Valuation Gains at Shopping Centres Australia expected to be offset by Cap Ex & Derivates losses

SCA Property Group has reported increases in its property valuations of $34.5m or +0.7% as at June 2022 but other balance sheets movements are expected to offset the gains.

The valuation increase on like-for-like properties was due to:

  • A minor increase in the Net Operating Income of $2.3m (up +0.9%) from December 2021;
  • A tightening of the capitalisation rate of 2bps, from 5.45% at December 2021 to 5.43% at June 2022;
  • A compression of 2bps on the discount rate, from 6.19% at December 2021 to 6.17% at June 2022.

The total value of SCP’s Investment Properties has increased from $4,426.4m at December 2021 to $4,460.9m at June 2022.

Shopping Centres Australia indicated that the valuation gains will be offset by capital expenditure during the period and movements in other balance sheet items including an expected negative movement in the mark-to-market valuation of the cross-currency & interest rate swaps (derivates) that are taken out to hedge the foreign currency exposure US dollar denominated Notes issued by the Group.

There were no acquisitions or disposals during the period (aside from those classified as assets held for sale in the December 2021 financial accounts).

Investment Property Portfolio Summary $m
December 2021 Portfolio Valuation 4,426.4
Add: Valuation increase ‘like for like’ 34.5
June 2022 Portfolio Valuation 4,460.9
Valuation Weighted Average Capitalisation Rate 
December 2021: % Rate 5.45%
Cap Rate tightening (0.02)%
June 2022: % Rate 5.43%

A total of 43 properties from the like-for-like portfolio of 91 were valued externally over the period and make up $28.2m of the total increase in valuation (an increase of 1.4%). The remaining 48 properties were internally valued and make up $6.3m of the total increase in valuation (an increase of 0.3%).

Independent vs. Internal Valuation 
  
Independent Values: 
Number of Properties 43
% of portfolio book value 47.1%
Change in Valuation ($m) 28.2
Change in WACR (0.04)%
  
Internal Values: 
Number of Properties 48
% of portfolio book value 52.9%
Change in Valuation ($m) 6.3
Change in WACR 0.00%
  
Total Portfolio 
Number of Properties 91
Change in Valuation ($m) 34.5
Change in WACR (0.02)%

The assets that were classified as assets held for sale in the December 2021 financial statements (Ballarat, VIC at $23.1m and SCA Metro Fund seed assets at $284.5m) were not included in the Investment Property value and as such do not affect the valuation movement. The divestment of these assets was completed during the period.

SCP also announced the distribution payable for the period from 1 January 2022 to 30 June 2022 to be 8.0 cents per SCP Stapled Unit. This is 19.4% higher than the prior corresponding period and 11.1% higher than the period ended 31 December 2021 (both of which were impacted by COVID events).

SCP expects to release its Financial Year 2022 Results on 16 August 2022.

Premium Members can find all Shopping Centres Australia Articles, trading Analysis, Annual Reports and Presentations here

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