SPH Reit takes A$670m stake in South Australia mall

Singapore

SPH REIT is expanding its footprint Down Under, with a deal inked on Thursday for a half-stake in a freehold mall, Westfield Marion Shopping Centre, in the state of South Australia.

The transaction with Lendlease Real Estate Investments comes at a price tag of A$670 million (S$627.9 million), to be funded by a recent perp issue, plus debt and/or equity fund-raising, the manager said.

The price tag, reached on a willing buyer, willing seller basis, took into account an independent valuation of Westfield Marion.

SPH Reit will also enter a joint venture partnership with retail real estate investment trust Scentre Group, which owns and runs Westfield malls in Australia and New Zealand.

The manager said that it planned to pay for the deal with a mix of proceeds from the August issuance of S$300 million of perpetual securities, as well as debt and/or equity fund-raising, with a decision on the timing and share of funding yet to be made.

It will also arrange a bridging loan facility that can be drawn upon to fully fund the acquisition if need be.

Westfield Marion, which is about 10 kilometres from the downtown of state capital Adelaide, has three storeys of retail space and five office floors, with 5,270 parking lots.

Its gross lettable area is 1.5 million square feet, and anchor tenants include department stores David Jones, Myer, and Harris Scarfe, and supermarkets Aldi, Coles, and Woolworths.

The transaction is expected to increase the Reit portfolio's weighted average lease expiry by net lettable area to 5.1 years, up from 3.2 years as at Aug 31. It also raises the portfolio value's exposure to Australian assets from 5.3 per cent to 19.7 per cent.

Last year, SPH Reit took an 85 per cent stake in another freehold Australian mall - Figtree Grove Shopping Centre in Wollongong, New South Wales. It also has interests in three Singapore retail properties.

The Reit's manager said the Westfield Marion purchase "deepens (its) strategic presence in Australia with entry into (the) attractive and stable Adelaide market".

Susan Leng, chief executive of the manager, added: "The acquisition will enhance the sustainability and resilience of SPH Reit's returns to unit holders through the increased geographic diversity, larger freehold land tenure, and longer underlying leases with embedded rental growth potential.

"This transaction and our co-ownership with Scentre Group marks another significant milestone in expanding our presence in a country and sector with growth prospects."

The Westfield Marion transaction would have upped pro forma full-year distribution per unit from 5.6 Singapore cents to 5.69 Singapore cents if it had been done on Sept 1, 2018, noted the manager in its filing.

The manager is a wholly owned subsidiary of Singapore Press Holdings, which publishes The Business Times.

SPH Reit units lost S$0.01, or 0.87 per cent, to S$1.14, before the news.