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After making its fortunes with suburban malls anchored by blue-chip tenants like Aldi and Coles, Shopping Centres Australasia (SCA) has now received capital backing from a Singaporean partner to bolster its position in convenience retail within lower yielding metropolitan locations.
SCA Property Group (ASX: SCP) has teamed up with the Government of Singapore Investment Corporation (GIC) to establish a joint venture that will be known as the SCA Metro Convenience Shopping Centre Fund.
SCA will own 20 per cent of the fund, which it will seed with seven assets from its existing portfolio totaling $284.5 million at a weighted average capitalisation rate of 4.84 per cent.
The investment criteria of the JV ensures there is limited conflict with SCA's balance sheet activities, with the JV getting a first right over neighbourhood assets in the Sydney and Melbourne metropolitan areas until the target level of $750 million in assets has been achieved.
The Sydney-based company has made the move partly to increase its third party assets under management and diversify its income streams, aligning with a core strategy to generate defensive, resilient cash flows to support secure and growing long-term distributions to unitholders.
"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 Sydney-based company said.
"This initiative further confirms SCP’s leading position in the ownership and management of convenience-based retail shopping centres."
Proceeds from the sale of the seed portfolio assets will initially be used to reduce debt and provide capacity for future acquisition and development opportunities, with the company planning to redeploy these proceeds into higher yield and higher return assets within the next 12 months.
The joint venture is subject to Foreign Investment Review Board (FIRB) approval.
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