Follow Up On SPH REIT's New Acquisition



In early Nov, SPH REIT proposed to acquire a 50% stake in Westfield Marion Shopping Centre in Adelaide, Australia at a price of A$670m. Scentre Group will hold the remaining 50% stake. The deal is expected to be finalised by the end of this year. We covered the deal in our previous post. The REIT had further disclosed its long-term plan last week.



What you need to know


Property


Westfield Marion Shopping Centre is located about 10 km from Adelaide's central business district. Westfield Marion is the largest and also the only regional shopping centre in South Australia. It is sitting on a massive plot of land with 1.5m square feet of gross lettable area on a 2.5m land parcel. SPH REIT is planning to redevelop the area to tap on the future growth of the region.



Financing of the acquisition


The acquisition will be financed through a combination of:

  1. Proceeds from the $300m of perpetual securities issued in Aug

  2. Debt Financing

  3. A private placement at $1.05 per unit to raise $164.5m

The placement will help to improve the trust's liquidity, as well as to make sure the deal is yield-accretive to the existing unitholders.



Long-term portfolio growth


SPH REIT's portfolio has been very concentrated, with Paragon Shopping Mall taking 76% of its portfolio valuation. The long-term strategy of the REIT is to continue to diversify its portfolio through yield-accretive acquisitions. The REIT manager has acquired The Rail Mall, Figtree Grove Shopping Centre over the years, and now, adding the Westfield Marion Shopping Centre to its portfolio.



Summary


The market has positively received the new acquisition. The asset will only start to contribute to its DPU in Q2/Q3 next year. With a strong portfolio, SPH REIT has been maintaining its yield at about 5%.




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