Vicinity to Launch $1 Billion Property Fund with Singapore's Keppel Corp

Vicinity Centres, one of Australia’s largest retail landlords, has formed a $1 billion wholesale fund with Singapore group Keppel Capital.

The proposed 50:50 joint venture fund, the Vicinity Keppel Australia Retail Fund (VKF), will have an ongoing investment strategy to own, acquire and grow a diversified portfolio of regional, sub regional and neighbourhood centres in Australia.

The new wholesale fund would boost Vicinity’s total strategic partnerships business to close to $12 billion of assets under management.

There is a targeted financial close by the end of the first quarter in 2019, according to Vicinity.

Vicinity chief executive Grant Kelley said the new fund would also increase both fund and asset management fees, with Vicinity providing all property management, leasing and development services.

“Including the planned divestment of up to $1 billion of non-core assets which we announced in June 2018, and following the establishment of this fund, we will have sold approximately $2 billion of assets in addition to the $2 billion of assets sold since the merger was completed in 2015.”

Vicinity's portfolio includes Melbourne's Chadstone Shopping Mall, the iconic Queen Victoria Building (pictured), and the DFO outlet centre portfolio.

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ASX-listed Vicinity own $16.1 billion of retail assets and manage some $26.1 billion in assets across the full retail asset spectrum.

Kelley said the intention is to reinvest the proceeds into the development pipeline and, potentially, to buy back Vicinity securities.

Each party will hold a 10 per cent equity interest in the VKF fund.

“In addition, Keppel Capital will introduce a vast network of potential investors, particularly from Asia, to the VKF opportunity,” Kelley said.

Keppel, which is a subsidiary of Keppel Corporation Limited, has assets under management of roughly $S29 billion ($28.7 billion).

Keppel Capital chief executive Christina Tan said the proposed fund will be Keppel Capital’s first retail-focused real estate fund, expanding the group’s operations beyond office developments.