Vicinity’s Strategic Moves Heighten Exposure to Development and Market Risks

Strong Financial Performance

Vicinity Centres has delivered a robust first half for FY26, with statutory net profit after tax soaring to $805.6 million, a significant increase from $492.6 million in the prior corresponding period. Funds From Operations (FFO) per security rose modestly by 1.3%, but when adjusted for one-off items and lower lost rent from developments, the growth was a more impressive 4.1%. This solid financial footing underpins the company’s confidence in hitting the top end of its full-year guidance for FFO and Adjusted FFO per security.

Strategic Asset Recycling and Portfolio Enhancement

Vicinity’s disciplined capital management is evident in its recent transactions. The company irrevocably accepted IFM Investors’ offer to acquire the remaining 75% stake in Uptown Brisbane for $212 million, securing full ownership of this landmark retail asset in the heart of Brisbane’s CBD. This move positions Vicinity to accelerate Uptown’s revitalisation, leveraging major infrastructure projects ahead of the 2032 Olympic Games to unlock latent value.

Simultaneously, Vicinity divested non-strategic assets and ancillary land parcels for a combined $327 million, achieving an 18.2% premium to book values. These sales continue a trend of recycling capital to focus on premium, high-quality retail assets, which now comprise 66% of the portfolio by value, up from 51% in mid-2022.

Operational Strength and Leasing Momentum

Occupancy across Vicinity’s portfolio nudged higher to 99.6%, reflecting strong demand for retail floorspace amid tightening supply. Leasing spreads improved to +4.6%, with average annual escalators on new deals holding steady at +4.7%. Specialty and mini-major retail sales grew by 5.1%, supported by active tenant remixing and enhanced retail environments, signalling sustained shopper confidence and spending capacity.

Development Pipeline and Mixed-Use Opportunities

Development projects are progressing well, with the successful Stage 1 opening of Chatswood Chase in October 2025 meeting visitation and sales expectations. Stage 2, featuring a new luxury precinct, remains on track for a late FY26 launch. Meanwhile, the $240 million Galleria redevelopment is slated for completion before Christmas 2026, promising a revitalised mall and entertainment precinct.

Vicinity is also advancing mixed-use residential developments at Chatswood Chase and Bankstown Central, with plans for up to 480 luxury apartments at Chatswood and over 1,500 units at Bankstown. These projects align with government housing priorities and could unlock significant long-term value, although timelines and approvals remain in early stages.

Balance Sheet Discipline and Outlook

Despite active capital deployment, Vicinity maintains a conservative gearing ratio of 26.3%, comfortably within its 25%-35% target range. Portfolio valuations increased by 2.6% in the half, driven by income growth and capitalisation rate compression across retail segments. The company’s prudent approach to debt and capital expenditure supports its capacity to fund growth while preserving financial flexibility.

Looking ahead, Vicinity expects FY26 comparable net property income growth of around 3.5%, slightly up from prior guidance, and distribution payout ratios within its target range. The company’s strategic focus on premium retail assets, combined with a strong development pipeline and mixed-use potential, positions it well to navigate evolving market dynamics.