Scentre Eyes $3bn Development Pipeline

Shopping mall giant Scentre Group is pushing ahead on more than $3 billion of future retail development opportunities despite soft guidance and anaemic consumer spending.

Scentre, which is led by Peter Allen, posted a full-year net profit of $1.18 billion, down 48.4 per cent from $2.28 billion a year ago, with windfall gains in portfolio values boosting the result for 2018-19 financial year.

The retail landlord reported a lift in Funds From Operations to $1.34 billion up 0.4 per cent from its 2018 result.

Distribution for the 12 month period was 22.6 cents per security, up 2.0 per cent and in line with forecast while distribution for 2020 is forecast to be 23.28 cents per security, an increase of 3 per cent.

Scentre, with total assets under management of $54.6 billion, remains bullish on its outlook for its top retail assets.

The retail landlord has been remixing its Westfield shopping centre portfolio to meet demands for leisure-focused customers and to combat the threat posed by e-commerce.

“We continue to innovate in how we engage with our customer and are using new technology to enhance our direct engagement with the consumer,” Scentre chief executive Peter Allen said.

Scentre reported that its portfolio, made up of 42 Westfield shopping centres, holds an occupancy rate of 99.3 per cent and welcomed over 548 million visitors over the twelve months to December—an increase of 12 million visitors on the previous year.

“[Scentre's] operating metrics are outperforming peers, but we expect underlying income will likely disappoint in 2020,” analysts from investment bank UBS said.

“At a time when there remain a large number of retail assets on the market and increased income uncertainty, we believe valuations will likely remain under pressure.”

Over the year Scentre divested $2.1 billion worth of assets including office towers above Westfield Sydney and a stake in Sydney’s Westfield Burwood in order to raise capital.

The group acquired a 50 per cent interest in Westfield Booragoon in Perth for $570 million and became the long-term property and development manager for the centre.

Scentre also completed the $757 million Westfield Newmarket development, which has become the leading lifestyle and fashion destination in New Zealand.

In 2019, Scentre received approval for the masterplan of Westfield Doncaster for a $500 million redevelopment and is providing the retail component of Sydney’s Central Barangaroo.

Allen also sounded out about $1.5 billion worth of mixed use redevelopment being planned for Westfield malls, which could include offices, apartments and potentially educational uses.