Emporium Melbourne drives $147m Vicinity lift
Retail landlord Vicinity Centres has unveiled a $147 million lift in the value of its shopping centre portfolio, with its largest assets, including Emporium Melbourne, leading the way.
The rise in the value of its best city malls, including of its recently acquired stakes in the Queen Victoria Building, The Galleries and The Strand Arcade, all in Sydney, is in keeping with its focus on the best properties.
An overhaul of Melbourne’s Chadstone mall, which it co-owns with billionaire John Gandel, also poured $324.1 million on to Vicinity’s books in the first half.
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Vicinity Centres’ chief executive Grant Kelley says that growth is driven by ongoing “quality enhancement initiatives”, the group’s intensive asset management approach and strong demand for quality shopping centres.
“Significant increases in value have been achieved for the City Centre portfolio,” he says, citing the company’s premium assets in Melbourne and in Sydney.
But he is alive to the challenges that retailers are facing from the rise of e-commerce, as well as the falling market values of subregional centres, worth more than $100 million but falling below the mega-centres pitching as leisure destinations.
The $10 billion group is now looking to shed 14 smaller properties it holds around Australia and plans to pour the sale proceeds back into improving its best malls and readying select properties for mixed-use projects, including apartments.
Vicinity Centres chief executive Grant Kelley. Picture: Mike Burton.
Vicinity says 37 of its 74 directly owned retail properties were independently valued and the remaining properties have been subject to internal valuations.
Combined with valuation growth reported for the first half, it had net valuation growth of $555 million, or 3.6%, on its directly owned portfolio over the past 12 months.
As well as releasing the 0.9% lift in property revaluations, Vicinity announced an extension of its on-market buyback to acquire up to 5% of its shares.
Macquarie analysts says Vicinity’s net tangible assets growth is positive “although relatively limited as expected”. The stock trades around a 10% discount to its new asset backing.
Chadstone Shopping Centre has undergone a major renovation.
The group’s gearing has edged down to about 26.4% as at June, allowing it to chase high-quality assets should they hit the block.
Valuations on the group’s portfolio of Discount Factory Outlets were also up, driven by strong income growth, with a rise of $36.3 million, or 2.4%. The Mandurah Forum in Western Australia, which completed a major redevelopment in March, also recorded a 6.3% valuation increase.
Other retail landlords remain under pressure and Citi analysts have downgraded three retail exposed A-REITs: Scentre Group, owner of the local Westfield empire; Charter Hall Retail REIT; and SCA Property Group.
“Our analysis highlights that cyclical and structural pressures continue to build for retail landlords, culminating in negative earnings revisions and downward valuation pressure,” Citi says.
Citi warns about the potential for falling house prices to weigh further on retail conditions and drive a de-rating.
This article originally appeared on www.theaustralian.com.au/property.
