Vicinity divests two malls for $200 million

Vicinity divests two malls for $200 million

Shopping centre operator Vicinity Centres (ASX: VCX) has divested two malls for a total of $195.5 million.

The two centres are both suburban malls, with its stake in the Mt Ommaney Centre in Queensland selling for $94.5 million while the Corio Central mall near Geelong sold for $101 million.

The total $195.5 million received in the divestment of the non-core assets reflects a 0.5 per cent discount to their combined June 2019 book values.

Vicinity Centres CEO and MD Grant Kelley says the divestments are part of the group's strategic portfolio refinement, which has seen the company divest 37 non-core assets for $3.3 billion so far.

"We are pleased to have achieved solid pricing for these assets, following improved investor demand since we announced in August 2019 that we would not proceed with any further material divestments in the current environment," says Kelley.

"The transaction will further strengthen our balance sheet, with around a 90-basis point reduction in gearing, with the proceeds assumed to repay debt in the short term."

"Over the medium term, we expect to drive additional value for securityholders through investing the sale proceeds into accretive developments of our strongly performing centres, acquiring destination assets aligned with our strategy, or by acquiring Vicinity securities at accretive pricing."

Proceeds from divestments have so far allowed Vicinity to create additional value for shareholders through $1.1 billion in acquisitions, $0.5 billion of securities buy-back at an 11.1 per cent discount, and $1 billion in new developments.

Vicinity's divestment of its 25 per cent interest in the Mt Ommaney Centre was sold to YFG Shopping Centres, while the sale of Corico Central to IP Generation is expected to settle mid to late next month.

The funds received will initially be used to repay floating debt. The expected impact of FFO is approximately 0.3 cents per security reduction on an annualised basis, prior to any reinvestment of proceeds.

Due to the expected timing of settlement, the forecast impact on Vicinity's FY20 FFO is approximately 0.2 cents per security. As such, Vicinity has reduced its FFO per security guidance from 17.8 to 18.0 cents to 17.6 to 17.8 cents.

Shares in Vicinity Centres are down 0.19 per cent to $2.66 per share at 11.30am AEDT.

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