‘Recovery gathering momentum’: Mall owner Vicinity optimistic as shoppers return

Australia’s second largest retail landlord is cautiously optimistic a consumer-led recovery will reverse the sharp fall in earnings, the legacy of Melbourne’s long COVID lockdown.

Vicinity Centres, which owns 60 malls across Australia including half of the country’s largest shopping centre, Chadstone, said consumer and business confidence is improving and customers are returning to its shopping centres.

Vicinity Centres owns 60 malls across Australia including half of the country’s largest shopping centre, Chadstone.Credit:Getty Images

“We are cautiously optimistic that a retail recovery is gaining momentum,” Vicinity chief executive and managing director Grant Kelley said.

“Localised outbreaks of COVID-19 are being well managed, governments are providing significant encouragement of economic activity, and consumer sentiment is just off 10-year highs,” he said.

But the group’s centres in Australia’s capital cities and Victoria – where a COVID outbreak has prompted another lockdown – are still being impacted by the slow return of office workers and limited tourism.

The landlord said its funds from operations, a metric that excludes gains or losses from property valuations, slumped 20.7 per cent to $267.1 million over the six months to December, down from the previous corresponding period by nearly $70 million.

Like many other retail and property landlords, the value of Vicinity’s property assets fell as a result of the pandemic, wiping $572 million, or about 4 per cent, off its portfolio and contributing to the group reporting a statutory loss of $394.1 million.

Mr Kelley said, despite trading conditions improving, the ongoing uncertainty meant Vicinity would not provide full-year earnings guidance. Vicinity is targeting a distribution payout ratio of 95 to 100 per cent of adjusted funds from operations for the full year.

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