Vicinity invests $1b to future-proof malls

Vicinity invests $1b to future-proof malls

31 August 2018

Shopping centre landlord Vicinity is investing $1 billion into new developments to future-proof its shopping centres across Australia, reports The Sydney Morning Herald.

The push was outlined in Vicinity’s first full year result overseen by new chief executive Grant Kelley and it comes as the country’s second largest listed retail landlord battles a softer retail sector and the challenge of e-commerce.

“Over the past few months, following an early stage assessment, we have identified 12 significant mixed-use projects and potential value upside of approximately $1.0 billion for Vicinity from mixed-use opportunities,” Mr Kelley said

“Additional uses identified are primarily residential, to be undertaken using a capital-light approach, office and hotel. Although it will take time to realise these mixed-use opportunities across the portfolio, the value they can create for Vicinity is substantial.”

The 12 malls earmarked for redevelopment include the high-profile Box Hill Central and Northland in Melbourne, Bankstown in Sydney, and Buranda Village in Brisbane.

The country’s biggest shopping centre landlord will also upgrade its Chatswood Chase centre on Sydney’s highly-affluent north shore and Victoria Gardens in Melbourne’s Richmond.

The company is currently developing a $50 million Victoria’s Secret flagship store and expanded dining atrium at the Chadstone mall in Melbourne in preparation for guests at the new MGallery by Sofitel hotel being constructed next to the mall.

The idea is to make the malls service the surrounding community with not just the traditional apparel shops but to include offices, creches, and bigger food courts and cinemas.

Vicinity executive general manager development Carolyn Viney said that shopping malls are increasingly becoming much more than just a retail experience – they have a critical role in enabling the desires people have to be with other people, to meet friends and to share experiences together.

With this in mind, the Group also plans to build apartments, hotels, and office towers on land currently ear-marked as future car parking areas, but which in time will be redundant as autonomous vehicles arrive.

Mixed-use developments will offer a more varied income stream for retail landlords through the sale of the apartments and lease of land to hotels and offices.

The residents, guests and workers can add to the malls’ coffers through the patronage of the traditional apparel tenants as well as the expanded foods courts and leisure and entertainment areas.

Vicinity also plans to sell off smaller malls and use the proceeds to invest in retail developments and buy back securities, says The Australian.

The company has laid the groundwork for funds management with the recent launch of the $1 billion wholesale trust with Keppel Capital housing eight malls that are now within the 50-trophy asset portfolio.

The fund would boost the firm’s strategic partnerships business to close to $12 billion of assets under management and would increase both fund and asset management fees.

Keppel Capital’s chief executive, Christina Tan said: “The proposed fund, which will be Keppel Capital’s first retail-focused real estate fund, will expand our track record in Australian real estate investments beyond office developments to include retail properties.”

“It will allow us to connect our investors to a select diversified portfolio of Australian retail assets that generate stable cash flow with growth potential.”

Keppel Capital, which is a subsidiary of Keppel Corporation, had approximately S$29 billion in assets under management as at December 2017.

Vicinity’s portfolio booked total growth of 1.2 per cent over the year, up from up from 0.4 per cent in the previous period.

Last week, Vicinity unveiled a $90 million upgrade of the Roselands Mall in Sydney’s south west, with a focus on dining and entertainment, reported The Sydney Morning Herald

Vicinity executive general manager development Carolyn Viney said “The New Roselands” would “transform the existing dated centre into a culinary destination offering a convenient and authentic fresh food experience inspired by our local community”.

Further stages are scheduled for completion by 2023.