Shopping mall landlord Vicinity Centres has continued to get rid of unwanted shopping centres as it looks to polish its portfolio amid the continuing retail malaise.
Vicinity told the ASX yesterday that it had sold its 25% in the Mt Ommaney Centre in Queensland for $94.5 million and entire holding in the Corio Central neighbourhood centre in Victoria for $101 million.
Mt Ommaney changed hands at a 3.3% premium to book value, while Corio’s sale price represented a 3.8% to book value.
As a result, Vicinity has reduced its guidance for its funds from operations by 0.2 cents, to between 17.6 to 17.8 cents, due to the timing of asset sales and assuming no reinvestment of the sale proceeds.
Over 18 months of weak retail sales growth makes it easier to understand moves like Vicinity’s to clean up its portfolio and focus more on what it thinks are its top-earning centres.
CEO Grant Kelley said the sales were in line with the group’s strategy of focusing its portfolio on market-leading destinations.
“We are pleased to have achieved solid pricing for these assets, following improved investor demand since we announced in August 2019 that we would not proceed with any further material divestments in the current environment,” he said in a statement to the ASX.
Mr. Kelley said the sales would strengthen its balance sheet and provide a 90 basis point (0.90%) reduction in gearing as the proceeds would be used to repay debt in the short term.
Vicinity’ is concentrating its attention on its bigger or so-called destination malls. It owns the largest shopping centre in the country at Chadstone in Melbourne and has sold off stakes or control of 37 non-core centres for a total of $3.3 billion.
About $1.1 billion of the proceeds have been used for acquisitions, another $500 million was spent on share buy-backs at an 11.1% discount to market and a further $1 billion was spent on developments of its portfolio.
Vicinity securities eased 0.3% to $2.65 yesterday.