Vicinity payout as centres rebound

Retail property landlord Vicinity Centres is planning to pay a distribution for this half as it expects shoppers to return to its properties.

Retail property landlord Vicinity Centres is planning to pay a distribution for this half as it expects shoppers to return to its properties.

Retail property landlord Vicinity Centres is planning to pay a distribution for this half as it expects shoppers to return to its properties, including Melbourne’s landmark Chadstone Shopping Centre which it co-owns with billionaire John Gandel.

The company, which was heavily exposed to Melbourne’s lockdown in the last quarter, said it had been hit by government-mandated closures for most retail stores.

Vicinity’s CBD centres have also been hit by office workers staying home and by travel restrictions, and although most are expected to improve, the weekday pick-up has been slow.

Chief executive Grant Kelley said centre visitation had returned to 79 per cent of the previous year’s level across Victorian centres, including its CBD complexes, Emporium Melbourne and DFO South Wharf, which were running at 48 per cent and 64 per cent of last year respectively.

Mr Kelley said the reopening of retailers across Victoria would help Melbourne centres to rebound, “repeating the trend observed in other markets in Australia where the virus has been largely contained”.

“When combined with borders reopening and the return of domestic tourism, along with a steady increase in workers returning to CBD offices, this should support improved retail conditions across Australia,” he said.

Vicinity had moving annual turnover growth to the end of September of -15.2 per cent but excluding Victorian and CBD centres it was off by 1.7 per cent.

September quarter sales across the portfolio were 32 per cent below last year but if Victorian and CBD centres were excluded, the steadier suburban malls were up by 1.1 per cent.

Foot traffic is lifting and hit 80 per cent of last year across the portfolio by early November, and was running at 96 per cent excluding Victorian and CBD centres.

However, the company cited uncertain circumstances, saying it could not provide fiscal 2021 earnings guidance as it would not be ­reliable.

Assuming no material deterioration in existing conditions, Vicinity intends to pay a distribution for the six months to the end of December 2020.

In the September quarter, 56 per cent of gross rental billings across the portfolio were collected, or 76 per cent excluding Victorian and CBD centres.

Macquarie Equities analysts warned that Victoria remained the “Achilles heel” in the quarter. They said retail sales were still under pressure, with NSW sales still 19.9 per cent down.

But there are some strong performers in the centres with supermarkets, discount department stores and mini-majors up strongly.

Vicinity is yet to provide an update on how many lease deals it has struck with retailers under the Morrison government’s leasing code or how many chains have also yet to come to terms with it for rent payments during the pandemic.

The company is negotiating short-term lease variations using waivers and deferrals, but is yet to disclose the quantum of relief that has been provided.

“While Victorian outcomes should improve, pressure will remain on Vicinity’s cash collection rates given exposure to CBDs. We also anticipate weakness in leasing outcomes across the broader NSW and Victorian portfolios given lower confidence of consumers to shop at malls, as well as higher probability of COVID outbreaks,” Macquarie said.

Vicinity shares closed up 0.7 per cent on Friday at $1.40.