Scentre Group buys into Eastgardens with development potential

Scentre Group (ASX: SCG) announced that it will pay $720M to acquire a 50% stake in Westfields Eastgardens, NSW, highlighting the ongoing demand for top performing retail shopping centres in Australia. The 50% share in the centre was acquired from Tower Terrace Group, the family property group created by John Saunders, who also co-founded Westfields.

The centre is one of the top 30 performing shopping centres in Australia with sales of over $600M, which was reflected in the highly competitive 4.25% capitalisation rate. Although the capitalisation rate is lower than SCG’s weighted portfolio capitalisation rate of 4.91%, upside potential is expected through redevelopment opportunities at the site. Management has indicated that it will consider retail expansion opportunities as well as mixed-use development projects, which may include apartments. As one of the most experienced retail property managers in Australia, we expect SCG will unlock further value in coming years as the centre is located in a strategic catchment of ~300,000 residents in south eastern Sydney, with strong forecast population growth.