Vicinity Centres (ASX: VCX) has announced that its portfolio has suffered a net valuation decline of 11.3% at June 2020. The Vicinity share price is down 2.5%.
Vicinity Centres is a property business with a national portfolio of shopping centres and DFOs. It also owns a 50% stake of the huge Chadstone Shopping Centre.
Vicinity’s painful valuation decline
The property business has recently done independent valuations of 60 of its directly-owned retail properties. This resulted in a net valuation decline for the overall portfolio of $1.79 billion, equating to an 11.3% drop. This is within the range of the 11% to 13% decline announced last month.
The flagship portfolio, which includes Chadstone, Premium CBD and DFO outlet centre properties, saw a net valuation loss of 8.8%.
Vicinity CEO and Managing Director Grant Kelley said: “We have independently valued our entire portfolio at 30 June 2020. While the overall portfolio net valuation decline was 11.3%, the results highlighted the resilience of our Flagship portfolio, affirming out strategy and weighting towards metropolitan markets with strong long term fundamentals.”
Vicinity said that the valuers had focused closely on the underlying cashflows of the centres due to the lack of property transactions since the COVID-19 outbreak.
However, pleasingly, Mr Kelley said that aside from Victoria, many centres have seen customer visitor numbers return close to pre COVID-19 levels. Excluding Victoria, customer visitation is 80% of last year’s numbers. With Victoria included the number drops to 68%.
This has been a painful period for shopping centre businesses like Vicinity. There may have been a permanent shift to online shopping for some customers. Perhaps there is an opportunity here if life goes back to normal quickly. But I’m not sure it will. I’d rather look at dividend shares like these for the long term.