This article is from the Australian Property Journal archive
Looking to boost visitation and take advantage of huge demand for housing, Westfield shopping malls landlord Scentre Group is eyeing off major residential redevelopment opportunities around its assets.
Reporting its full-year results, Scentre recorded 526 million customer visits across its 42 destinations, an increase of 14 million compared to 2023. That drove sales to a record level of $29 billion, $544 million higher year-on-year.
Funds from operations was $1.132 billion, at 21.82c per security, up 3.5% on the previous year. Distributions for the period was $893 million, or 17.20c, up 3.8%.
Statutory profit for the period was $1.050 billion, a huge jump on 2023’s $174.9 million which had been whacked heavily by nearly $1 billion in asset writedowns as the commercial real estate sector faced a post-COVID value reckoning.
Occupancy across its portfolio lifted to 99.6%, from 99.2% at the end of 2023. Scentre completed 3,253 leasing deals with new specialty lease spreads of 2.0%. Average specialty rent escalations were 5.2%.
Net operating income for 2024 was $2.030 billion, an increase of 4.0%.
“Our strategy to attract more people to our destinations and unlock growth opportunities is expected to continue to deliver growth in earnings and distributions,” said Scentre’s CEO Elliott Rusanow.
Scentre is targeting FFO of 22.75 cents per security for 2025, representing 4.3% growth for the year. Distributions are expected to grow by 2.5% to 17.63c.
Resi potential
The group has received rezoning approval at Westfield Hornsby in Sydney and Westfield Belconnen in Canberra that now provides the opportunity for large scale residential development at those sites.
“We have the potential to make a significant contribution to housing supply at our locations across Australia and New Zealand. We are focused on how we can create substantial long term growth for the group by adding density to our large and uniquely located strategic land holdings.”
Westfield Hornsby could be the beneficiary of the NSW government’s transport-oriented development initiative as it seeks to boost supply around transport and shops amid a housing crisis. Towers of up to 53 storeys could be built, accommodating as many as 2,300 homes. Hornsby is a “tier one” site under the plan, deemed a high-priority location where high- and mid-rise housing will be encouraged within 1.2 kilometres of the train station.
The Belconnen asset could now be home to 28-storey towers.
Sydney’s vacancy rate sharpened to just 2.0% in January, according to REINSW figures.
Scentre’s rival Vicinity Centres is also looking maximise the airspace above its malls after securing masterplan approval to develop 6,000 apartments across four key assets, including Buranda Village in Brisbane, Box Hill Central and Victoria Gardens Shopping Centre in Melbourne, and Bankstown Central in Sydney.
Meanwhile, Scentre continued to progress its $4 billion pipeline of future development opportunities, including the expansion of Westfield Sydney and construction of the adjoining commercial and residential tower on the corner of Market and Castlereagh Streets in Sydney’s CBD.
During the year the group completed works at Westfield Tea Tree Plaza in Adelaide and Westfield Mt Gravatt in Brisbane, and it said visitation at the centres was up 8.6% and 6.7% respectively since opening.
The group also commenced projects at Westfield Southland in Melbourne and Westfield Burwood in Sydney. Works began on the staged development of Westfield Bondi in Sydney, introducing Virgin Active as part of a new health, wellness and fitness precinct on level 1, alongside a new rebel rCX concept store. Scentre is “well advanced” in its planning for a lifestyle, dining and entertainment redevelopment on level six.
During the year, Scentre established two external trusts to become joint venture owners in a pair of Adelaide assets. In June the $310 million Tea Tree Opportunity Trust purchased a 50% share in Westfield Tea Tree Plaza, followed by the $175 million West Lakes Opportunity Trust acquiring a 50% share in Westfield West Lakes in September. Scentre continues to own the remaining 50% of both centres.
Meanwhile, the Carindale Property Trust (CDP), the single-asset trust co-owned by Scentre Group, announced an 8.6% increase in interim funds from operations to $14.6 million.
The property was valued at $1.558 billion, up 1.8% in the period, reflecting growth in net operating income and completion of the casual dining precinct project in September.
A statutory profit of $19.1 million was booked.
Distribution for the six-month period is $11.5 million or 14.23c per unit.
