Keppel Reit buys 3 retail units in Melbourne, Australia for $8.6 million

8 Exhibition Street in Melbourne, Australia.
8 Exhibition Street in Melbourne, Australia. PHOTO: KEPPEL CORPORATION LIMITED

SINGAPORE - Keppel Reit, through Keppel Reit (Australia) Trust, has agreed to acquire the three remaining prime retail street-fronting units at 8 Exhibition Street in Melbourne, Australia from Cerberos for A$8.6 million (S$8.6 million).

Keppel Reit currently owns a half stake in the 8 Exhibition Street office development and two retail units. The addition of the three remaining retail units will allow the reit strategic control over the 35-storey freehold office building and all five retail units in 8 Exhibition Street.

Enjoying prominent frontages along the main thoroughfares of Flinders Street and Exhibition Street, the three units of some 5,500 sq ft are part of the historic Herald and Weekly Times building, which also includes the 8 Exhibition Street office development.

The retail units are currently fully leased to two popular and established food and beverage outlets for 10 years with options for another 30 years.

Tenants of the office block include multinational corporations such as Ernst & Young, UBS and the National Australia Bank.

Ms Ng Hsueh Ling, chief executive officer of Keppel Reit Management, said the acquisition was a rare opportunity for Keppel Reit to gain strategic control of the office and retail components in a freehold landmark in the heart of Melbourne's central business district.

"The three commercial retail units have a 10-year lease with options for another 30 years. There are also fixed annual rental escalations which will provide Unitholders with long-term income stability and resilience."

The distribution per unit accretive acquisition is expected to be completed in the fourth quarter of 2015.

It will be funded with a combination of working capital and Australian-dollar debt to provide natural hedging, and at least 90 per cent of the distributable income will be hedged.

The Australian dollar has weakened significantly this year and is now trading at marginally below par to the Singapore dollar.