Scentre divests office towers to Blackstone for $1.5b

Scentre divests office towers to Blackstone for $1.5b

5 July 2019

Scentre Group has offloaded the Sydney CBD office towers above its Westfield mall to US giant Blackstone for $1.52 billion, announcing it will use the proceeds to buy back $800 million of Scentre securities.

Scentre Group CEO Peter Allen said: “We are pleased to have concluded this transaction with Blackstone. 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 securityholders.”

“As a result of these transactions the Group is also announcing today its intention to commence an $800 million buy-back of SCG securities. This will allow the Group to enhance its return on equity while maintaining its very strong balance sheet position.

“Our development of the Sydney Office Towers in 2011 and ongoing investment until now has created significant value for securityholders. The transaction price represents almost $800 million in additional value created compared to our investment cost and has generated an unlevered internal rate of return of over 16% per annum for the Group.”

The disposal will be effected by way of the Group granting a 299-year leasehold interest to Blackstone over the office components located at 100 Market Street, and 77 and 85 Castlereagh Street.

The key property is the landmark office building at 85 Castlereagh Street, which was completed in 2011, with banking giant JP Morgan signing on as the anchor tenant of the 27-level tower.

Scentre Group will retain ownership of Westfield Sydney and Sydney Tower.

The Australian Financial Review, reports that Scentre is under pressure to boost its share market performance with the stock price falling 9.5 per cent over the last 12 months as the retail sector faces strong headwinds brought on by online shopping and weaker consumer demand.

The proceeds from the transaction will initially be used to repay debt.

This latest transaction is the largest property deal of the year, eclipsing the $1.476 billion purchase of 80 Collins Street in Melbourne by Dexus in May.