SCP is an internally managed real estate investment trust (a REIT) owning a portfolio of 69 quality sub-regional and neighbourhood shopping centres and freestanding retail assets located across Australia and New Zealand.
SCA Property Group invests in shopping centres predominantly anchored by non-discretionary retailers, with long-term leases.
SCA owns a portfolio comprising in total 69 neighbourhoods, sub-regional and freestanding retail shopping centre assets situated across Australia (55) and New Zealand (14).
The Portfolio consists predominantly of operating properties (56) in addition to 13 properties currently under construction or re-development by the Woolworths Group.
Weighted Average Lease Expiry as of December 2012 is 15.8 years. Tenants include Woolworths (50.7%), Specialties (38.8%), Big W (8.7%), and Dan Murphy s (1.8%).
This company was spun out of Woolworths as they looked to unload some of their property assets.
The attraction for this company was Woolworths being the major tenant and the yield of 7.4% on the float price. The dividend is expected to be 35% to 40% tax deferred.
So what is the problem?
The first issue is that 40% of the gross lease income will come from speciality stores, which currently have a 20% vacancy rate. Woolworths is providing a guarantee for this rent over the next two years. But, what then?
The second issue is that the other 60% is leased to Woolworths on a five-year review, not with CPI, which will limit growth in earnings.
The third issue is that 13 properties are still under construction.
The fourth issue is that Woolworths had previously tried to sell a group of its centres, but only managed to sell around 8 of them, indicating that this market sector is not strong.
The stock is trading around its net tangible assets which given the restrictions on earnings growth has not factored in any margin for risk.
Investors who are chasing the yield may be sacrificing their capital in the process.
For more information on Shopping Centres Australasia Property Group (SCP) please contact us on 07 4771 4577.