Metro Holdings re-enters Australia, buys 20% stake in a property portfolio for $89.5m

SINGAPORE - Mainboard-listed department store operator Metro Holdings, which also invests in real estate, has re-entered Australia with plans to take a minority stake in a property portfolio for A$95.8 million (S$89.5 million), under a joint venture agreement disclosed on Friday (Nov 8).

Paying in a mix of internal cash resources and external borrowings, Metro will take a 20 per cent interest in the 14 freehold properties by subscribing for units in three property trusts, while regional property group Sim Lian will own the rest of the portfolio.

Metro and Sim Lian have agreed to set up an asset management company to look after the portfolio of four office buildings and 10 malls, spread across Sydney, Brisbane, Melbourne and Perth.

The price tag, which reflects the consolidated net asset value of the trusts and takes into account the expected net income from the portfolio, will be subject to adjustment, Metro said, while valuing the properties at roughly A$900 million altogether.

The portfolio has a net lettable area of 130,925 square metres, with 96.7 per cent committed average occupancy and a weighted average lease expiry of about eight years.

"The investment, while not significant to the Metro Group as a whole, will nonetheless enable the Metro Group to further extend its regional footprint," the company said in a bourse filing.

Citing the high occupancy and defensive leases, it added that "these quality properties will generate stable and recurring income stream to the group immediately".

The move marks a return to Australia for Metro, which last divested a luxury resort hotel in Cairns in 2005. Chairman Winston Choo said in a statement that the acquisition is "in line with the group's strategy to expand our regional presence and diversify our investment portfolio". Metro's other real estate investments are in China, Indonesia, Britain and Singapore.

The investment is not expected to significantly affect Metro's consolidated net tangible assets and consolidated earnings per share for the year to March 31, 2020, the group said.

In September, Metro closed its Singapore flagship store at The Centrepoint mall in Orchard Road, after five years as the mall's anchor tenant. It has two other department stores here.

It had the month before posted a 47.5 per cent drop in first-quarter net profit to S$10.6 million on the back of lower fair-value gains from investments and weaker contributions from joint ventures.

Metro closed up on Friday by 0.53 per cent, to S$0.945, before the news.