SCA Property Group, the A$1.4 billion ($1.5 billion) shopping center trust spun off by Australia’s biggest retailer, jumped 2.9 percent on its first day of trading.
Shares of the Sydney-based company, which raised A$472 million through a placement to institutional investors at A$1.40 a share last week, closed at A$1.44 in Sydney, after opening at A$1.405. Woolworths Ltd. shareholders will receive one stapled unit in the property group for every five shares they hold in Australia’s largest retailer as of Nov. 30.
“This is a good, solid defensive story and the pricing’s about right,” Stuart Cartledge, Melbourne-based managing director at Phoenix Portfolios, said in a telephone interview. “Over the next five to six years, we’re likely to see the realization that there’s not too much growth in this thing, as 60 percent of its rent is coming from Woolworths, so it should trade at a higher yield to reflect that.”
The listing of SCA, which holds 69 shopping centers in Australia and New Zealand, is the largest initial public offering in Australia since Westfield Group hived off ownership of some of its Australian and New Zealand malls into the new Westfield Retail Trust in December 2010, according to data compiled by Bloomberg.
It follows attempts by Woolworths to divest the properties for the past two years, and an agreement to sell eight malls in October 2011 for A$266 million to a joint venture between Charter Hall Retail REIT and pension fund Telstra Super.
SCA expects distributable earnings of 6.5 Australian cents a share for the shortened financial year ending June 30, 2013, and 11.8 cents for the following fiscal year, it said on Oct. 12. It will pay a dividend of 5.6 cents for the period to June 30, 2013, and 10.4 cents for the 12 months ending June 2014, it said.
“A sustained improvement in retail conditions from rate cuts positions SCA to benefit from solid turnover rent growth from anchor tenants and higher growth specialty rents,” Tony Sherlock, Sydney-based head of property research at Morningstar Australasia Pty, wrote in a report dated Oct. 24.
Australian consumer confidence surged to a 19-month high this month as the central bank’s 1.5 points of interest-rate reductions boosted household optimism. Retail sales climbed 0.5 percent in September from August to A$21.6 billion, beating economists’ forecasts.
Improving consumer spending will help a recovery next year in shopping center rents, which were stable through 2012, according to Jones Lang LaSalle Inc.
“As the demand for retail space slowly improves, pressure will build in the leasing market because vacancy rates and new supply both remain relatively low across most markets and retail sub-sectors,” Andrew Quillfeldt, national retail analyst at Jones Lang LaSalle, said in an e-mailed release on Oct. 24. “This will result in moderate rental growth returning to the sector from early 2013.”
Woolworths shares rose 0.6 percent to A$28.55, taking this year’s price gain to 15 percent.