Vicinity Centres delivered a resilient 3Q FY26 with high occupancy, strong retail sales growth, and a $654 million capital raise through long-dated debt issuances, reaffirming its FY26 earnings guidance at the top end.
- FY26 FFO and AFFO guidance reaffirmed at top end
- Raised $654 million via 10-year debt issuances
- Retail occupancy steady at 99.6%, leasing spreads +5.1%
- Chatswood Chase luxury precinct opens with strong early trade
- Galleria redevelopment on track for Christmas 2026 opening
Capital Management Strengthens Balance Sheet
Vicinity Centres (ASX:VCX) has extended its weighted average drawn debt maturity to 4.6 years from 3.5 years at the half-year mark, thanks to a disciplined capital management strategy that raised $654 million through a $500 million 10-year Australian medium-term note and a ~A$154 million 10.3-year Hong Kong dollar private placement. This approach not only lengthens debt tenure but also mitigates near-term interest rate volatility, with 89% of drawn debt hedged in FY26 and 85% in FY27, underscoring Vicinity’s conservative balance sheet management amid a challenging macroeconomic backdrop.
These moves build on the company’s recent financial momentum, following a strong first half of FY26 where statutory net profit surged and portfolio premiumisation accelerated, including key acquisitions in Brisbane’s Uptown precinct strong first half of FY26. The capital raise supports ongoing development expenditure and provides liquidity to navigate market fluctuations.
Robust Retail Performance and Leasing Metrics
Retailer confidence remains high, reflected in a near-perfect occupancy rate of 99.6% and positive leasing spreads of +5.1% for the quarter. Holdovers remain low at 3.1% as a proportion of income, indicating stable tenant retention. Total portfolio retail sales grew by 3.4% in 3Q FY26, buoyed by mini majors increasing sales by 3.7% and specialty sales productivity rising to approximately $13,500 per square metre.
Chadstone, one of Vicinity’s flagship assets, reported total centre sales growth of 4.2% excluding luxury, further demonstrating the strength of specialty and mini major retailers across the portfolio. This follows a pattern of sustained retail sales growth and premium asset focus evident in prior periods retail sales growth and premium asset focus. However, Vicinity remains cautious about rising retailer costs and the broader macroeconomic and geopolitical uncertainties that could weigh on future performance.
Key Developments: Chatswood Chase and Galleria
The luxury precinct at Chatswood Chase officially opened on 30 April, featuring 13 retailers including Louis Vuitton, Dior, and Bvlgari, alongside premium hospitality venues. Early trade has been strong, with positive feedback from both retailers and customers. The precinct is expected to be around 95% open and trading by 30 June, with additional luxury brands such as Hermes, Rolex, and Cartier scheduled to open progressively through July. The arrival of international athleisure brand Alo Yoga marks a notable first entry into Australian retail at Chatswood Chase.
Meanwhile, the Galleria redevelopment is progressing well and remains on track for a pre-Christmas 2026 opening. Leasing is robust, with over 75% of the project secured, including a lease extension with Myer and the addition of a new Hoyts cinema. The project maintains its previously stated development returns, targeting a stabilised yield of 6% and an internal rate of return exceeding 10%.
Distribution and Outlook
Vicinity continues to expect its full-year distribution payout to fall within the target range of 95-100% of adjusted funds from operations (AFFO), reaffirming guidance for FY26 FFO and AFFO per security at the top end of the ranges (15.0 to 15.2 cents and 12.8 to 13.0 cents respectively). The company’s strategy of portfolio premiumisation, active capital management, and disciplined development execution positions it well to navigate the evolving retail landscape.
Bottom Line?
Vicinity’s extended debt maturity and strong retail metrics underpin a resilient FY26, but rising retailer costs and macro uncertainties warrant close monitoring.
Questions in the middle?
- How will rising retailer costs impact leasing spreads and occupancy in FY27?
- Can the luxury precinct at Chatswood Chase sustain early trade momentum through full opening?
- What effect will geopolitical uncertainties have on Vicinity’s capital management strategy?