Vicinity Centres (ASX:VCX) has provided its update for the September 2019 quarter with total portfolio MAT up 2.6%. According to Grant Kelley, CEO and Managing Director, Vicinity Centres, this was underpinned by solid specialty store and mini majors combined sales growth of 3.0% and increased sales from the DDS category, up 2.9%.

Vicinity’s total portfolio sales growth also benefited from a continued improvement in its Western Australian (WA) portfolio, which delivered 3.4% growth in sales during the September 2019 quarter and 2.7% total MAT growth, up 110 basis points compared to June 2019 MAT. This compares to total portfolio sales excluding WA experiencing growth of 2.5% for the September 2019 quarter and 2.6% growth in MAT.

Chadstone – The Fashion Capital, Victoria

“We are particularly pleased with the positive momentum maintained in specialty store sales growth during the September 2019 quarter, as we continue to execute on our strategy and further enhance the portfolio through active tenant remixing, and progressing our retail and mixed-use development opportunities.” said Kelley.

Across the portfolio, Chadstone (+7.0%) and the DFOs (+4.2%) continued to report strong MAT growth, and the Core portfolio was up 2.0%. Performance of the Premium CBD asset portfolio (-1.9%) reflects remixing at Melbourne Emporium post the initial 5-year lease period and customer traffic flow disruptions at the Sydney CBD assets from surrounding light rail construction works now complete, together with remixing activity at these centres. The trams will start carrying commuters in December 2019, which is expected to significantly benefit Vicinity’s three Sydney CBD assets; The Strand Arcade, Queen Victoria Building and The Galeries – all currently ranked in the Top 4 of SCN’s 2019 CBD Guns for Specialty MAT/m2.

The Strand Arcade, Sydney will benefit from the new metro light rail at its front door

Specialty stores and mini majors combined MAT growth of 3.0% was underpinned by continued strong growth in luxury of 34.7% (excluding the impact of store roll-outs, same-store growth is +5.1%).

Kelley said: “Progressing our developments continues to strengthen portfolio performance and improve centre productivity, and we achieved a number of significant pipeline milestones during the period.”

In August 2019, the final major stage of the $430 million redevelopment of The Glen, VIC was completed. The centre now has more than 250 retailers, a new-format David Jones and a new indoor-outdoor dining precinct. Construction has also commenced on more than 500 residential apartments at The Glen in the largest air-rights deal above a retail centre in Australia.

Also on mixed-use, Hotel Chadstone Melbourne will open next week on 1 November 2019. The $130 million, 250-room 5-star hotel includes two restaurants, rooftop pool, bar, wellness retreat and day spa. Hotel Chadstone will be an in-demand destination for domestic and international tourists and visitors, as well as business travellers and corporate event specialists to the Monash region. Once certified by the Green Building Council of Australia, Hotel Chadstone will be the first 5 star Australian hotel to receive a 5 Star Green Star Design & As Built rating.

Hotel Chadstone Melbourne will open on the 1 November

At Victoria Gardens Shopping Centre, in Melbourne’s inner-city suburb of Richmond, the acquisition of a parcel of adjacent land during the quarter has enabled planning to progress for both a retail expansion and mixed-use opportunity at the asset. Vicinity Centres and Salta Properties, the joint owners of Victoria Gardens Shopping Centre have consolidated land holdings to the south of the centre creating a strategic 1.3-hectare development site.

Vicinity Centres Chief Development Officer, Carolyn Viney said: “The acquisition of this land, which shoulders our Victoria Gardens asset, means we can now progress planning for both a retail expansion of the centre and an exciting mixed-use development opportunity.”

Victoria Gardens Shopping Centre, in Melbourne’s inner-city suburb of Richmond

“With Richmond experiencing on-going densification and urban regeneration, Victoria Gardens is well positioned for growth. Our vision for the centre seeks to maximise the potential value of this prime inner-city real estate to include residential accommodation and commercial space to meet the growing needs of our community. It also provides the opportunity to further shape Victoria Gardens’ retail offer to meet our customers’ ever-changing needs and tastes.”

Viney said realising value from mixed-use opportunities is a key part of Vicinity’s strategy, with Victoria Gardens identified as a priority for future development.

Roselands’ new Fresh Food precinct – The Markets

At Roselands, NSW, the $90 million transformation of the lower ground floor launched with the opening of ‘The Markets’ in September 2019, including a new ALDI store and 20 new specialty retailers. A new Woolworths and additional specialty retailers will open at the centre over the coming month.

The $63 million development at Ellenbrook Central, WA commenced during the quarter. This project will introduce Kmart, three mini majors and 15 specialty stores upon completion, which is expected in the third quarter of 2020. This will further reinforce the centre as the dominant Sub Regional destination in Perth’s growing North Eastern suburbs.

Sod turning at Ellenbrook Central: Jamie Nancarrow, Jessica Shaw MLA – Member for Swan Hills; Cr Cate McCulloch, Ellenbrook Ward Councillor – City of Swan; Roisin McDonagh, Centre Manager, Cr David McDonnell, Ellenbrook Ward Councillor – City of Swan

A redevelopment is underway at Emporium Melbourne, VIC to introduce Australia’s first Fortress Esports venue. To operate 7 days a week, 10am till late, this video gaming and esports venue is a popular entertainment concept globally, and will feature a 200-seat esports arena, more than 160 gaming PCs, a full-service restaurant and two bars. On track to open in early 2020, the venue is expected to significantly diversify customer visitation to the centre.

“Fortress Melbourne will bring an exciting new, unique drawcard to our Flagship asset in the heart of the city, elevating Emporium Melbourne’s position as a leading CBD destination. This is a prime example of how we are evolving our tenant mix to meet consumer trends, and offering new reasons for customers to visit or stay longer” said Kelley.

Fortress Melbourne will offer an Australian-first entertainment experience with a 200-seat purpose-built esports arena

Vicinity’s sustainability program was also recognised during the period with Vicinity being rated sixth most sustainable real estate company globally in the DJSI survey and ranked third global listed retail company by GRESB.

During the quarter, a further three installations were delivered as part of Vicinity’s $73 million solar investment program. Across the portfolio, 15 systems are now operational and have generated more than 10 GWh of electricity since their staged introduction from October 2018. The program’s five remaining projects are forecast to be completed this financial year and the total program is expected to generate 46 GWh of electricity annually. This investment in solar is reducing reliance on electricity sourced from the grid and assists Vicinity to achieve its commitment to Net Zero carbon emissions by 2030.

Grant Kelley (left) launching Vicinity’s solar program