Securities in Vicinity Centres (VCX) (the recently merged Federation and Novion shopping centre group) were left unmoved by the group’s update yesterday which revealed plans to recycle up to $1 billion in surplus assets in the next year or so.
The securities eased 0.7% to $2.73 (against the 100 point or 2% slide in the wider market) after management revealed plans to sell the surplus assets and then reinvest the proceeds in the group’s core retailing centre assets.
Vicinity announced that following an evaluation of its $14.1 billion directly-owned portfolio of 83 retail shopping centres, it had identified approximately $750 million to $1 billion of asset recycling opportunities, subject to market conditions.
"The proceeds of any asset sales will be redeployed into value- accretive development and acquisition opportunities, such as the recently announced $319 million acquisition of The Shops at Ellenbrook and Livingston Marketplace in Perth,” the company said in a lengthy statement to the ASX yesterday.
“In the short term we have assumed the proceeds would be used to reduce our borrowings, which would reduce gearing by between approximately 350 bps and 450 bps,” the company said.
"Assuming no immediate reinvestment of any sale proceeds, the impact on earnings would be approximately 0.7 to 0.9 cents dilution per security on an annualised basis.
"There is no change to the Group’s FY16 underlying earnings guidance of 18.8 to 19.1 cents per security, given the expected timing of the asset sales.
“The proceeds of any asset sales will ultimately be reinvested into value-accretive investment opportunities such as the Group’s $1.5 billion (Vicinity share) development pipeline and acquiring assets that meet our investment criteria.”
VCX YTD – Vicinity flags asset sales
Vicinity’s CEO, Angus McNaughton said in the same statement that: “Vicinity’s portfolio is very strong and includes Australia’s premier retail asset, Chadstone Shopping Centre. We are the largest owner and manager of Sub Regional and Outlet centres, and the second largest owner and manager of Regional assets in Australia.
"With our deep capability, we see opportunities and value across each of the retail sub-sectors. Our scale and diversity is the central element of our investment strategy and operating model.
“We are focused on long-term value creation and delivering sustainable earnings growth through the cycle, while maintaining a strong balance sheet and efficient cost structure.
“The Group will target a total return of greater than 9.0% and underlying earnings growth of greater than 3.0%, on an annualised basis through the cycle.”
Mr McNaughton also revealed that the group’s recent refinancing activities will result in the cancelling its $1.8 billion bridge finance facility by the end of December.
This follows the establishment of $700 million of new bank debt facilities and the issuance of $A433 million of US Private Placement (USPP) Notes which will settle next week.”
Vicinity’s $1.5 billion development pipeline includes projects at Chadstone Shopping Centre, Warriewood Square, Colonnades and Halls Head Central are underway and works at Mandurah Forum are expected to start in the first half of next year.
“Beyond the development opportunities that we have underway and in the pipeline, we will look to selectively acquire assets,” The company said.
"The Shops at Ellenbrook and Livingston Marketplace in Perth are examples of the type of assets which will be focused on. They are both in strongly growing catchments, anchor tenants in the centres are performing very well, and they have high specialty sales productivity and low occupancy costs plus development potential. Importantly, we have a very strong team on the ground to create additional value.”
