SCA Sell down 7 assets into GIC JV Fund

SCA Property Group has established a $750m Joint Venture with GIC to invest in established metropolitan convenience retail centres across Australia selling 7 assets worth $284.5m into the Fund.

Subject to FIRB approval, GIC will hold an 80% equity interest in the new unlisted vehicle, to be known as the SCA Metro Convenience Shopping Centre Fund, and SCP will hold the remaining 20% equity interest and will be the investment manager of the JV.

The strategic rationale for SCP for the creation of the JV is compelling:

  • Establishment of a long-term strategic partnership with a high quality and globally recognised capital partner in GIC;
  • Ability to expand and accelerate participation in the convenience-retail sector, with the JV focused on neighbourhood assets in lower yielding metropolitan locations. The investment criteria of the JV ensures that there is limited conflict with SCP’s balance sheet activities, with the JV to have a first right over neighbourhood assets in the Sydney and Melbourne metropolitan areas until the target $750m of asset level has been achieved;
  • Increasing third party assets under management and diversification of income streams, aligning with SCP’s core strategy which is 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. This initiative further confirms SCP’s leading position in the ownership and management of convenience-based retail shopping centres.

The pricing of the initial seed portfolio represents a ~9.3% premium to SCP’s 30 June 2021 valuations. SCP will receive market-based fees for funds, asset and property management services provided to the JV.

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. SCP aims to redeploy the proceeds from the sale of the seed portfolio into higher yield and higher return assets within the next 12 months. There is no change to SCPs full year FY22 AFFO guidance of 15.0cpu as previously advised.

The seven seven assets from SCP’s existing portfolio totalling $284.5m are detailed below and were transacted at a weighted average capitalisation rate of 4.84%.

 AssetCityBook Value June 2021 ($m)Sale Price Nov 2021 ($m)Premium to Book Value (%)Cap Rate (%)
1BeralaSydney33.337.011.1%4.25%
2Clemton ParkSydney63.169.09.4%5.00%
3CoorparooBrisbane42.745.87.3%5.00%
4Epping NorthMelbourne34.535.01.4%5.00%
5HighettMelbourne32.936.510.9%4.75%
6WalkervilleAdelaide29.333.715.0%4.75%
7Wyndham ValeMelbourne24.527.512.2%5.00%
 TOTAL 260.3284.59.3%4.84%

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About Warwick Petschack

Warwick has over 25 years of property investment and management experience. Principally responsible as Managing Director for Capital Management Australia and Joint Managing Director for Chauvel Capital Partners and Editor of Australian Property Markets News.

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