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Vicinity Centres announces $195.5 million asset divestments and guidance update

James Mickleboro
shopping mall, shops, purchase,

The Vicinity Centres (ASX: VCX) share price could be on the move on Wednesday after the release of an announcement.

What did Vicinity Centres announce?

This morning the shopping centre-focused real estate trust announced two non-core asset divestments and an update to its FY 2020 earnings guidance.

According to the release, Vicinity has signed an agreement to divest two non-core assets for a total of $195.5 million. This reflects a 0.5% discount to their combined June 2019 book values.

These assets are the Mt Ommaney Centre in Queensland and the Corio Central in Victoria.

The 25% share of the Mt Ommaney Centre was sold to YFG Shopping Centres for $94.5 million, which is a 3.3% premium to book value. Whereas Corio Central was sold to IP Generation for $101.0 million, a 3.8% discount to book value.

The company’s CEO and managing director, Grant Kelley, was pleased with the sales.

He said: “We are pleased to have achieved solid pricing for these assets, following improved investor demand since we announced in August 2019 that we would not proceed with any further material divestments in the current environment. The sale of these non-core assets is in line with our strategy of focusing our portfolio on market-leading destinations.”

“The transaction will further strengthen our balance sheet, with around a 90 basis point reduction in gearing, with the proceeds assumed to repay debt in the short term,” he added.

FY 2020 guidance.

The proceeds of the divestment will initially be used to repay its floating debt.

This is expected to negatively impact its FFO by approximately 0.3 cents per security on an annualised basis, prior to any reinvestment of proceeds. However, due to the timing of the asset sales, the forecast impact on Vicinity’s FY 2020 FFO is approximately 0.2 cents per security.

In light of this, Vicinity’s FY 2020 FFO per security guidance has been reduced from the range of 17.8 cents to 18.0 cents, to 17.6 cents to 17.8 cents.

Vicinity’s distribution payout ratio remains unchanged at the upper end of the target range of 95% to 100% of adjusted FFO.

Despite this slight downgrade, Vicinity Centre still offers a very generous distribution yield of around 5.9%. Given how low interest rates have gone, I think this could make it worth considering along with Scentre Group (ASX: SCG).

The post Vicinity Centres announces $195.5 million asset divestments and guidance update appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019