This article is from the Australian Property Journal archive
VICINITY Centres has put its $1 billion divestment program of non-core assets on ice, as well as the launch of a new wholesale property fund with Singaporean group Keppel Capital, as it waits retail industry’s headwinds to ease.
Australia’s second-largest major retail landlord posted a $235.3 million interim profit was less than one third of the previous first half’s $755.9 million.
Funds from operations were up by 2.0% to $349.5 million, at 9.06 cents per security. Revenue dipped to $659.3 million.
The group also announced that Peter Huddle would join Vicinity as chief operating officer from the start of April, having spent 18 years at Westfield in shopping centre management and asset general manager, and most recently as COO US of Unibail-Rodamco-Westfield following the French giant’s takeover of Westfield.
It follows QIC Global Real Estate poaching Vicinity’s newly-minted chief financial officer Michael O’Brien last week, to take up the role of managing director, in place of retiring veteran Steve Leigh.
Vicinity’s specialty store moving annual turnover increased by 6.0% over the first half to $10,746 per sqm, while its Chadstone and premium CBD centres reported an average of $18,423 per sqm.
Specialty store and mini majors MAT growth of 4.2%, up from 1.6% in June, driven by Chadstone 12.4% growth and 6.7% seen at its DFO portfolio, while total MAT growth lifted from 1.2% to 2.7%.
Jewellery sales lifted by 12.7%, leisure by 5.6%, homewares by 5.3%, retail services by 5.2% and apparel and footwear by 4.2%. The latter included 13.7% growth in fashion accessories, 6.0% in men’s apparel and 4.6% in jeaneries and unisex. Smaller growth was seen in food catering (2.9%), general retail (0.8%), and food retail (0.5%).
Across majors, department stores were down by 2.8%, DDS was up 0.8% and supermarkets 1.4%.
Chadstone, premium CBD and DFO Centres underpinned leasing spreads of 4.4%, with that latter achieving 15.9%.
Portfolio occupancy remained at a strong 99.7% and comparable net property income growth was 1.1%.
The group told analysts it had shelved plans to sell off the its remaining identified non-core assets, having already sold off $670 million last year, which included a portfolio of nine centres to SCA Property Group for $573 million.
It has planned to establish a new fund with Keppel by March, but Vicinity said ongoing discussions with potential investors would continue into the next financial year.
Vicinity’s chief executive officer and managing director, Grant Kelley said the group’s performance metrics had “significantly” improved over the half, largely due to the strength of our flagship assets and the divestment of $670 million of non-core assets. That included a portfolio of 10 centres to SCA Property Group for $573 million.
The group wrote down the value of the four remaining non-core assets the group was looking to offload up between 7% and 8%. Kelley told analysts the market for capital transactions had “worsened materially” and that there is a “dearth of capital sources”.
In a warning sign for the broader market, 38 of its 62 directly-owned retail properties were independently valued resulting in a net valuation decline of $37 million, or a 0.2% decrease as at the end of the period. Chadstone saw a 1.4% gain, at $42.4 million, and its DFO centres broadly saw positive outcomes.
Kelley said the divestment of the remaining non-core assets was still part of Vicinity’s plans to focus its balance sheet on its destination portfolio, and create value by realising mixed-use opportunities on its landholdings and expanding its wholesale funds platform.
Vicinity’s reformatting of its stores has seen DFO Perth delivering a 40% valuation gain on the back of strong performance; stage three at The Glen opened fully leased; and Australia’s first full-line Victoria’s Secret store opened at Chadstone.
Planning continues for an expansion of Chatswood Chase Sydney to incorporate a greater collection of premium retailers and food and dining experiences; Ellenbrook Central’s $63 million expansion will being a Kmart, three mini majors and specialty retailers; and Box Hill Central will undergo a redevelopment to create a retail destination integrated with public transport and mixed-use developments.
“In addition to further retail expansion, Vicinity is focusing on a select number of large, strategic, high-value mixed-use projects at Box Hill Central, Chadstone, QueensPlaza and Victoria Gardens Shopping Centre. Other smaller non-strategic sites are also progressing plans to gain mixed-use entitlement, with the development rights potentially being sold off to release capital for reinvestment into Vicinity’s destination portfolio,” Kelley said.
Vicinity has pushed forward with its solar investment program, with $73 million total investment across 22 centres.
Net tangible assets per security was $2.96.
The interim distribution was down 1.85% to 7.95 cps, reflecting an adjusted FFO payout ratio of 95.2%. Vicinity reaffirmed its full-year FFO per security guidance of 18.0 to 18.2 cents, reflecting comparable growth of 2.3% to 3.4%.
Australian Property Journal
