Restructuring Vicinity To Setup New Fund With Keppel

By Glenn Dyer | More Articles by Glenn Dyer

Shopping centre group, Vicinity will get rid of another $1 billion of marginal Australian shopping malls to a joint venture it is setting up with Singapore investor, Keppel Capital to manage a new wholesale property fund – Vicinity Keppel Australia Retail Fund (VKF).

The fund will start with around $1 billion worth of shopping centres from Vicinity’s balance sheet, taking planned asset divestments for Vicinity in 2018-19 to approximately $2 billion.

Vicinity will continue to provide property and development services for these assets.

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 hold up to a 10% equity interest in the proposed fund, targeted to close by the end of the first quarter of calendar 2019.

Vicinity said yesterday "The expected impact of the establishment of VKF on Vicinity’s funds from operations per security is approximately 0.5 cents dilution on an annualised basis before reinvestment of proceeds. Assuming the repayment of debt, gearing would be reduced by approximately 400 basis points (4%).

Keppel Capital has assets under management of approximately $S29 billion as at December 2017. It is a subsidiary of Keppel Corporation Limited, listed on the Singapore Stock Exchange with a market capitalisation of approximately $S13 billion as at June 2018.

That’s close to Vicinity’s value of $10.26 billion at yesterday’s close when its securities rose 2.6% on news of the JV

Vicinity said the launch of VKF "is the next key step in Vicinity’s strategy to deliver superior income and sustainable long- term capital growth for securityholders by focusing its directly-owned portfolio on destination assets that provide market-leading shopping, dining and entertainment experiences.”

"The transaction, if implemented, will also continue Vicinity’s successful capital recycling program which has created significant value for securityholders over the past three years, contributing to net tangible assets per security growth of 21 per cent by providing capital for value-accretive developments and acquisitions whilst also reducing gearing,” he said yesterday.

Grant Kelley, Vicinity CEO and Managing Director, said: “Including the planned divestment of up to $1 billion of non-core assets which we announced in June 2018, and following the establishment of this fund, we will have sold approximately $2 billion of assets in addition to the $2 billion of assets sold since the merger was completed in 2015. We intend to reinvest the proceeds into our high-quality development pipeline and, potentially, to buy back Vicinity securities.

The new wholesale fund would boost Vicinity’s total strategic partnerships business to close to $12 billion of assets under management.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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