Vicinity Centres to raise up to $1.4bn, suspends dividend

Vicinity Centres CEO Grant Kelley at the Chadstone hotel at Chadstone shopping centre. Picture: David Geraghty

Malls landlord Vicinity Centres is raising up to $1.4 billion as it announces the suspension of dividend payments.

The shopping centre owner will secure $1.2bn through an institutional placement underwritten by Macquarie Capital and Credit Suisse and $200m through a share purchase plan.

Vicinity has also dumped its distribution for this half and said preliminary valuations could see up to $2.1bn wiped off the value of its portfolio, with falls of up to 13 per cent expected.

“We are taking decisive action today to strengthen our balance sheet and provide Vicinity with flexibility to respond to the uncertainty caused by COVID-19 and the evolving retail landscape,” said chief executive Grant Kelley. “This equity raising also provides support for the continuation of Vicinity’s investment-grade credit ratings.”

Shares are being sold at $1.48 each, an 8.1 per cent discount to the last closing price of $1.61.

Major shareholder The Gandel Group will subscribe to $100m of new shares.

The funds are being used to strengthen the company’s balance sheet after negotiating with tenants that may be unable to afford rent during the coronavirus disruptions.

The group will pay no distribution for the six months to June 30.

Vicinity said the coronavirus pandemic has had a significant impact on its operations, although visitor numbers to its malls have improved as restrictions ease and more stores are reopening. Management is continuing to discuss short-term variations to leases with many tenants.

Foot traffic has recovered to 74 per cent of levels at the same stage of 2019, from a low of 50 per cent in April. Around 80 per cent of stores across Vicinity’s portfolio of malls are now trading, from a low of 42 per cent in April.

The raising comes as the group says the value of its shopping centre portfolio has fallen by between 11 per cent and 13 per cent during the COVID-19 pandemic, or by $1.8bn to $2.1bn, according to a preliminary estimates.

The raising will reduce gearing to 26.6 per cent from 34.9 per cent.

Vicinity says it has cash and undrawn debt facilities worth $2.6bn, as it announces it has taken on $300m of new debt and extended $650m of existing debt.

The group says it has cut back staff hours and reduced director salaries.

On the back of COVID-19 impacts, its net tangible assets per security has also fallen to $2.23 from $2.40 per security.

With Dow Jones Newswires