Keppel and Vicinity Centres to create AUD1bn Australian property fund

Singapore’s Keppel Capital and Australia’s Vicinity Centres intend to set up a AUD1bn (€639.5m) property fund, Vicinity Keppel Australia Retail Fund (VKF).

Vicinity said it has entered into an agreement with Keppel Capital Ventures, a Keppel Capital subsidiary. The agreement is subject to final board approvals of both parties.

The 50-50 partnership, which is expected to be launched by March next year, will be Keppel’s first retail-focused real estate fund.

Shopping centre owner Vicinity will seed the fund with assets.

Michael O’Brien, Vicinity’s CIO, told IPE Real Assets, the partners have identified a diversified portfolio of regional, sub-regional and neighbourhood centres in Australia for the proposed fund.

Under the partnership, O’Brien said Keppel will source the investors while Vicinity will source assets and provide the asset management for the fund.

“Sourcing capital is Keppel’s strong suit and we can see real interest from offshore capital in Australia,” he said.

A spokesperson from Keppel Capital told IPE Real Assets that ”beyond the initial portfolio we are looking to expand the fund size via the acquisition of suitable additional assets either from Vicinity or third parties.

“Keppel Capital will introduce a network of potential investors, particularly from Asia, to the Vicinity Keppel Australia Retail Fund opportunity.”

Vicinity, which currently manages some AUD26bn of retail assets, and Keppel Capital are anticipated to each initially hold up to a 10% equity interest in VKF.

Christina Tan, CEO of Keppel Capital, said: “It will allow us to connect our investors to a select diversified portfolio of Australian retail assets that generate stable cashflow with growth potential.”

The transaction will lift Vicinity’s partnerships to a total value of AUD12bn, and it will increase Vicinity’s asset divestment to AUD2bn this financial year.

Grant Kelley, Vicinity’s 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.”

Investors are seeking access to a diversified portfolio of Australian retail assets with strong, sustainable yields and potential for long-term capital growth.”

IPE Real Assets understands that Kelley who has a close relationship with Keppel from his time in Singapore when he ran a top property group, brought Keppel into the partnership with Vicinity.

Vicinity currently manages an office asset in Melbourne on behalf of K-Reit, one of the listed entities under Keppel Capital, manager of some SGD29bn (€18.35bn) worth of assets.

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