Impacted by a year of heavy divestments and a "challenging retail environment", Vicinity Group's (ASX: VCD) profit has dropped almost 72 per cent.
The shopping centre giant reported a net profit after tax of $346.1 million, down from an FY18 result of $1.218 billion.
Managing director and CEO Grant Kelley admits the weaker global retail market has taken its toll.
Due to challenging conditions, Vicinity has axed its plans to establish Vicinity Keppel Australia Retail Fund (VKF), a wholesale property fund which would have seeded around $1 billion worth of Vicnity assets into a joint venture with Singapore's Keppel Capital if launched.
As well as choosing not to proceed VKF, Vicinity has also put a halt on or any further asset offloads.
"The recent softening in investor demand for retail property funds globally, compounded by a crowded divestment market, is impacting retail property pricing in Australia," says Kelley.
"Consequently, we believe it is in the best interests of securityholders not to proceed with the proposed wholesale fund, VKF, nor any further material asset divestments in the current environment."
Despite a deep profit plunge and its asset sale pipeline dead in the water, Kelley says the company is still optimistic about its position.
"In addition to strengthening the quality of our portfolio through repositioning, we have reinvested divestment proceeds into acquisitions, developments and our securities buy-back creating further value," he says.
Vicinity sold $670 million worth of non-core assets during the year, including a ten-shopping centre portfolio worth $573 million to SCA Property Group.
These sales formed part of its divestment program which has offloaded $3.1 billion worth of assets over the past four years.
Despite buying the ten convenience-based shopping precincts from Vicinity in October 2018, SCA Property Group failed to turn a decent profit in FY19.
VCD shares have dipped a slight 1.5 per cent to trade at $2.49 at the time of writing (11:49am AEST).Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
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