Keppel unit to set up A$1b wholesale Australian property fund with Vicinity

KEPPEL Corporation, through its asset management arm Keppel Capital Holdings, has entered into a memorandum of understanding with Australian-listed retail property group Vicinity Centres to establish a new private fund which will invest an initial A$1 billion (S$1.01 billion) into property currently owned by Vicinity.

Vicinity will initially inject some A$1 billion of retail assets located across five Australian states into the proposed fund, and continue to provide property and development services for these assets, according to Keppel's media statement.

Keppel Capital Ventures - a wholly owned subsidiary of Keppel Capital - and Vicinity Centres will manage the proposed fund via a 50-50 joint venture, with each party expected to initially hold up to a 10 per cent equity interest in the proposed fund, targeted to close by the end of the first quarter in 2019.

"The ongoing investment strategy of the proposed fund will be to own, acquire and grow a diversified portfolio of Australian retail assets with stable yields and potential long-term capital growth, underpinned by high occupancy rates, balanced lease expiries and a diversified tenant base predominantly focused on non-discretionary spending," Keppel added.

Christina Tan, chief executive of Keppel Capital said: "Keppel Capital has been actively pursuing opportunities with best-in-class partners to grow into new markets and asset classes. The proposed fund, which will be Keppel Capital's first retail-focused real estate fund, will expand our track record in Australian real estate investments beyond office developments to include retail properties. It will allow us to connect our investors to a select diversified portfolio of Australian retail assets that generate stable cash flow with growth potential."

Vicinity Centres is listed on the Australian Securities Exchange, and has a fully integrated asset management platform and A$26 billion in retail assets under management across 81 shopping centres.

Keppel Corp's shares advanced 0.59 per cent, or S$0.04 to S$6.77 as at 9.25am on Monday.

In a separate announcement, Keppel announced that, through Keppel Land China Limited, it has entered into an agreement with vendor Sichuan Shengdai Food Co to acquire the latter's stake in a 3.35 hectare (ha) plot of land in Chengdu, China for 373 million yuan (S$74.56 million).

Sichuan Shengdai will form an incorporated company - called NewCo - in which Keppel will hold a 100 per cent equity interest in, effectively becoming Keppel's indirect wholly owned subsidiary.

Completion of the acquisition is expected to take place sometime in the third quarter of 2018, and Keppel intends to develop a residential project at the site.

Keppel said the consideration took into account the site's market value, which is estimated to be around 416 million yuan as at July 29, 2018 based on similar sites.

The transaction is not expected to have any material impact on Keppel Land China's earnings per share and net tangible asset per share for the current financial year.