SCA to raise $250m, may capitalise on coronavirus crisis

Shopping Centres Australasia CEO Anthony Mellowes. Picture: Hollie Adams/

Shopping centre owner SCA Property Group has successfully bet that investors will back its network of supermarket-anchored centres around Australia by undertaking a $250m raising to bolster its balance sheet.

The company is the first major real estate investment trust to raise funds in the wake of the damage inflicted on the sector by the coronavirus crisis. The move indicates that only the strongest groups will be able to tap the market at a reasonable price.

Rival groups, including local Westfield owner the Scentre Group, and Vicinity Centres, have seen their share prices slashed as larger malls have emptied, while customers are still stocking up in supermarkets owned by the likes of SCA and rival Charter Hall Retail REIT.

SCA signalled that it would try to capitalise on the crisis, saying it was undertaking the $250m institutional placement both to strengthen its balance sheet and provide funding flexibility for acquisition opportunities.

Citi and Moelis are expected to handle the placement and the company also launched a $50m non-underwritten unit purchase plan. The placement was at $2.16 per unit, an 8.5 per cent discount to Monday’s closing price of $2.36.

SCA said its convenience-based supermarket-anchored centres were resilient but there was uncertainty in relation to the duration and economic impact of the COVID-19 pandemic.

Many of its specialty tenants are also trading strongly and the company said government stimulus packages should benefit its small business tenants.

The trust will now be geared at just 24 per cent and said the pandemic may provide a unique opportunity to secure quality assets at competitive prices over the next 6-12 months as it now has more than $550m in cash and undrawn facilities.

All but one of SCA’s 85 shopping centres is anchored by either a Coles or Woolworths supermarket, and the centres are benefiting from the elevated foot-traffic being generated by the supermarkets.

SCA’s specialty tenants account for the other 52 per cent of its gross rental income and are heavily weighted toward non-discretionary categories.

Many of the specialty tenants are trading strongly, including pharmacies, medical centres, discounters, liquor and fresh food retailers. But gyms, cinemas, massage, beauty, tanning salons and nail bars are closed, costing $1m a month, and cafes are also shut.

All up only 0.6 per cent of SCA’s income is affected and it said it would consider abatement and deferral requests on a case-by-case basis once March sales figures were made available.

“The impact on our fiscal 2020 earnings from any rent lost from these tenants is expected to be partially offset by increases in percentage rent from our anchor tenants, interest expense savings and cost savings,” SCA said.