GIC backs return to shops with $750m local venture with SCA Property Group

Singapore’s sovereign fund has emerged as the latest big believer in supermarket-backed retail property.

SCA Property Group CEO Anthony Mellowes: ‘We are seeing our centres doing very well. People are seeing how resilient they are.’ Picture: Britta Campion

Singaporean sovereign fund GIC is making a bet on local shopping centres continuing their comeback with the group unveiling a $750m joint-venture with local specialist SCA Property Group.

The pair will invest in metropolitan centres, where values have soared as buyers chase the certain returns from supermarkets while larger centres are battling the threat of a new coronavirus variant.

SCA stays clear of the larger regional malls that have been smashed by the pandemic and instead focuses on smaller centres that have attracted local shoppers and are doing well from the work from home phenomenon.

Prices of these assets have leapt in major cities, putting them out of reach for most listed groups and teaming up with the Singaporean fund will give SCA the firepower to compete.

SCA also likes slightly larger centres on its own account and is riding the rising tide of consumer spending that it expects to jump in the run-in to Christmas.

“We are seeing our centres doing very well,” SCA chief executive Anthony Mellowes said. “People are seeing how resilient they are.”

Mr Mellowes said that consumers were spending after recent lockdowns with the pent-up demand now being released.

SCA said the venture would invest in established metropolitan convenience retail centres across Australia. The new unlisted vehicle, to be known as the SCA Metro Convenience Shopping Centre Fund, will be seeded with seven assets from the trust’s existing portfolio totalling $284.5m.

GIC will hold an 80 per cent equity interest in the venture and SCA will hold the remaining 20 per cent. The pair say their ability to expand and accelerate in the convenience-retail sector will be bolstered as they will focus on neighbourhood assets in lower yielding metropolitan locations.

SCA was among a series of A-REITs to announce ambitions to manage funds during the last reporting season, so winning GIC as a backer is a coup for the group.

The very hot market for neighbourhood assets in Sydney and Melbourne has been nominated as among their first targets. The pricing of the initial seed portfolio showed a 9.3 per cent premium to book values, a rapid jump in just five months.

SCA will pour proceeds from the sale of the seed assets back into reducing debt and will have the capacity to make future acquisitions and to launch developments.

Macquarie analysts said the establishment of the GIC venture was a “positive endorsement” of the subsector, as well as the SCA platform. They said the deal “highlights the significant upside risk to net tangible assets”.