Vicinity portfolio loses half a billion in value

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THE pandemic has wiped out another $570 million from the value of Vicinity Centres’ retail portfolio, as low office occupancy and tourism levels, and a shift to online shopping continued to hurt its CBD assets.

The figure equates to 4% of the value of the 60 assets directly owned by Australia’s second-largest retail landlord, following 48 independent valuations and 12 being internally valued.

Vicinity had $1.8 billion wiped off its portfolio in the first six months of 2020, representing 11.3%.

In the latest round of revaluations that covered the second half the year, Chadstone, the super-regional mall in Melbourne that Vicinity co-owns with John Gandel, had 2% of its value shaved off – about $63.8 million – to $3.062 billion.

Its seven CBD assets took the biggest hit, with their value slashed by 8.6% to $2.033 billion. Among those are its co-owned Emporium Melbourne and Myer Bourke St, which suffered from the city going into a second heavy lockdown during the half.

Vicinity’s chief executive officer and managing director, Grant Kelley said that outside of CBD locations, customer activity in December across its portfolio averaged 88.4% of the prior year.

He said visitation and retail trade had picked up in its Victorian assets, following the lifting of the state government’s stage four restrictions in late October.

“Our CBD centres in Brisbane, Sydney and Melbourne, however, continued to be impacted by the current low levels of tourism and office occupancy.”

Neighbourhood and sub-regional centres fared a little better, given their weighting to non-discretionary and convenience retail, while also providing a higher income yield. Vicinity owns 25 sub-regional centres worth a combined $2.7 billion, following a 3.2% fall in value. Its four neighbourhood centres fell 1.0% to $196 million.

The value of its seven DFO outlets went down 2.7% to $1.716 billion.

Capital growth for retail assets has fallen sharply as the pandemic accelerated shifts towards online shopping and ecommerce, while trading and movement restrictions in response to COVID halted travel or all but shut down shopping centres entirely.

The pandemic has wreaked havoc on retail values. Rivals Scentre Group, the owner of Westfield shopping centres, took a 10% hit to its portfolio value in the first half of 2020, and Stockland booked a 10.7% hit of $715 million. Mirvac took a $349 million blow to its retail segment, while $476 million was wiped from GPT’s retail portfolio in the first five months of the year alone.

Kelley said that while Vicinity remains cautious on the impact of potential future outbreaks of COVID-19 on retail trade, and the challenges of the evolving retail environment, the group is encouraged by a number of factors.

“Australia has been highly successful in containing COVID-19 outbreaks, which puts our economy in a relatively strong position globally. Australians have also shown that they are excited to return to their favourite retail destinations with customer visitation bouncing back strongly over the Black Friday and Christmas periods,” he said. “Additionally, the COVID-19 recovery is expected to be further boosted by the national rollout of a vaccine which is anticipated in the first half of 2021.”

Vicinity proposed an interim distribution of 3.4 cents per security for the six month period,  but has not provided FY21 earnings or distribution guidance.

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