Vicinity Centres reported a 63.5% surge in net profit for HY26, driven by strong property income and revaluation gains, while advancing its strategic asset recycling and development pipeline.
- Net profit after tax rises 63.5% to $805.6 million
- Funds from operations up 1.3% to $351 million
- Interim distribution declared at 6.20 cents per security
- Divestment of $327.2 million in non-core assets at premium
- Acquisition of 75% interest in Uptown Brisbane for $212 million
Robust Profit Growth and Distribution
Vicinity Centres has delivered a strong financial performance for the half year ended 31 December 2025, with net profit after tax soaring 63.5% to $805.6 million. This impressive growth was underpinned by a 1.1% increase in net property income to $468.8 million and substantial property revaluation increments reflecting income growth and tightening capitalisation rates.
Funds from operations (FFO), a key measure of operating performance, rose modestly by 1.3% to $351 million, translating to 7.66 cents per security. The Group declared an interim distribution of 6.20 cents per stapled security, representing an 88.4% payout of adjusted funds from operations (AFFO), signalling confidence in ongoing cash flow generation.
Strategic Portfolio Recycling and Acquisitions
Continuing its disciplined capital management, Vicinity has divested $327.2 million of non-strategic assets, including Gympie Central, Whitsunday Plaza, Armidale Central, and Victoria Park Central, at an 18.2% premium to book values. These sales support the Group’s strategy to recycle capital into premium retail assets with superior growth potential.
In a notable acquisition, Vicinity irrevocably accepted IFM Investors’ offer to purchase a 75% interest in Uptown Brisbane for $212 million, subject to Ministerial consent and expected to settle by June 2026. This move enhances Vicinity’s exposure to a strategically located retail asset in Queensland’s capital.
Portfolio Strength and Development Progress
Vicinity’s retail portfolio remains resilient with occupancy steady at 99.6%, leasing spreads improving to +4.6%, and specialty sales productivity up 3.0%. The Group’s premium assets, including Chadstone and Chatswood Chase, continue to outperform, with leasing spreads of +9.7% and strong retail sales growth.
Development projects are advancing well. Chadstone’s revitalised fresh food precinct and new office tower have attracted major tenants like Adairs and Kmart, boosting weekday visitation. Chatswood Chase’s staged reopening has exceeded expectations, welcoming 2.4 million visitors and generating nearly $119 million in retail sales in just two months. The $240 million Galleria redevelopment is on track for completion by Christmas 2026, promising enhanced retail and entertainment offerings.
Financial Position and Capital Management
Vicinity’s balance sheet remains robust, with investment properties valued at $15.7 billion and gearing at a conservative 26.3%, within the Group’s target range of 25-35%. The weighted average cost of debt slightly improved to 5.0%, with 85.8% of drawn debt hedged. Credit ratings remain stable at A2 (Moody’s) and A (S&P).
Capital management initiatives during the period included repaying US$224 million of private placement notes, cancelling $250 million in bank facilities, and executing $100 million in new interest rate swaps, reflecting a proactive approach to managing debt maturity and cost.
Outlook and Guidance
Looking ahead, Vicinity expects FFO and AFFO per security for FY26 to be at the top end of guidance ranges, with distributions forecast to remain within 95-100% of AFFO. The Group’s strategic focus on premium retail assets, supported by favourable retail sector fundamentals such as population growth and limited new retail space, positions it well for sustainable income and value growth.
Bottom Line?
Vicinity’s strong HY26 results and strategic asset moves set the stage for continued portfolio transformation and income growth.
Questions in the middle?
- How will the Uptown Brisbane acquisition impact Vicinity’s income profile and capital allocation?
- What are the risks and timelines associated with the Ministerial consent for the Uptown Brisbane deal?
- How might ongoing retail sector dynamics influence Vicinity’s development pipeline and leasing spreads?