Keppel Corporation, through its asset management arm Keppel Capital Holdings, has entered into a memorandum of understanding with Australia-listed retail property group Vicinity Centres to establish a private fund that will invest an initial A$1 billion (S$1 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 it will continue to provide all property management, leasing and development services for these assets.
The fund will be named the Vicinity Keppel Australia Retail Fund (VKF), according to Vicinity's Australian Securities Exchange (ASX) filing.
The properties to be injected to the fund are selected on the basis of being stable with "strong diversified cash flows", a Keppel spokesman said in response to questions from The Business Times.
The initial retail assets to be invested in are "regional and sub-regional shopping centres" located in Australia, anchored by supermarkets and services.
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 take a 10 per cent equity interest in it. The proposed fund is targeted to close by the end of the first quarter next year.
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.
"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.
Keppel Capital chief executive Christina Tan 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 chief executive and managing director Grant Kelley, meanwhile, said Keppel Capital is an ideal partner for Vicinity, with the former helping to introduce a "vast network of potential investors, particularly from Asia, to the VKF opportunity".
"Investors are seeking access to a diversified portfolio of Australian retail assets with strong, sustainable yields and potential for long-term capital growth," he added.
ASX-listed Vicinity Centres 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 2 cents, or 0.3 per cent, to $6.75 yesterday.
In a separate announcement, Keppel said that, through Keppel Land China, it has entered into an agreement with vendor Sichuan Shengdai Food Co to acquire the latter's stake in a 3.35ha plot of land in Chengdu for 373 million yuan ($74.5 million).
Sichuan Shengdai will form an incorporated company - called NewCo - with Keppel holding 100 per cent equity, effectively becoming its indirect wholly owned subsidiary.
Completion of the acquisition is expected to take place some time in the third quarter of this year, 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 416 million yuan as of July 29, 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.