Scentre Group lines up $900 million Westfield centres in Gold Coast, Perth and Melbourne

Shopping mall owner Scentre Group said it was working on a development pipeline of $900 million on projects in Perth, Melbourne and the Gold Coast, which includes the greenfield development at Westfield Coomera (above).

The others are Westfield Carousel in Perth and Westfield Plenty Valley in Melbourne.

The Westfield Shopping Centre owner expects returns in excess of 15%, it said during the half-yearly results announcement.

“Our announcement of the $470 million (SCG share: $235 million) development at Westfield Coomera (above), our first greenfield development in more than 12 years, reflects our commitment to growing the business, improving the quality of our portfolio and meeting customer and retailer needs,” said chief executive Peter Allen in an earnings release.

The new 59,000 square metre regional centre will comprise Coles and Woolworths supermarkets, an Event Cinemas complex including Gold Class, Kmart and Target discount department stores, and 140 specialty stores including an alfresco leisure and dining precinct.

The group also completed the $355 million development at Westfield Chermside, which includes a new fashion galleria over two levels establishing Chermside.

Adjacent to the galleria is the new entertainment, dining and leisure precinct, with 25 new restaurants and cafes and a laneway with a village atmosphere. 

The redevelopment is expected to add more than $300 million in retail sales and is forecast to exceed expected returns, creating significant long-term value for shareholders. 

Among current developments, Westfield Whitford City is on track to open in September.

Scentre reported funds from operations (FFO) grew to $638 million for the six months to June 30 and said it was on track for a full-year growth of nearly 4.25%.

The FFO figure represents 12.01 cents per security, up 3.5% and distribution of 10.86 cents per security, up 2%. 

Excluding the impact of transactions, FFO growth would have been nearly 5%, Scentre said.

Net operating income increased 2.6% for the six months, driven by contractual rent increases. The group, which owns Westfield Shopping Centres, maintained its forecast range of 2.75% - 3.0% growth for the full year.

Interestingly, fast-food franchisee SumoSalad was locked in a rental dispute with landlord Westfield recently, and was close to negotiating lower rents through its tactic of insolvency laws.

The Scentre Centre group owns and operates 39 Westfield shopping centres, including 16 of the top 25 performing centres in Australia with assets under management of $47.4 billion, it said.

For the six months, profit was $1.4 billion, which included $929 million of revaluation gains driven by growth in operating income across the portfolio and the completion of the Westfield Chermside redevelopment.

Comparable specialty sales in the portfolio grew 2% for the twelve months and 1.5% for the six months to 30 June 2017, with average specialty sales increasing to $11,250 per square metre. Strong sales growth was seen in the food retail, food dining, technology & appliances and retail services categories.

“The portfolio’s high specialty sales productivity ensures strong demand from retailers wanting to generate growth in sales and customer engagement,” Allen said.

The portfolio remains more than 99.5% leased.

The group announced that it will extend its current practice to grow distributions at a lower rate than earnings growth until it reaches a payout ratio at 85% of FFO. The distribution is targeted to grow at 2% per annum until the target payout ratio of 85% is achieved. Once this target is achieved the distribution is expected to grow in line with FFO growth.