When SPH REIT announced its FY19 full year results, I mentioned that the debt gearing currently stood at 27.5% which I felt is low for a retail REIT and there is definitely further room for more acquisitions.
On 7th November 2019, SPH REIT announced the acquisition of 50% in Westfield Marion Shopping Centre, Adelaide, South Australia. The other 50% stake is managed by Scentre Group Limited (“Scentre Group”), the largest Australian Retail REIT.
Westfield Marion Shopping Centre houses 327 tenants and have a high occupancy of 99.3% by Gross Lettable Area (“GLA”). The Weighted Average Lease Expiry (“WALE”) is 6.7 years by GLA and 4.2 years by income.
A picture speaks a thousand words. Post acquisition, you can see that Westfield Marion will make up 15% of SPH REIT’s portfolio valued at S$4.2 billion. The acquisition will be funded via the combination of proceeds from the S$300.0m of perpetual securities issued on 30 August 2019, debt and/or equity fund raising.
Rationale for Acquisition
I shall not touch into the details for the rationale for acquisition as you can find the details from the presentation slides. The important to me is the post acquisition DPU on whether it is accretive or not.
- Deepens strategic presence in Australia with entry into attractive and stable Adelaide market.
- Dominant, destination lifestyle mall in South Australia.
- Complementary acquisition, adding to resilience, diversity and quality of SPH REIT’s portfolio.
- DPU and NAV per unit accretive transaction.
Pro forma FY2019 DPU
Below is the illustrated Pro forma based on FY2019 DPU. We are expected to get 0.09 cents more post acquisition. Oh well, not much difference in terms of dividends to be collected.