Vicinity hit with $191m WA write-downs

Shopping centre giant Vicinity Centres has felt the full force of Western Australia’s weak retail climate, recording a $227 million write-down, largely due to the performance of its WA portfolio, which had $191 million wiped off its value

Vicinity, which owns 62 shopping centres across Australia, revealed its profit slumped 72 per cent, to $346.1 million, for the 2019 financial year.

Its revenue fell 3.6 per cent to $1.28 billion.

Vicinity said its Chadstone Shopping Centre in Melbourne and other premium CBD assets on the east coast performed strongly for the fiscal year.

Chief executive Grant Kelley said this was offset by declines in the WA portfolio.

“While Vicinity’s portfolio metrics have generally strengthened in FY19, the WA portfolio has impacted performance,” he said.

Ten of Vicinity’s 12 shopping centres in WA recorded multi-million dollar write-downs of asset values.

Its 50 per cent-owned Mandurah Forum, Galleria Shopping Centre and Rockingham Centre shopping centres logged impairments of $68.8 million, $50.6 million, and $37.3 million, respectively.

Mandurah Forum’s value is now $275 million, Galleria’s $337.5 million and Rockingham Centre’s $270 million.

Among other major WA impairments, Vicinity’s fully owned Wawrick Grove and Maddington Central had respective write-downs of $24.7 million and $12.9 million.

Wawrick is now worth $180 million and Maddington $109 million.

The DFO Perth was Vicinity’s only bright spot in WA, recording a valuation increase of $33.4 million to $110.5 million.

Mr Kelley also said a turnaround could be on the cards for its WA assets.

“There are however, potential signs of improvement in WA, with 4.7 per cent sales growth in the June 2019 quarter,” he said.

Vicinity chairman Peter Hay said the company was dealing with online competition, which has affected its entire Australian portfolio, by focusing more on tenants that offered on-site services such as food and beauty retailers.

"Online retail is a growing segment of the industry which can compete with physical retail on convenience and/or price, but often not on experience, customer engagement, or on the cost and ease of returning products when they are not quite right," he said.