Shopping centres set for a shake-up

The transformation of Australia’s retail scene is entering a new phase, with restructures at two of the largest shopping centre players likely to mean several assets come up for sale.

The 55-year-old Westfield Group is seeking approval from its shareholders to split its business into two geographic halves.

The first folds 47 Australian and New Zealand shopping centres and Westfield’s Retail Trust into the new Scentre Group. The second international half takes over Westfield’s 41 American and European malls, including the flagship Stratford City on the site of the 2012 London Olympics.

Westfield split gives two options

Westfield has told the market its new structure is a simplified option, providing “investors with a clear choice as to what they invest in, both in terms of geographic focus and currency exposure.”

The sticking point of the merger to date has been gearing in the new group which could trigger significant divestments. The most likely assets proceeding to the checkout counter are Westfield’s Bondi and Sydney shopping centres.

That would follow Westfield’s sale of eight malls in the US last year and two in the UK.

The most likely assets proceeding to the checkout counter are Westfield’s Bondi and Sydney shopping centres.

The other group positioning for the future is CFS Retail Property Trust, or CFX, which sits on a $13.8 billion portfolio of 34 assets. CFX completed its ‘internalisation’ of CBA’s retail management business in March and told investors it is on track to fully separate from the bank within 12 months.

CFX is a significant player behind factory outlet specialist DFO, which recently opened a new, fully leased centre in the Sydney suburb of Homebush. CFX also owns the newly opened Emporium centre in Melbourne and co-owns with the Gandel group the sprawling Chadstone centre, Australia’s largest mall which has plans for another major expansion.

CFX shifting smaller centres

CFX has been concentrating on selling down smaller shopping centres and part stakes in larger malls while the group retains significant exposure to office assets as well.

So expect to see some of Australia largest shopping centres up for sale in 2014-15 – but not fire sales with a host of local players and overseas owners interested.

Top of mind for likely buyers will be each asset’s proportion of food sales, with casual dining once again outperforming the retail sector’s overall numbers.

Food’s importance was highlighted by a Colliers International report showing the cafe and restaurant sector helped itself to a whopping 10.3% jump in sales in the past year, compared with 4.9% for retail as a whole.

“Discretionary spending has led the retail recovery,” said Michael Bate, Head of Retail at Colliers International.  “Money spent in cafes and restaurants is particularly good for the local economy, as unlike international luxury purchases where the financial benefit goes offshore, spending in cafes and restaurants is predominantly retained at home.”