Vicinity Centres resumes mall sales

Vicinity’s sales of a Victorian shopping centre and a stake in a Brisbane mall come as investor demand improves.

Vicinity CEO Grant Kelley. Picture: David Geraghty

Listed mall owner Vicinity Centres has sold off a Victorian shopping centre and a stake in Brisbane’s Mt Ommaney Centre for a total price of $195.5m.

The company’s move reverses its earlier stance of retaining a series of malls that it had on the block and plans for a $1bn shopping centre fund with Singapore’s Keppel Capital that would have contained some centres.

Vicinity sold Corio Central in Victoria to Chris Lock’s IP Generation Pty Ltd and a 25 per cent interest in Mt Ommaney Centre to private Queensland landlord YFG Shopping Centres.

The centres sold at a 0.5 per cent discount to their combined June 2019 book values.

READ MORE: Vicinity Centres portfolio valuation dips amid retail chill

Vicinity chief executive Grant Kelley said the pricing on the assets was “solid”, arguing investor demand had improved since August when the company said it would not make any further material divestments.

“The sale of these non-core assets is in line with our strategy of focusing our portfolio on market-leading destinations,” he said. Vicinity said the deal would further strengthen its balance sheet, with around a 90 basis point reduction in gearing.

The company will pour the proceeds into developing its more strongly performing centres and it may seek to acquire what it called “destination assets”.

Vicinity has been trimming down its portfolio and it has sold off interests in 37 non-core assets for $3.3bn at a combined 0.7 per cent premium to book value. In that time it has bought $1.1bn of higher quality centres and undertaken $1bn of developments, as well as buying back about $500m of shares.

“Our strategy focused on creating and investing in market-leading destinations is delivering results,” Mr Kelley said.

Offloading the centres means that Vicinity’s funds from operations will dip by about 0.3 cents per share on an annualised basis, prior to any reinvestment of proceeds. The impact this year is about 0.2c per share, cutting guidance back to 17.6 to 17.8c per share.

CBRE head of retail capital markets Simon Rooney negotiated the sales, with Corio Central acquired by IP Generation for $101m and the quarter stake in Mt Ommaney Centre purchased by YFG for $94.5m.

“While retail transaction volumes have decreased in 2019, we are now seeing clear signs of more positive investor sentiment and heightened inquiry levels for retail assets,” Mr Rooney said.

“There is general acknowledgment that the retail sector has been oversold, and that stabilised, better quality assets with an obvious growth and value add profile represent an attractive value proposition compared to other sectors.”

IP Generation is a property-based investment syndicate that has completed over $250m of property transactions over the last year.

Corio Central is a subregional centre securely anchored by Coles, Woolworths and Kmart on leases until at least 2025.

Situated in an established northern Geelong suburb, the 31,052sq m centre has a diverse tenant mix with major, chain and national retailers comprising 87 per cent of the space.

YFG could take on the management of the Mt Ommaney Centre, adding to its empire of

20 shopping centres in southeast Queensland, including Australia Fair on the Gold Coast and Brookside Shopping Centre in Brisbane’s north.

Mt Ommaney spans 56,469sq m and dominates its area. It is anchored by Coles, Woolworths and Aldi and also has a Kmart, Big W and Target. There is approval for a new cinema and casual dining precinct.

JPMorgan said that on-going asset sales would provide development funding for assets including Chadstone, Chatswood Chase and mixed use projects including Box Hill, Bankstown, Sunshine, Victoria Gardens, Queens Plaza and Buranda.