Westfield shopping centre owner Scentre Group is being tipped as among the most likely of the real estate-related retail stocks that could be forced to raise equity, should its mall valuations fall further and panic selling on the sharemarket continue.
As retail tenants fight for survival, valuations of its malls have been in decline, leaving Scentre’s balance sheet in need of replenishment, according to some market analysts, who say its debt to equity ratio has narrowed.
During its full-year results, Scentre Group, which owns Australian Westfield centres, said its net debt was $12.9bn, and the thinking is that if it tapped the market, it would be for about $1bn. Scentre’s debt levels are nearing 35 per cent and, should its property values fall further, its gearing could increase beyond that level and it could lose its AAA rating. The company’s market value is $15.87bn with its share price falling to $2.96 on Tuesday, before closing at $3.04. The shares hit $4 in January.
In February, Scentre posted a $1.2bn net profit and it has $$39.9bn of total assets.
The expectations of an equity raising comes despite Scentre embarking on an $800m share buyback, with the landlord already clawing back $350m worth of the stock.
Credit Suisse was used for the buyback so could be once again called upon for a raise, while JPMorgan has also worked for the group in the past.
The owner of the international Westfield malls, Unibail-Rodamco-Westfield, also has a high debt level comparative to others in the sector. But many in the market say the largest Australian mall owners are in good shape from a balance sheet perspective.
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