton and 277 in Newmarket.

Harbour owns shares in Scentre Group and Solly said while he did not know details, he considered a sale quite on the cards.

Australian AFR share market publication, Street Talk, also contained substantial details but said Scentre might only sell half its New Zealand malls.

"It is understood Singapore's sovereign wealth fund, GIC and one of Canada's biggest pension funds, CPPIB, are frontrunners to acquire a stake, in a move that would value the Kiwi shopping malls at about $NZ3 billion – far higher than the current book value of $NZ2.7 billion," Street Talk said.

That is just a week after Westfield and its former satellite trust, Westfield Retail Trust, won a hard-fought merger plan that provoked opposition from some its largest investors.

"Yet this deal is expected to meet with widespread support as the money will most likely be funnelled into early debt repayments, and the shopping centre landlord will still derive a management fee from running the malls. Shedding a stake in the NZ portfolio, which accounts for close to 10 per cent of Scentre's asset base, should also generate a higher return on equity and free up cash for the development pipeline," Street Talk reported.

"While the group's management, led by former Westfield chief financial officer, Peter Allen, has wasted little time in this new role, joint ventures had been flagged to investors, as far back as six months ago when the Lowys and their financiers were in the midst of campaigning for the demerger and subsequent creation of Scentre.

"In documents obtained by Street Talk in January, the Westfield team were already mapping out prospective sales in flagship shopping centres, such as Westfield Sydney at Pitt Street mall and the Bondi Junction property. At the time sources claimed early stage discussions had already been initiated with large-scale funds.

"If CPPIB were to prevail, the deal would mirror its involvement in AMP's portfolio of top Australian shopping malls in a joint $872 million transaction with the Abu Dhabi Investment Authority. Under that transaction, the Canadian fund acquired a foothold in major malls like the Macquarie Centre in Sydney and Pacific Fair on the Gold Coast after AMP and Westfield agreed to largely terminate a long-standing partnership.

Earlier this week, Unisuper, the chief objector to WRT's merger into Scentre, shunted an extra $200 million into what now ranks as the nation's largest shopping centre landlord," Street Talk said.

- By Anne Gibson of the New Zealand Herald

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