SPH REIT enters deal to acquire 50 percent stake in Adelaide shopping center for S$637M

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SPH REIT has entered a deal to acquire a 50 percent stake in the Westfield Marion Shopping Centre, located in Adelaide, Australia, from Lendlease Real Estate Investments for A$670 million, or around S$636.5 million, the REIT said in a filing to SGX.

Scentre Group, Australia’s largest retail REIT, owns the remaining 50 percent of the shopping center and will become SPH REIT’s joint venture partner after the deal is completed, the filing said.

“The acquisition deepens SPH REIT’s presence in the Australian market and follows on from our first asset acquisition of Figtree Grove Shopping Centre in December 2018,” Susan Leng Mee Yin, CEO of SPH REIT’s manager, said in the statement.

“The acquisition will enhance the sustainability and resilience of SPH REIT’s returns to unitholders through the increased geographic diversity, larger freehold land tenure, and longer underlying leases with embedded rental growth potential,” she said.

After the acquisition, 19.7 percent of SPH REIT’s portfolio by valuation will be from Australia, compared with 5.3 percent previously, the REIT said.

Westfield Marion, which has a 99.3 percent occupancy rate, is the largest and only super-regional shopping center in South Australia, with around 1.5 million square feet of gross lettable area, the REIT said. The property is located about 10 kilometers southwest of Adelaide’s central business district, and it attracts around 13.5 million visitors annually, the REIT said.

The tenant base includes national retailers, such as David Jones, Myer, Target, Kmar, Coles and Woolworths, the filing said.

The deal is expected to be financed with a combination of proceeds from the S$300 million perpetual securities issued in August, debt and/or an equity fundraising, the REIT said.

On a pro forma basis, assuming the acquisition had been completed on 1 September 2018, the distribution per unit (DPU) for the year ended 31 August 2019 would have been 5.69 Singapore cents, compared with 5.60 Singapore cents reported, the filing estimated.

The deal is expected to be completed by the end of the year, the REIT said.

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