“We expect the market to view this favourably given the uncertainty of whether Scentre’s balance sheet could withstand material further devaluations.”
Mr Jones said there is no liquidity or covenant issue for Scentre but said its gearing would get to the mid to high 40 per cent range if its assets are devalued a further 15 per cent to 20 per cent.
“We assume this is the case and it would leave Scentre gearing well above its 30-40 per cent target range. The hybrid issue would alleviate a lot of this concern,” Mr Jones said.
UBS and CBRE are conducting the sale process with the first round of bids received two weeks ago.
Meanwhile, a number of potential buyers are said to be circling AMP Capital including Dexus, which has made an offer to merge its Dexus Wholesale Property Fund with the AMP Capital Diversified Property Fund.
Charter Hall which recently employed Carmel Hourigan, the former head of AMP Capital’s real estate business is also said to be running the ruler over the business. AMP Capital has about $192 billion of funds under management.
There is also market speculation that APN Property and the acquisitive ARA Asset Management, chaired by Dr Gary Weiss, are also interested parties. ARA is also locked in a long-running battle for control of Cromwell Property.
Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.