Vicinity rely on Capital Improvements to offset Valuation drop.
Vicinity announced that as at 31 December 2018, 38 of its 62 directly-owned retail properties (50% by value) were independently valued and the remaining properties were internally valued resulting in a net valuation decline for the overall portfolio of $37 million, a 0.2% decrease for the six month period.
Vicinity's flagship portfolio increased in value by $169 million or 2.4% in the period, with capitalisation rates firming by 4 basis points .
Chadstone recorded a gain of $42.4 million or 1.4%, valuing Vicinity’s investment in the asset at $3.15 billion, with a capitalisation rate of 3.75%, unchanged from the previous valuation.
Vicinity's DFO assets also contributed a valuation gain in the half, driven by strong income growth and capitalisation rate compression, particularly DFO South Wharf (up $48.4 million or 7.4%) and DFO Homebush (up $34.3 million or 7.1%). Additionally, Vicinity’s investment in DFO Perth recorded a gain (up $30.7 million or 40.4%) following since opening in October 2018.
Valuation gains are also the result of the completion of capital improvements which Vicinity and whilst the announcements today reflect the net gain in valuations the completion of Stage 1 of the $430M Glen redevelopment and the $150M Perth DFO development are likely to be major contributors to the gains, offsetting what would otherwise be lower results.
Net valuation declines were recorded across a number of Regional, Sub Regional and Neighbourhood centres largely driven by recent market transactional evidence, including some softening in capitalisation rates.
Further details on the December 2018 valuations will be included in Vicinity’s FY19 interim results announcement to be released to the ASX on Friday 15 February 2019.