Vicinity whets appetite for acquisition

Mr Kelley’s fighting words come after an extended period of divestment by the country’s second-largest mall owner – with billionaire John Gandel it jointly owns the country’s largest mall, Chadstone – which has generated $3.3 billion in proceeds since 2015.

Headwinds in the retail sector – the rise of e-commerce and softer consumer sentiment – have weighed on mall values and made institutional investors wary of the sector. Last week, Lendlease sold a half stake in Adelaide’s largest mall, the Westfield Marion, for $670 million, a 9 per cent discount to book value.

But Mr Kelley, a veteran Australian executive with a considerable history in global markets, along with Vicinity’s incoming chairman Trevor Gerber, are taking a more sanguine outlook, confident an end to the current cycle is in sight.

“We have got such a strong balance sheet and we’ve just proven that capital is plentiful for us,” Mr Kelley said following the AGM.

“We shouldn’t always believe we have to sell an asset to buy another good one.

“If there is a product out there that is trading at a discount and we think there is good long-term potential, absolutely we should evaluate. Growth for us is on the radar screen once again.”

While Mr Kelley and his management team keep a weather eye on the broader sector – including the prospect of acquisition opportunities – they have been carefully working through the redevelopment potential inherent in the existing portfolio.

That exercise has uncovered considerable potential. Among six redevelopments now in planning, two of the biggest – Box Hill in Melbourne’s east and Bankstown Central in Sydney’s south west – have a scale which is more typical of a broad-ranging urban regeneration project.

At Box Hill, Vicinity has completed a master plan to reconfigure two existing retail sites across the existing 5.5 hectare footprint. The redevelopment could potentially deliver 350,000 sq m across seven new towers, creating close to $2 billion in developed real estate.

Carolyn Viney, Vicinity’s chief development officer, said the plan would consolidate the existing retail holdings into one land parcel, on the southern side, to create a major destination above the train station.

That would then free up the remaining parcel on the northern side for a “higher density, mixed-use development integrated and connected into the broader Box Hill town centre,” she said.

Vicinity’s plan for its Bankstown mall in Sydney is equally ambitious. It could create as much as 300,000 sq m of new space across 16 separate towers, worth anywhere between $1.5 and $2 billion when fully developed.

Ms Viney noted both proposed developments rode the benefit of the malls’ location near transport infrastructure.