Vicinity Centres announced this week that 35 of its 62 directly-owned retail properties (57% by value) are in the final stages of being independently valued and the remaining properties are being internally valued, with an estimated net valuation decline for the overall portfolio of 1.3% or $202 million for the six month period to 30 June 2019.
The June valuations are subject to finalisation and audit, and will be confirmed in Vicinity’s 2019 annual results on 14 August 2019. The results reveal that income growth in the Flagship Centres (being Chadstone, CBD Assets and DFO Outlets) has grown valuations by 1.2% off the back of consistent cap rates, however the remaining portfolio has declined in value by $288M or -3.4%.
Regional and Major Regional Centres were the worst performing centres, down -4.5% in value with the future redevelopment of The Glen, Bayside, Bankstown and Chatswood Chase beginning to remove income from the assets.
The greatest impacts were in Western Australia which contributed to more than half of the estimated portfolio valuation loss, with a $130 million or -6.7% decline.
The challenging operating conditions in Western Australia, compounded by an increased competitive environment, has resulted in lower income forecasts and a softening in capitalisation rates for Vicinitys assets in WA.
Across the portfolio, cap rate movement was minimal with Neighbourhood Centres softening 3bps to 6.34% and DFO Centres 1bps softer to 5.81%. Cap rates for Regional Centres was 2bps sharper at 5.77% and Sub Regionals 5bps sharper at 6.26%.
Mr Kelley said Vicinity announced its estimated valuations earlier than 30 June to facilitate an opportunity to issue bonds in debt capital markets. “A potential bond issuance will extend our weighted average debt maturity, decrease our weighting to bank debt, and with the recent material fall in interest rates, enable us to take advantage of lower borrowing costs,” Mr Kelley said.