AMP Capital Sell down 50% and handover management to SCentre

5 December 2019

Scentre Group has agreed to acquire a 50% interest in Garden City Booragoon, Perth from AMP Capital for $570 million, inclusive of long-term property management, brand and development rights.


Booragoon was 100% owned by AMP Capital Diversified Property Fund, who will now become Scentre Group's 50% joint venture partner.


Scentre Group CEO Peter Allen said: "Opportunities to purchase the best assets like Booragoon are rare. This acquisition follows the transactions we executed earlier in the year which released $2.1 billion of capital allowing us to pursue strategic and long-term value creating opportunities such as this one today."


Westfield Booragoon is located approximately 13.5 kilometres south-west of the Perth CBD in a trade area with a population of more than 500,000. Westfield Booragoons trade area is very strong, with total annual retail expenditure per capita 19% above the Perth average. The trade area is comparable to our Bondi, Miranda and Doncaster centres.


The centre includes Myer, David Jones, Kmart, Coles, Woolworths, Hoyts Cinemas and more than 160 specialty stores including Apple, Zara and JB Hi Fi. Westfield Booragoon is one of Perth's 'major activity centres' and presents significant redevelopment opportunities.


Scentre has held the development rights to Garden City as the result of a carve-up of retail property assets around the country between AMP Capital and Westfield some years ago.


The mall has the potential for a $750 million redevelopment that would expand its retail footprint from 72,000 square metres to 120,000 square metres. Development plans have been approved.


Scentre Group will immediately commence pre-development work for a new development scheme in order to realise the long-term value for the co-owners.


The acquisition price represents a stabilised economic yield of approximately 5.5%. Booragoon's current income has been impacted by preparations for the previous redevelopment plans. The current passing yield is approximately 4.7% with the immediate focus on improving income back to its full potential.


The Centre has been in need of significant redevelopment for some time and AMP Capital has struggled to raise fresh capital with most wholesale investors reducing exposures to the sector. The option to sell 50% and to trade away the management rights would have been difficult for AMP Capital who have built a strong Shopping Centre Management team in WA. AMP's preference would have been to sell the half share and retain the management rights however there would have been few parties willing to treat in this manner in the current climate.


The price however is fair for investors and follows the sale last month of 50% of Lend Leases' Westfield Marion at 5.75% and recognises the potential value from the redevelopment opportunity.


SCentre will defer upgrade works at Westfield Stirling in order to pursue the opportunity at Booragoon.


Mr Allen said. The transaction is expected to be marginally accretive to Scentre Group's earnings from 2020 and will increase gearing to 31.7% (pro forma 30 June 2019 and before the buyback of SCG securities).


Scentre Group reconfirms its forecast Funds from Operations (FFO) growth per security, for the full year 2019, of 0.7% and distribution of 22.60c per security.