JV entrenches Shopping Centres Australia dominance in convenience-based retailing
SCA is joining hands with an affiliate of Singapore-based GIC for a $750m convenience retail JV
Mentioned
KEY POINTS
- JV signals renewed confidence in the covid-hampered shop-local thematic.
- SCA will a retain a remaining 20% of the new JV.
- Pricing of the initial seed portfolio represents 9.3% premium to SCA’s 30 June 2021 valuations.
Following the acquisitions it made in the September quarter, real estate owner Shopping Centres Australasia Property Group - aka SCA (ASX: SCP) has announced the establishment of an Australian-based $750m metro convenience retail joint venture, with an affiliate of Singapore-based GIC.
The new unlisted vehicle is planning to trade under the moniker, SCA Metro Convenience Shopping Centre Fund of which GIC expects to own an 80% equity interest with SCA retaining the remaining 20% of the JV.
It’s understood the JV will be seeded with seven assets from SCA’s existing portfolio totalling $284.5m at a weighted average capitalisation rate of 4.84%. The pricing of the initial seed portfolio represents a circa 9.3% premium to SCA’s 30 June 2021 valuations.
Expansion into convenience retailing
Underpinning SCA’s rationale for the creation of this new JV is the ability to expand and accelerate participation in the convenience-retail sector, with the JV focused on neighbourhood assets in lower yielding metropolitan locations.
The JV signals renewed confidence in the shop-local thematic that struggled during the worst of the covid pandemic.
Investment criteria for the JV ensures there’s limited conflict with SCP’s balance sheet activities.
The JV reserves a first right over neighbourhood assets in the Sydney and Melbourne metropolitan areas until the target $750m of asset level has been achieved.
SCA will receive market-based fees for funds, asset and property management services provided to the JV.
More acquisitions
Proceeds from the sale of the seed portfolio assets will initially be used to reduce debt and provide capacity for future acquisition and development opportunities. Management has previously signalled to the market plans to seek more acquisitions which may result in fresh capital being required.
Meantime, SCA aims to redeploy the proceeds from the sale of the seed portfolio into higher yield and higher return assets within the next 12 months.
There is no change to the company’s full year FY22 adjusted funds from operations (AFFO) guidance of 15.0cpu as previously advised.
Broker sentiment towards SCA varies from Strong Buy to Sell. The consensus recommendation is Hold.
Some brokers expect the stock to deliver a full year FY22 dividend of 15.00 cents, and earnings per share (EPS) of around 16.40 cents.
