March 2019 quarterly update Vicinity have been pursuing their strategy to revitalise the Trust with a focus on creating leading destinations, realising mixed-use opportunities, and expanding their wholesale funds platform. The Group has made progress on developments at Chadstone, with construction on the hotel and its link to the centre in progress.
In addition, stage four of the major redevelopment at The Glen remains on track to open in August 2019.
Despite disposing 10 centres to SCA Property Group last year, Vicinity have not yet completed any further assets sales this year and are yet to conclude a deal to move assets into a new wholesale fund which was announced last year. Vicinity still believe they are well positioned in the retail environment by holding 13 flagship assets including Chadstone, 6 premium east coast CBD assets and 6 DFOs.
Together these assets are achieving higher sales growth, higher leasing spreads and higher rental growth. Vicinity hold another 37 shopping centres regarded as "high potential" and approx 12 which are earmarked for disposal. Vicinity also attribute as a strength the fact that they are Australia’s leading landlord for luxury retailers, though in an economic downturn, luxury is not necessarily a protective coating.
Vicinity are continuing to down weight to fashion (down 8% in GLA), homewares (down 10.4%) and department stores (down 8.4%) and increase exposure to mini majors (up 7%), services (up 26%) and food catering (up 14.5%).
Vicinity are prioritising resources to extract value from four mixed use projects at Box Hill Central, Chadstone, QueensPlaza and Victoria Gardens Shopping Centre. At other centres, they will look to realise capital, for example by selling off the mixed-use development to a third party or strategic partner or fund.
Vicinity are continuing to trade at a discount to NTA and have implemented a share buy back program. So far the group have acquired 91m securities for $234m at 13.4% discount to December 2018 NTA.
Progress this quarter
• Specialty store and mini majors moving annual turnover (MAT) growth of 3.3%
• Specialty store MAT of $10,939 per sqm , up 10.3% over the past year
• Value-accretive developments progressed:
– Chadstone: Hotel Chadstone to open November 2019 and is taking bookings; the link between the hotel and centre has commenced construction and the centre has introduced premium valet parking
– The Glen: Stage four of the major redevelopment on track to open in August 2019
• Four solar projects completed and a further 10 underway as part of Vicinity’s $73 million solar investment
• Acquired 91 million securities for $234 million at a 13.4% discount to December 2018 net tangible assets per security
• Peter Huddle commenced as Chief Operating Officer in March 2019
• FY19 funds from operations (FFO) per security guidance remains 18.0 to 18.2 cents and the distribution payout ratio is expected to be the upper end of the target range of 95% to 100% of adjusted FFO
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