$1.8bn wiped off portfolio

Vicinity Centres hit hard by shopping uncertainty

THE pain in the retail sector has been put on display as Vicinity Centres slashes the value of its shopping centre portfolio by a hefty $1.8bn.

The writedown from one of the nation’s largest shopping mall owners – which represents 11.3 per cent of its portfolio value – comes as it grapples with the impact of the coronavirus pandemic on shoppers’ willingness to visit malls. Vicinity has a portfolio of 60 shopping centres, including 21 in Victoria and 11 in Queensland.

Vicinity said the drop in its portfolio valuation reflected the impact of COVID-19 and the evolving retail landscape.

Shopping centre values have plunged as many tenants are yet to agree to lockdown rental arrangement.

The implications of a drawn-out recession, including higher mall vacancies and lower rents, are also hurting retail landlords.

Vicinity cut the value of its flagship portfolio (including premium and CBD centres) by 8.8 per cent.

Vicinity said its portfolio of 60 directly-owned retail properties were now worth $14.1 billion.

The shopping mall giant had already told investors it expected to cut the value of its portfolio by between 11 and 13 per cent when it wrapped up a $1.2 million capital raising last month.

Chief executive Grant Kelley warned the coronavirus pandemic looms over the nation’s mall sector and property values could easily be cut further given the storm clouds over the economy.

“This remains a highly uncertain and evolving environment, as demonstrated by current circumstances in Victoria,” Mr Kelley said on Friday.

“Any reductions in discretionary retail spending and lower retail activity may continue to have an adverse impact on the valuation of Vicinity’s assets.”

Mr Kelley said that aside from Victoria, which had reinstated stage 3 restrictions across metropolitan Melbourne, trading conditions across other Australian states continued to improve.

“For many of our centres, particularly those that are less reliant on office workers or tourists, customer visitation has returned to, or is close to, pre COVID-19 levels,” Mr Kelley said.

Shares in Vicinity slumped 2.5 per cent on Friday to close at $1.37.