Vicinity Centres has reaffirmed its FY27 earnings targets after a resilient first quarter, with occupancy steady at 99.6%, leasing spreads widening to 5.1% and portfolio sales rising 3.0%. The AGM also marked the retirement of chairman Trevor Gerber and director Tim Hammon.
- FY27 FFO guidance reaffirmed at 16.0-16.2 cents per security
- First-quarter occupancy held at 99.6%, with leasing spreads of 5.1%
- Total portfolio sales increased 3.0% in the September quarter
- Galleria redevelopment set to open its first stage on 5 November
- Trevor Gerber retired as chairman, with Patrick Allaway taking over
FY27 guidance survives a tougher rate environment
Vicinity Centres (ASX:VCX) has held its FY27 earnings guidance despite a more demanding operating backdrop, pointing to resilient leasing and retail demand across its shopping-centre portfolio. Funds From Operations is still expected at 16.0 to 16.2 cents per security, while Adjusted Funds From Operations is forecast at 13.9 to 14.1 cents.
The company said first-quarter metrics supported a strong start to the year. Portfolio occupancy remained at 99.6%, leasing spreads improved to 5.1% from 4.2% in FY26, and total portfolio sales rose 3.0% in the September quarter. Specialty stores and mini-majors performed better, with sales growth of 3.6%.
Premium assets continue to carry the portfolio
More than 90% of Vicinity’s income is contracted, while holdovers excluding development sites remained stable at 1.6% of income. The specialty occupancy cost ratio was 14.6%, which management described as healthy and supportive of further rent growth where retailer sales and profitability allow it.
The operating figures build on the portfolio changes outlined in the company’s September capability showcase, when Vicinity highlighted its shift towards premium assets and development-led value creation. Premium assets now represent approximately 67% of portfolio value on a pro forma basis, up from 51% four years ago.
For FY26, Vicinity reported Funds From Operations of $700.1 million, or 15.21 cents per security, comparable net property income growth of 4.2% and a full-year distribution of 12.40 cents per security. Net tangible assets increased 7.7% to $2.59 per security, helped by $700 million in net portfolio valuation gains.
Galleria opening becomes the next operational test
The first stage of the $240 million Galleria redevelopment in Morley, Perth, is scheduled to open on 5 November. A refurbished Myer and about 60 retailers are due to trade initially, with Hoyts, Coles and an entertainment and dining precinct expected to follow before Christmas. Vicinity said it has allocated funding to support the stabilisation of trade through FY27 and plans to report on the early trading period at its interim results in February.
Development applications have also been submitted for the Uptown redevelopment in Brisbane and a residential project beside Chatswood Chase. Neither project has yet been approved. Management said it intends to retain flexibility over the capital structure and timing of delivery, particularly given recent changes in the residential market.
Gerber hands the chair to Patrick Allaway
The AGM marked Trevor Gerber’s retirement as chairman after joining the board in 2015 and taking the chair in 2019. Tim Hammon also retired after almost 15 years as a director. Patrick Allaway, who had been named chair-elect in June, now takes over following what Vicinity described as an orderly transition.
The immediate investor question is less about the handover than execution. Galleria must move from redevelopment to stabilised trading, while Uptown and Chatswood Chase add approval, funding and delivery decisions to the growth pipeline. Against that backdrop, the reaffirmed guidance leaves retailer performance, interest rates and development timing as the variables most likely to test Vicinity’s cautious confidence.
Bottom Line?
The next evidence point is Galleria’s trading performance after its November opening, followed by approval and funding decisions for Uptown and Chatswood Chase.
Questions in the middle?
- Can Galleria convert its expanded retail, dining and entertainment offer into the income growth embedded in FY27 guidance?
- When will the Uptown and Chatswood Chase applications receive approval, and how will Vicinity phase their capital requirements?
- Will sustained leasing spreads and occupancy offset pressure on retailers from higher interest rates and cost-of-living conditions?