Unitholders questioned SPH Reit's manager over a proposed Australian acquisition at the annual general meeting yesterday.
Unitholders were particularly keen to find out its strategy for the freehold Westfield Marion Shopping Centre in Adelaide and the rationale behind a private placement to partially fund the deal.
The real estate investment trust (Reit) announced earlier this month that it is planning to acquire a 50 per cent stake in Westfield Marion for A$670 million (S$620 million), with the other 50 per cent held by Scentre Group. The deal is expected to be concluded by the end of the year.
Westfield Marion is the largest regional shopping centre in South Australia with 1.5 million sq ft of gross lettable area on a land parcel of 2.5 million sq ft. It is about 10km south-west of Adelaide's central business district.
Dr Leong Horn Kee, chairman of the Reit manager, said the trust is taking a longer term view of the asset. "We do have plans on how to further redevelop this area, (in the) medium to longer term."
The acquisition is being financed through a combination of proceeds from the $300 million of perpetual securities issued on Aug 30, debt as well as a private placement. The Reit's gearing will stand at 29.7 per cent after the acquisition.
One unitholder queried the choice for a private placement. SPH Reit units shed three cents to close at $1.08 last Friday after the Reit announced it had raised $164.5 million through the private placement.
The issue price for the placement was $1.05 per new unit. The placement allows the Reit to bring in more shareholders and improve liquidity, given that the units are not very well traded, Dr Leong said, adding that the placement was also priced such that the yield accretion was maintained.
Singapore Press Holdings (SPH) holds a stake of around 70 per cent in SPH Reit.
Other assets in SPH Reit's portfolio include Paragon, The Clementi Mall, The Rail Mall and an 85 per cent stake in Figtree Grove Shopping Centre in Australia.
During the hour-long session that was attended by around 175 people, one unitholder questioned the concentrated risk of having Paragon account for so much of the Reit's portfolio and asked if it would consider any mergers and acquisitions. At $2.75 billion, Paragon accounts for around three-quarters of the $3.6 billion valuation of the portfolio.
Dr Leong said: "Paragon is one of our mainstays. We put a lot of focus on Paragon, making sure it is well-managed and well-maintained. We continue to look at asset enhancement initiatives there."
He added that SPH Reit has been diversifying by acquiring The Rail Mall, Figtree Grove Shopping Centre and now, Westfield Marion.
One unitholder broached the possibility of The Seletar Mall being injected into the Reit, a question that has come up before. The Seletar Mall is owned by SPH.
The timing and pricing of a sale of the mall would have to suit SPH's own corporate objectives, with Dr Leong noting: "When the time comes that (SPH is) prepared to sell, we are prepared to look at it. We have to assess it based on our constitution."
