Vicinity’s Uptown Buy and Asset Divestments Signal Strategic Shift Amid Retail Market Challenges

Strong Financial Performance Amid Strategic Portfolio Shift

Vicinity Centres has delivered a compelling set of FY26 interim results, reporting a statutory net profit after tax of $805.6 million, a significant increase from $492.6 million in the prior corresponding period. This performance reflects a 3.7% growth in comparable net property income (NPI), supported by a disciplined focus on premium retail assets and operational efficiencies.

The company’s funds from operations (FFO) rose modestly to $351 million, with FFO per security up 1.3%, or 4.1% when adjusted for one-off items and lower lost rent from developments. Distribution per security increased to 6.20 cents, representing 88.4% of adjusted FFO, signalling a steady income stream for investors.

Portfolio Premiumisation and Uptown Acquisition

Central to Vicinity’s strategy is the ongoing premiumisation of its retail portfolio. Premium assets now constitute 66% of the portfolio, up from 51% in June 2022, underscoring a deliberate shift towards higher-quality, higher-growth centres. This repositioning is validated by superior leasing spreads and specialty sales metrics compared to the broader portfolio.

A highlight of the period was the irrevocable acceptance of IFM Investors’ offer to acquire the remaining 75% interest in Uptown, Brisbane, for $212 million. Uptown is a landmark retail asset strategically positioned to benefit from Brisbane’s $27 billion government infrastructure investment, including the Brisbane Metro and Cross River Rail projects. Vicinity plans a large-scale retail redevelopment of Uptown from 2027 to 2029, targeting a stabilised yield above 6% and an internal rate of return exceeding 10%.

Robust Leasing and Asset Divestments

Leasing outcomes remain robust, with portfolio occupancy at a near-record 99.6% and a leasing spread of 4.6%, up from 3.5% in the previous year. Apparel and footwear categories led the growth, driven by strong demand at premium centres such as Chadstone and the Outlet Centres. The specialty occupancy cost ratio remains healthy at 14.1%, providing room for further rental growth amid sustained retail sales momentum.

Vicinity also divested $327 million of non-strategic assets at an average premium of 18.2% to book value, recycling capital into higher-growth opportunities. These transactions, combined with disciplined balance sheet management, have maintained gearing at a conservative 26.3% and ensured liquidity to cover debt maturities and committed development spend.

Development Progress and Outlook

Development projects are advancing on schedule, with the successful opening of Stage 1 of the reimagined Chatswood Chase, which has already attracted 2.4 million visitors and 65 new retailers since October 2025. Chadstone’s integrated 20,000sqm office tower is now fully operational, hosting over 6,500 office workers and enhancing the centre’s mixed-use appeal.

The Galleria redevelopment in Western Australia is underway, focusing on a new entertainment and lifestyle precinct expected to open by Christmas 2026. Vicinity’s development pipeline also includes mixed-use projects at Chatswood and Bankstown, aligning with government housing priorities and offering long-term value creation potential.

Looking ahead, Vicinity expects FY26 FFO and AFFO per security to be at the top end of guidance ranges, with comparable NPI growth revised upward to approximately 3.5%. The company maintains a cautious but optimistic outlook, supported by favourable retail fundamentals, tightening supply of retail floorspace, and strong tenant demand.