Key Highlights

• For the year to June 2026, statutory net profit after tax was $1,391.2 million against $1,004.6 million in FY25, helped by property valuation gains.

• Holdover income, meaning tenants staying beyond Lease expiry, fell to 1.5% of income from 2.1%.

• Gearing was 26.1% at June 2026 (26.5% pro forma), at the lower end of the target range, with Interest Cover of 4.1 times and a weighted average cost of Debt of 4.98%.

• Large developments can displace rent while construction occurs, which is why the company flagged a development-related rent loss of about $18 million in FY27, compared with about $27 million in FY26.

Why is Vicinity Centres (ASX:VCX) leaning so heavily on premium shopping centres and a staged development pipeline? The FY26 numbers offer an answer: premium Assets now make up 67% of the retail portfolio, they delivered more encouraging income growth than the rest of the portfolio, and management is guiding to faster funds from operations growth in FY27. On 20 August 2026 Vicinity reported Funds From Operations (FFO) of $700.1 million and FFO of 15.21 cents per security for FY26.

The FY26 result

For the year to June 2026, statutory net profit after tax was $1,391.2 million against $1,004.6 million in FY25, helped by property valuation gains. FFO, the REIT Earnings measure that strips out valuation and non-cash items, rose 3.9% to $700.1 million, or 2.8% higher at 15.21 cents per security. The distribution was 12.40 cents per security versus 12.00 cents.

Net tangible assets (NTA) per security were $2.59 against $2.40 a year earlier. The portfolio was valued at $16.1 billion, with a full-year valuation gain of $700 million and a second-half net increase of $293 million.

Operating performance

Operating metrics were encouraging. Occupancy was 99.6%, comparable net property income grew 4.2%, and the leasing spread, which is the change in rent on renewed or new leases versus the previous rent, was 4.2%, described as the highest since inception, with premium assets at 7.7%. Holdover income, meaning tenants staying beyond lease expiry, fell to 1.5% of income from 2.1%. Average lease tenure on completed deals was 4.6 years.

Retail sales grew 3.3% across the portfolio, with specialties and mini majors up 4.0%, while department stores declined 1.3%. Specialty sales density at premium centres was $17,035 per square metre versus $13,512 for the whole portfolio. That gap is the economic logic of the strategy: premium centres collect higher sales per metre and support higher rents.

Balance sheet and Capital recycling

Gearing was 26.1% at June 2026 (26.5% pro forma), at the lower end of the target range, with interest cover of 4.1 times and a weighted average cost of debt of 4.98%. Vicinity raised $732 million through ten-year debt Capital Markets deals, extending weighted average debt Maturity from 3.8 to 5.1 years.

During FY26 the group acquired $563 million of assets, including DFO Eastern Creek for $351 million at a 6.0% Capitalisation rate and the remaining 75% of Uptown for $212 million, and sold assets at $327.2 million, reported as an 18.2% premium to book.

Development pipeline

The summary lists Chatswood Chase as completed with a stabilised Yield of about 6.7%, Galleria in Perth opening in November 2026 for about $130 million at around a 6.25% yield, a luxury and MECCA expansion at Chadstone opening from Christmas 2026 at about $60 million, and Uptown in Brisbane starting works in early 2027 at about $350 million to $400 million. Yields on cost and internal rates of return quoted for these projects are management targets, not outcomes. Large developments can displace rent while construction occurs, which is why the company flagged a development-related rent loss of about $18 million in FY27, compared with about $27 million in FY26.

FY27 guidance

Vicinity guided to FFO of 16.0 to 16.2 cents per security and adjusted FFO (AFFO, which deducts maintenance Capital Expenditure and leasing costs) of 13.9 to 14.1 cents. The distribution payout is guided to 95% to 100% of AFFO. Assumptions include comparable net property income growth of about 3.5%, cost of debt of about 5.0% and Investment capital expenditure of about $300 million. Guidance is conditional on retail conditions holding up and on the timing of the developments.

Sector position

Vicinity competes with other listed retail landlords and unlisted owners, with larger flagships such as Chadstone as differentiators.

Risks and what to monitor

Consumer spending is the central risk: higher living costs or a slowdown would reduce sales growth and limit rent increases. Valuations depend on capitalisation rates, so higher interest rates could reverse gains. Development cost overruns, delays and leasing shortfalls are further risks. Finally, a cost of debt creeping towards 5.0% reduces the benefit of rental growth.

Items to watch include the opening of Galleria and the Chadstone expansion in the second half of calendar 2026, the AGM, first-half FY27 results in February 2027, progress on the Uptown redevelopment and any further asset swaps.

Reading the FFO growth step-up

FY27 guidance implies FFO growth of roughly 5% to 7%, well above the 2.8% achieved in FY26, even though comparable net property income growth is expected to slow to about 3.5%. The bridge therefore relies on other factors: a smaller development-related rent loss, income from acquisitions such as DFO Eastern Creek, and new space opening. These are more controllable than market rents but also more dependent on delivery on time, which makes the second-half calendar 2026 openings a useful early test.