Keppel Reit raises S$113 million in private placement for Sydney mall buy

The manager of Keppel Reit on Thursday (Oct 9) announced that the private placement to raise S$113 million for its majority purchase of Top Ryde City Shopping Centre in Sydney, Australia, has closed.

The placement was about three-times covered with strong demand from new and existing unitholders globally, comprising institutional and accredited investors.

The issue price per unit was S$0.983, about a 4.6 per cent discount to the volume-weighted average price of S$1.0304 per unit of all trades from Tuesday until the agreement was signed on Wednesday.

The trading of about 115 million new units is expected to commence on Oct 17.

The purchase of a 75 per cent stake in the freehold mall will cost the real estate investment trust (Reit) A$393.8 million (S$334.8 million) in total, which will be funded through a mix of debt, perpetual securities and the private placement.

Morningstar equity analyst Xavier Lee stated that the acqusition marked a “measured diversification” from the Reit’s office-focused portfolio. However, he noted that its management remained committed to maintaining a Singapore-centric and office-heavy asset base, with retail exposure capped below 20 per cent.

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He also pointed out that the presence of competing malls such as the larger Macquarie Centre means Top Ryde is “unlikely” to be the dominant mall in the region and it thus had no “moat”, or no significant competition advantage.

Still, Morningstar said it viewed the transaction “positively” as the shopping centre offers the Reit defensive characteristics and helps mitigate cyclical risks tied to the office sector, especially with its focus on non-discretionary retail.

“We believe the units are undervalued and Keppel Reit remains our top pick among Singapore Reits,” said Lee, maintaining a fair value estimate of S$1.16. “We think that Keppel Reit’s expansion into Australian retail reflects a pragmatic response to limited inorganic growth opportunities in the office sector.”

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Units of Keppel Reit finished Tuesday flat at S$1.03, before the manager called for a trading halt on Wednesday morning. The halt was lifted on Thursday before the market opened.