Vicinity Centres RE Ltd (ASX: VCX) has a chequered past, with the real estate investment trust (REIT) changing considerably from its initial incorporation. Vicinity Centres is now the third-largest property trust in Australia and trades near all-time highs, making one wonder whether its shares are still cheap today.

Group history

In November 2015, Vicinity Centres changed its name from Federation Centres, following a merger between Novion Property Group (formerly CFS Retail Property Trust Group) and Federation Centres (formerly Centro Properties Group) earlier in 2015. The current Vicinity Centres owns $22 billion of assets under management, comprising various retail assets throughout Australia and is eclipsed in size only by Scentre Group Ltd  (ASX: SCG) and SCA Property Group Ltd  (ASX: SCP).

Shares in Vicinity Centres currently trade at all-time highs, mimicking the stellar run in the S&P/ASX 200 Australia REIT Index (ASX: XPJ), which surged over 20% since 2015 to trade at post-GFC highs.

Impressively, the group has gone from strength to strength in recent years, despite Centro Properties almost going bankrupt during the GFC. This is in part due to management’s active focus on investing in, and retaining, high-quality assets.

Active management

On Monday morning, management announced the acquisition of the DFO Outlet Centre in Brisbane for $55 million. This follows from Vicinity Centres’ previous announcement to develop a new Outlet Centre at Perth Airport, taking its total Outlet Centre portfolio in excess of $1.1 billion.

The strategy to acquire Outlet Centres coincides with Vicinity Centres’ asset divestment program being extended to $1.5 billion (from $1 billion previously). The motive is to free up capital and reinvest funds in high-yield assets.

Company fundamentals

A key driver of Vicinity Centres’ share price is the growing demand for high quality yield assets. Being a REIT, Vicinity Centres offers a stable yield akin to the likes of Sydney Airport Holdings Limited (ASX: SYD) and Transurban Group  (ASX: TCL). This makes it highly coveted by income-seeking investors.

Nevertheless, Vicinity Centres’ success is not solely due to the current low-interest rate environment; the company’s active management of assets has seen 2016 forecast underlying earnings per share (EPS) rise to 19.1 cents.

Assuming management retains its payout ratio of between 90% to 95% of EPS, investors can expect to receive distributions of between 17.2 cents and 18.15 cents per share. This places Vicinity Centres on a robust yield of at least 5.3%.

Foolish takeaway

Shares in Australian REITs have outperformed the S&P/ASX 200 Index (ASX: XJO) over the past year, with a low interest-rate environment providing a catalyst to demand. Whilst this trend is likely to continue for the foreseeable future, investors may wish to wait before purchasing Vicinity Centres given its elevated share price (despite being a solid business).

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Motley Fool contributor Rachit Dudhwala has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.