Morningstar

Morningstar, Inc.

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Vicinity Centre’s first-half fiscal 2019 was worse than expected, with the majority of the malls across the portfolio reporting sluggish sales and rent performance. New management are trying to extract value, but it will be difficult as trading conditions are changing far faster than the three to five years it takes for a landlord to revise its inmall offering. A case in point is the fanfare surrounding the opening of Victoria's Secret’s first full-line Australian store in Chadstone (Vicinity’s…

Consistent with Vicinity’s strategy to divest AUD 1.0 billion of subregional and neighbourhood shopping centres, the firm has agreed to the sale of 11 malls for AUD 631 million. Transaction evidence implies the market yield for Vicinity’s shopping malls has weakened significantly as the 11 malls sold were executed at a 5.1% discount to the June 2018 book values, whereas the 24 malls Vicinity sold for AUD 1.9 billion over the previous three years were sold at a 2.1% premium to book value. The 11…

Narrow-moat-rated Vicinity Centres' fiscal 2018 earnings on a funds from operations, or FFO, basis of AUD 18.2 cents per security, or cps, were in line with guidance. Our fair value estimate increases 5% to AUD 2.85 from AUD 2.70 as we raise long-term rental growth projects as a further AUD 1.9 billion of lower growth assets are planned to be sold over the year to June 2019. This is a very significant sales program, representing 11.5% of the portfolio by value. Gearing will fall materially from…

There are still no specifics from new CEO, Grant Kelley on the assets across the portfolio that will be earmarked to undergo development to incorporate offices, hotels or apartments. That said, we think the February announcement to convert some of the pure retail malls to mixed use assets will be a value-accretive strategy. Our reasoning is many of the assets in the portfolio do not have population or income growth outlook to support a significant expansion to the retail trade area. We expect…

Vicinity Centres' reported first-half fiscal 2018 earnings on a funds from operations, or FFO, basis of AUD 9.14 cents per security, or cps, is broadly unchanged from the previous corresponding period. Reiterated fiscal 2018 guidance for FFO of AUD 18.0 to 18.2 cps (implying growth of 2.8% to 4.0%) would seem easy to achieve, given the second half will benefit from a full run-rate from new developments (first and second stages of The Glen and Chadstone) and contracted rental growth for most…

Australia

Vicinity Centres retails asset and property management services. The Company offers a retail property investment and services organization involved in the ownership, management, and development of retail properties. The Company operates shopping centers across Australia.

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