Keppel Capital announces first property fund focused on retail with Vicinity

Keppel Capital Ventures -- a wholly-owned subsidiary of Keppel Capital Holdings, the asset management arm of Keppel Corporation -- has entered into a Memorandum of Understanding (MOU) with Australian retail property group Vicinity Centres to establish a new private fund.

The proposed fund intends to invest in an initial AU$1 billion portfolio of Australian retail properties currently owned by Vicinity. The MOU is subject to due diligence, definitive documentation and final board approvals of both parties.

The parties intend to manage the proposed fund through a joint venture where Keppel Capital and Vicinity will each hold a 50% stake. Vicinity is expected to initially inject approximately AU$1 billion of retail assets located across five Australian states into the proposed fund, and continue to provide property and development services for these assets. Each party is expected to initially hold up to a 10% equity interest in the proposed fund, which is targeted to close by the end of the first quarter in 2019.

The ongoing investment strategy of the proposed fund will be to own, acquire and grow a diversified portfolio of Australian retail assets with stable yields and potential long-term capital growth, underpinned by high occupancy rates, balanced lease expiries and a diversified tenant base predominantly focused on non-discretionary spending. The proposed fund will benefit from Keppel Capital's extensive investor network and Vicinity's strong capabilities in the retail sector in Australia, according to the companies. As one of the largest retail property managers listed on the Australian Securities Exchange, Vicinity has a fully integrated asset management platform and AU$26 billion in retail assets under management across 81 shopping centres.

Christina Tan, CEO of Keppel Capital, said: "Keppel Capital has been actively pursuing opportunities with best-in-class partners to grow into new markets and asset classes. The proposed fund, which will be Keppel Capital's first retail-focused real estate fund, will expand our track record in Australian real estate investments beyond office developments to include retail properties. It will allow us to connect our investors to a select diversified portfolio of Australian retail assets that generate stable cashflow with growth potential."

Grant Kelley, Vicinity CEO and managing director, said: "Global investors view the Australian retail property market favourably, with our transparency, stable and growing economy, and strong population growth particularly attractive. Keppel Capital is an ideal partner for Vicinity, with our aligned objectives of expanding our respective property funds platforms and delivering long-term sustainable growth for partners invested in those platforms."