GIC Sets Up $532M Aussie Convenience Retail Fund With SCA Property Group

GIC is set to add some retail items to its shopping cart of Australian property acquisitions, as the Singapore sovereign wealth fund teams up with an ASX-listed REIT to launch a convenience centre fund targeting A$750 million ($532 million) in assets.

GIC will hold an 80 percent equity interest in the joint venture as the REIT, Sydney-based SCA Property Group (SCP), retains 20 percent and serves as the investment manager. SCA was created by Woolworths in 2012 with the retailer transferring its ownership of a number of shopping centres to the REIT at the time.

The unlisted vehicle, dubbed SCA Metro Convenience Shopping Centre Fund, will be seeded with seven assets valued at A$284.5 million from the trust’s existing portfolio at a weighted average cap rate of 4.84 percent, SCP said late last week in a stock exchange filing.

The establishment of the JV, which is subject to regulatory approval, comes amid a flurry of moves Down Under by GIC, including the acquisition of a Canberra office building alongside fund manager Charter Hall and a pair of Melbourne acquisitions — one announced on 26 November and another this week — by separate logistics joint ventures between the $744 billion sovereign fund and industrial giant ESR.

Neighbourhood Watch

In the ASX filing, SCP said the strategic partnership with GIC would focus on neighbourhood assets in lower-yield metropolitan locations, benefiting from first right over the trust’s neighbourhood assets in the Sydney and Melbourne metro areas until the target asset level of A$750 million is achieved.

“The establishment of a long-term strategic partnership with GIC represents an exciting opportunity for SCP to pursue opportunities on an expanded basis in the convenience retail sector,” the REIT said. “This initiative further confirms SCP’s leading position in the ownership and management of convenience-based retail shopping centres.”

The proposed fund’s seven seed assets include two retail centres in Sydney, three in Melbourne and one each in Brisbane and Adelaide. The top-valued property, with a sale price of A$69 million, is Clemton Park Shopping Village in a suburban area 15 kilometres (9.3 miles) southwest of the Sydney CBD. The single-level shopping centre features a Coles supermarket and 22 specialty shops across 7,017 square metres (75,530 square feet) of gross leasable area.

The A$284.5 million price of the seed portfolio represents a 9.3 percent premium to valuations assessed in June of this year. SCP will receive market-based fees for funds, asset and property management services provided to the joint venture.

Also known as Shopping Centres Australasia, SCP is an internally managed REIT with a portfolio of sub-regional and neighbourhood shopping centres and free-standing assets focused on convenience retailing. As of June, the portfolio comprised 95 assets under management and was valued at A$4.05 billion.

Financial information released by the REIT shows that Woolworths continues to account for 26 percent of its rental income, with competitor Coles contributing 12 percent, with other major retail chains such as Kmart, Bunnings and Officework also occupying a significant slice of the portfolio.

Blizzard in Oz

GIC is on a tear with its Australia plays, just this week announcing a joint venture with ASX-listed Charter Hall to pick up a 12-storey office tower at 50 Marcus Clarke Street in Canberra from South Korea’s Mirae Asset Global Investments for A$335 million.

That deal follows GIC’s tie-up with Charter Hall in October of last year, when the duo paid A$682 million for a 49 percent interest in a portfolio of convenience stores operated by Ampol, Australia’s biggest oil refiner.

In the Aussie industrial space, GIC forged a partnership with ESR in April to purchase the Milestone Logistics portfolio from Blackstone for A$3.8 billion. In late November, ESR’s Australia Development Partnership, which is majority-owned by GIC, agreed to buy 2-50 Glenelg Street in Melbourne’s Coolaroo suburb for a reported A$45 million.

And on Tuesday of this week, ESR Australia revealed in a LinkedIn post that its ESR Australia Logistics Partnership ll, also backed by GIC, is buying a 13,290 square metre logistics property at 18 Fairchild Street in Melbourne’s Heatherton suburb.