Vicinity to sell $1.0 billion of retail centres

Retail property continues to headline the market, with the announcement that Vicinity Centres (ASX: VCX) intends to sell up to $1.0B of Sub Regional and Neighbourhood shopping centres. The proceeds of the sale will be used to initially reduce debt, and then reinvested into higher returning acquisitions and developments.

VCX has a portfolio of $16.1B in assets, with around 26% (or $4.2B) held in Sub-Regional and Neighbourhood centres. Overall the asset sales will allow VCX to exit some of its lower growth centres, allowing VCX to focus on its Regional centres and Outlet sites, where higher growth and sales have been recorded.

The asset sales will not impact FY18 guidance for FFO of 18.0 – 18.2 cents per unit, however on an annualised basis FFO is estimated to reduce by 1.0 cents per unit assuming the sale proceeds are used to pay down debt.

Core Property expects the transactions to be accretive in the long term, as VCX is expected to reinvest the proceeds in higher yielding projects. The weighted average capitalisation rates on VCX’s Sub-Regional centres is 6.32% and Neighbourhood centres is 6.44%.