August 5, 2018 / 11:02 PM / a year ago

UPDATE 2-Singapore's Keppel Corp to set up Australian property fund with Vicinity Centres

(Updates with Vicinity’s statement, share movement)

Aug 6 (Reuters) - Conglomerate Keppel Corp Ltd said on Monday a unit of its asset management arm had entered a memorandum of understanding with Australia’s Vicinity Centres to establish a private fund.

The companies intend to invest in an initial A$1 billion ($739.40 million) portfolio of Australian retail properties currently owned by Vicinity, Keppel said in a statement, adding that the parties plan to manage the fund through a joint venture.

Vicinity said it would form Vicinity Keppel Australia Retail Fund, which both companies said is subject to due diligence and the approval of their boards.

The deal will introduce a vast network of potential investors, particularly from Asia, to the fund, Vicinity said in a statement. This will be Keppel Capital’s first retail-focused real estate fund.

Keppel Capital, which is Keppel Corp’s asset management arm, will hold a 50 percent stake in the venture with Vicinity, and each party will hold a 10 percent equity stake in the fund.

Keppel said Vicinity is expected to initially inject about A$1 billion of retail assets across five Australian states into the proposed fund, which is expected to close by the first quarter in 2019.

Shares of Vicinity rose as much as 2 percent on Monday to A$2.7, their highest since June 27. ($1 = 1.3524 Australian dollars) (Reporting by Ambar Warrick in Bengaluru and Jack Kim in Singapore; Editing by Bill Trott)

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