SPH REIT Buys Half Stake in Aussie Mall From Lendlease for A$670M

A REIT sponsored by media conglomerate Singapore Press Holdings has agreed to buy a half stake in one of the largest shopping malls in Australia for A$670 million ($461 million), continuing a wave of real estate investments Down Under by Singaporean firms.

SPH REIT will pick up the share in the Westfield Marion Shopping Centre, located near Adelaide in the state of South Australia, from Lendlease Real Estate Investment, the trust announced Thursday. The remaining 50 percent stake in the freehold asset is owned by Scentre Group Ltd, Australia’s largest retail REIT.

The deal for the 136,629-square-metre (1.47 million-square-foot) asset greatly expands SPH REIT’s Aussie portfolio, after the Singapore-listed trust made its first foray overseas by acquiring a shopping centre in New South Wales for A$175.1 million last December.

Snapping Up South Australia’s Biggest Mall

Located at 293-297 Diagonal Road in Oaklands Park, a southern suburb of the South Australian state capital, the Westfield Marion Shopping Centre has a gross lettable area of 136,629 square metres (1.47 million square feet) across three stories of retail space. The property also incorporates 5,270 parking spots and five storeys of office premises.

In its location  near the Oaklands train station, around 10 kilometres south west of Adelaide’s central business district, the mall is accessible from three major thoroughfares. Anchored by department stores David Jones, Myer, and Harris Scarfe, as well three discount retailers and three supermarkets, the lifestyle mall also features a 26-screen cinema, 320 specialty stores, a hardware chain store and a liquor supermarket.

The property is 99.3 percent occupied with a weighted average lease expiry (WALE) of 6.7 years. Built in 1968 and expanded repeatedly over the years, the Westfield Marion Shopping Centre is reputed to be the only super-regional shopping centre in the state and draws 13.5 million visitors annually.

Investment bank Moelis Australia has been appointed as investment manager for the buying entity, Marion Sub Trust, a wholly owned subsidiary of SPH REIT. The total acquisition cost of A$691.3 million includes the A$670 million purchase price in addition to a land transfer fee, acquisition fee, professional fees and other expenses.

Scentre Group CEO Peter Allen announced that the group would work with its new joint venture partner to bring about the next phase of the centre’s development. Allen’s company owns and operates 41 Westfield retail centres across Australia with total assets under management of A$54.6 billion.

According to an account by the Australian Financial Review, Lendlease’s 50 percent stake in the mall was valued at A$737.5 million when it put the asset on the market this past April. SPH REIT was believed to be the likely buyer as early as July.

REIT Acquires Fifth Asset

“This transaction and our co-ownership with Scentre Group marks another significant milestone in expanding our presence in a country and sector with growth prospects,” noted Susan Leng Mee Yin, CEO of SPH REIT Management in a statement.

Following the deal, Australia will account for 19.7 percent of SPH REIT’s portfolio by value, up from just 5.3 percent pre-acquisition. The transaction is also expected to improve the portfolio’s WALE by net lettable area from 3.2 years to 5.1 years.

The move into the Adelaide market serves to diversify the REIT’s holdings in Australia after last year’s purchase of an 85 percent stake in Figtree Grove Shopping Centre in New South Wales. SPH REIT acquired the interest in the 21,984-square-metre freehold property in Figtree, a suburb of Wollongong, for A$175.1 million ($126 million).

Listed in 2013, SPH REIT owns three commercial properties in Singapore spanning a total of 961,523 square feet, with an aggregate value of S$3.4 billion ($2.45 billion), including Paragon, The Clementi Mall and The Rail Mall.

SG Investors Bet on Australia

Singapore overtook China in the year through March 31, 2019 to become the biggest outbound investor in Asia-Pacific real estate, according to research by Knight Frank, and Australia has emerged as one of the leading targets for capital from the city-state.

Last week, Singapore’s sovereign wealth fund GIC and Australian property firm Charter Hall announced they had partnered to acquire Jessie Street Centre, a landmark office building in Parramatta, northwest of central Sydney. The JV paid A$415 million ($287 million) for the 20-storey tower, with Charter Hall taking a ten percent stake in the venture, Mingtiandi reported.

Singapore-based private equity firm SC Capital Partners is also deepening its presence in the Lucky Country. The company teamed up last month with Australia’s Fortius Funds Management to buy three shopping centres in Sydney for A$174.5 million ($118 million), five months after purchasing an office complex in the country’s city, Canberra, for A$62 million.

Singaporean real estate fund manager ARA Asset Management, which ventured into the country in 2015, expanded its Australian portfolio in March by acquiring a commercial block in Brisbane’s central business district for a reported A$96.5 million ($68.8 million). ARA-managed Suntec REIT snapped up its fourth commercial property in Australia this past July by striking a deal for an office project in the Sydney tech hub of Pyrmont.