Even though retail sales rose 0.4% in April which was a little stronger than expected, retail property investment trust Vicinity Centres Re is going ahead with plans to sell around $1 billion of its underperforming businesses.
The news saw the trusts securities rose 2.6% yesterday to end at $2.74.
The planned sale of its weaker shopping centres comes amidst a sluggish retail environment, subdued spending and stagnant wage growth for more than the past year.
Vicinity will take the funds raised from the asset sales and reinvest in its better centres.
The shopping centre operator said it would plough the proceeds into what it called “transformative developments” including The Glen and Box Hill Central in Melbourne; Galleria in Perth; as well as Chatswood Chase and Bankstown Central in Sydney.
Vicinity’s half-year 2018 underlying profit fell 1% because of a tougher environment.
The trust doesn’t expect any impact on funds from operations per security (FFOps) guidance for the year ending June 30 because of its timing, the company said in a statement on Monday.
The company added that its FFOps would see a 1 cent dilution on an annualised basis from the sale, beyond fiscal 2018.
“Vicinity’s strong portfolio already includes Chadstone, Australia’s number one shopping and entertainment destination; an unrivalled premium retail offer across Australia’s three largest CBDs as a result of the recently concluded acquisition of iconic Sydney CBD retail assets, including Queen Victoria Building, and Australia’s leading Outlet Centre portfolio, the DFOs.”
Vicinity has appointed JLL as its real estate advisor and coordinator of the asset sales process working with Macquarie Capital as its corporate advisor on the asset sales program.
"Following an extensive review of our portfolio, it is clear that we need to focus our resources on creating destinations that provide market-leading shopping, dining and entertainment experiences," chief executive and managing director Grant Kelley said.
