Vicinity Centres Re Ltd (ASX: VCX), the owner and manager of multiple shopping centres, has announced plans for the sale of up to $1 billion of non-core Sub Regional and Neighbourhood shopping centres, with sale proceeds to be reinvested into value-accretive development opportunities.
Vicinity operates large shopping malls such as Chadstone in Victoria, Chatswood Chase in Sydney as well as a factory outlet portfolio that operates under the DFO brand. It is malls such as these that the company would like to focus on.
According to Vicinity Centre’s CEO and Managing Director, Mr Grant Kelley, the move is an acceleration of a strategy that has been in place for the last 3 years to focus the company’s resources on creating “destinations that provide market-leading shopping, dining and entertainment experiences”.
He also said since 2015, the company had “sold $1.9 billion of assets at a 2.1% premium to book value with the proceeds used to reduce debt and reinvest over time into higher returning asset acquisitions and developments”.
Macquarie Capital which is part of Macquarie Group Ltd (ASX: MQG) has been appointed as the corporate advisor on the asset sales program.
Shares in Vicinity were up 2% at the time of writing, following the announcement.
There are a couple of key takeaways that I would highlight from this announcement.
Firstly, Vicinity is demonstrating a willingness to readjust its portfolio in line with market trends. Investors sometimes think in binary terms when assessing companies even though that might not be the best way to think about it. A good example is the rise of e-commerce and the Amazon.com, Inc. (NASDAQ: AMZN) effect. Whilst many say that this will be negative for bricks and mortar shopping centres, perhaps the more conveniently located malls will continue to thrive particularly as they reorient themselves towards customer experience.
Secondly, I think it’s good that management are at least thinking about ways to maximise shareholder value through effective capital management. The jury is still out, however, on how well they can use the $1 billion proceeds raised.
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Kevin Gandiya has no position in any of the stocks mentioned.
You can follow Kevin on Twitter @KevinGandiya.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia has recommended Amazon. 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 Scott Phillips.