Vicinity sells and SCA buys, as mall portfolio changes hands

Landlord Vicinity has reshaped its empire by selling 11 malls for $631m, 10 of which have been bought by SCA Property.

Vicinity CEO Grant Kelley at the Chadstone shopping centre. Pic: Stuart McEvoy

Retail landlord Vicinity Centres has sold 11 smaller malls for $631 million as it reshapes its portfolio away from neighbourhood shopping centres to focus on flagship assets.

SCA Property Group, a major landlord of Woolworths, will buy 10 shopping centres from Vicinity for $573m in a deal that will make it the largest convenience retail group in the country.

A private investor has bought one other neighbourhood shopping centre from Vicinity for $58m, in a deal settled late last month.

SCA’s purchase will be funded by a fully underwritten institutional placement to raise $259m, a non-underwritten unit purchase plan to raise up to $50m and a debt facility of up to $365m.

SCA also said it would sell down its shares in Charter Hall Retail REIT to help fund the acquisition, which could put an end to speculation about corporate activity between the two trusts.

Vicinity (VCX) has previously outlined a plan to shift its portfolio towards destination centres by selling up to $1bn of non-core assets, taking the view that in a challenging environment landlords need to specialise in either flagship or convenience retail, but not both.

Vicinity chief executive Grant Kelley said the deals were a “significant achievement”.

“In the interest of progressing our strategy of focusing on owning highly productive market-leading destination assets, the sale of the ten-asset portfolio to SCP makes strategic sense for both parties,” Mr Kelley said.

SCA (SCP) will buy Bentons Square and The Gateway in Victoria, Lavington Square and West End Plaza in New South Wales, North Shore Village and Oxenford Village in Queensland, and Currambine Central, Kalamunda Central, Stirlings Central and Warnbro Centre in Western Australia.

The private investor has bought Belmont Village in Victoria.

The 11 assets had specialty sales per square metre averaging $7,611. Vicinity said its comparable specialty sales per square metre would rise by 1.4 per cent after the sales.

Vicinity will reinvest proceeds into investing in retail developments, repaying debt and may buy back shares. The group affirmed its full-year funds from operations guidance of 18 to 18.2 cents per security.

SCA chief Anthony Mellowes. Pic: John Feder

SCA Property Group chief executive Anthony Mellowes said the purchase was a “material and important strategic acquisition” for the group.

“The portfolio is being acquired on attractive terms and is expected to provide management with the ability to add value over the short, medium and long term,” Mr Mellowes said.

SCA would be able to create value by remixing the tenants further towards non-discretionary retailers,the group said.

Citigroup is sole lead manager of SCA’s placement while its financial advisers are Citi and Moelis.