Vicinity Centres Reports $1.39 Billion Profit as Premium Portfolio Advances

Profit Surge Anchored by Premium Asset Growth

Vicinity Centres (ASX:VCX) has reported a standout FY26, with statutory net profit after tax soaring 38.5% to $1.39 billion, up from $1.00 billion the previous year. Funds from operations (FFO) rose 3.9% to $700.1 million, delivering 15.21 cents per security and landing at the top end of guidance. The company declared a final distribution of 6.20 cents per security, bringing full-year payouts to 12.4 cents and maintaining a payout ratio of 95.5% of adjusted FFO.

The net tangible asset value per security increased 7.7% to $2.59, reflecting both income growth and buoyant investor demand for retail assets. This strong financial performance underscores the success of Vicinity’s strategic focus on premium and differentiated retail assets.

Strategic Acquisitions Boost Eastern Seaboard Presence

Capital recycling was a key theme, with Vicinity acquiring the remaining 75% stake in Uptown, a landmark retail asset in Brisbane’s CBD, for $212 million. This acquisition, which settled in August 2026, positions Vicinity to accelerate redevelopment plans ahead of the 2032 Brisbane Olympic Games, enhancing the asset’s retail mix and customer experience.

In Western Sydney, Vicinity completed the $351 million acquisition of DFO Eastern Creek, a hybrid retail and outlet centre located in a high-growth industrial and residential corridor. This deal expands Vicinity’s Outlet portfolio and strengthens its metropolitan Sydney footprint.

To fund these strategic moves, the company divested non-core assets including Gympie Central, Whitsunday Plaza, Armidale Central, Victoria Park Central, and ancillary land parcels for $327.2 million, achieving an 18.2% premium to book values. Additionally, binding agreements were signed to divest Taigum Square for $120 million, expected to settle in September 2026. These transactions have sharpened the portfolio’s focus on assets with stronger income growth potential and strategic relevance.

Leasing and Retail Sales Drive Resilient Portfolio Metrics

Vicinity’s operational execution remains a core strength. Portfolio occupancy held firm at 99.6%, with leasing spreads climbing to +4.2% and average annual rental escalators steady at +4.8%. Specialty sales productivity reached $13,512 per square metre, marking the seventh consecutive half-year of growth. Shopper demand remained resilient despite macroeconomic headwinds, with total portfolio retail sales increasing 3.3% for the full year.

The company’s specialty occupancy cost ratio rose slightly to 14.4%, maintaining room for future rent growth where retailer sales and profitability allow. Vicinity also reported a record low level of leases on holdover, reflecting proactive income risk management.

Development Milestones and Project Pipeline Progress

Major development projects reached critical milestones during FY26. The $625 million transformation of Chatswood Chase was completed in April 2026, establishing the centre as Northern Sydney’s premier luxury retail destination outside the CBD, anchored by global brands such as Hermès, Rolex, and Cartier. The project’s stabilised yield and internal rate of return have both improved, with expected development profits exceeding $250 million.

At Chadstone, the One Middle Road office tower achieved full occupancy in January 2026, enhancing the mixed-use destination’s weekday activation. Luxury maisons including Louis Vuitton, Dior, Hermès, and Fendi are expanding their footprints, while MECCA’s flagship store is set to more than double in size by Christmas 2026.

In Perth, the Galleria redevelopment is on track for a November 2026 opening, featuring a revitalised mall, entertainment precinct, refurbished cinema, and enhanced retail and dining offerings. New tenants include MECCA, JD Sports, JB Hi-Fi, and Oroton, alongside a refurbished Myer and Coles.

Balance Sheet Strength and Capital Management

Vicinity’s balance sheet remains a competitive advantage. Headline gearing was 26.1%, at the lower end of the company’s 25% to 35% target range, and investment grade credit ratings of A/stable (S&P) and A2/stable (Moody’s) were maintained. The weighted average debt maturity extended to 5.1 years from 3.8 years at the prior year-end, supported by $732 million raised through a $500 million 10-year Australian Medium Term Note issuance and Hong Kong Dollar private placements.

With $5.2 billion in total facilities and $800 million of undrawn liquidity, Vicinity is well-positioned to fund growth initiatives and capitalise on market opportunities.

FY27 Earnings Guidance and Market Outlook

Looking ahead, FY27 is expected to mark an inflection point in earnings growth. Vicinity has raised its FFO per security guidance to a range of 16.0 to 16.2 cents, representing growth of 5.3% to 6.6%. Adjusted FFO per security is forecast between 13.9 and 14.1 cents. Comparable net property income growth is expected to moderate slightly to 3.5%.

The company anticipates development-related loss of rent of approximately $18 million, down from $27 million in FY26, and maintenance capital expenditure and leasing incentives of around $100 million. Investment capital expenditure is forecast at $300 million.

Chadstone enters FY27 fully stabilised, Chatswood Chase will contribute a full year of income, and Galleria is expected to open in November 2026. The acquisitions of Uptown and DFO Eastern Creek will support immediate income and future earnings growth, strengthening Vicinity’s exposure to key metropolitan markets along Australia’s eastern seaboard.

Sustainability and ESG Integration

Vicinity continues to embed environmental, social, and governance (ESG) factors into its strategy and operations. The company achieved a 45% reduction in emissions intensity against its Net Zero 2030 Target portfolio baseline and ranked #1 among listed companies in Oceania by GRESB in FY26.

Initiatives include expanding solar capacity to 31.3 MW across 17 assets, increasing electric vehicle charging infrastructure, and implementing community engagement programs. The company also advanced diversity and inclusion with women comprising 55% of people leaders and 43% of the Executive Leadership Team.

Governance and Leadership Transition

Chairman Trevor Gerber announced his retirement at the 2026 AGM, with Patrick Allaway appointed Chair-elect in June 2026. Allaway brings over 30 years of financial and board experience, ensuring continuity in Vicinity’s premium retail strategy leadership.

CEO Peter Huddle, appointed in February 2023, leads a seasoned executive team focused on disciplined capital allocation, asset management, and portfolio premiumisation.

What to Watch

Investors will be watching how Vicinity executes its redevelopment plans at Uptown and Galleria, and how the luxury repositioning at Chatswood Chase sustains momentum amid evolving retail dynamics. The company’s ability to navigate geopolitical uncertainty and household financial pressures while delivering on its FY27 guidance will also be key.

Climate-related risks and opportunities remain a focus, with Vicinity’s inaugural AASB S2 Climate-related Disclosures highlighting a resilient portfolio supported by proactive asset management and decarbonisation initiatives.