Vicinity Centres

Thank you for standing by and welcome to Vicinity Centre's FY26 interim results. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you will press the star key followed by the number one on your telephone keypad. I'll now let Dan the conference over to Mr Peter Huddle, CEO and Managing Director. Please go ahead.

Good morning and thank you for joining us for Vicinity Centre's results call for the six months ended 31 December 2025. Joining me on today's call is Adrian Chai, our Chief Financial Officer. Before we begin, I'd like to acknowledge the traditional custodians on the lands on which we meet today and pay my respects to their elders past and present. I extend that respect to the Aboriginal and Torres Strait Islander peoples on the call today. I'll start today's presentation on slide five. Owing to the continued success of our strategic execution, disciplined focus on delivering our immediate, medium and long-term growth priorities, and amid a supportive retail property sector fundamentals, I am pleased to report that we have had a strong start to FY26. Touching on the results themselves. Vicinity delivered a net profit after tax of $805.6 million for the six months, up by more than 60%, reflecting growth from funds from operation, or FFO, and a meaningful uplift in portfolio valuations. A 3.7% comparable net property income growth reflects the continued strength of our portfolio metrics having increased portfolio occupancy and achieved a leasing spread of positive 4.6%, representing the highest leasing spread reported since Vicinity's inception in 2015. And of note, strong cash flows generated by our retail assets were augmented by a lowering of cap rates, which resulted in a $407 million, or 2.6%, net valuation uplift. And consequently, our net tangible asset per security increased to $2.52, up 4.8% in the half. I'm particularly pleased to announce that we have irrevocably accepted IFM's offer to sell the residual 75% interest in Uptown to us for $212 million. I'll share more on why we believe this is an exciting, strategically aligned and compelling business decision shortly. We also exchanged contracts to sell Whitsundays Plaza and Gympie Central in Queensland. Armidale Central in New South Wales, Victoria Park Central in Western Australia, and several ancillary land parcels. Totalling $327 million, these most recent divestments were executed at a blended 18.2% premium to June 2025 book values. We completed and opened successfully the first stage of the reimagined Chatswood Chase on October 23, with the unveiling of this truly unique retail asset. Adding to this, just last month, we were delighted to welcome Kmart's headquarters to the One Middle Road office tower at Chadston. Having joined Adair's head office team at One Middle Road, Chadston is now home to an additional 2,000 office workers in weekday trading. Our investment strategy is clear. We are confident it remains fit for purpose and we are executing it with precision, consistency and importantly, with discipline. Showcased by our strategic and financial highlights today, we continue to actively reposition our asset mix, curating a more resilient and higher growth portfolio that is well positioned to deliver sustained income and value growth today and for the long term. We are driving this by accretive acquisitions, important developments at our premium assets, and by divesting non-strategic assets at attractive pricing, where we are maintaining, if not strengthening, our strong balance sheet and preserving our sector-leading credit ratings. What's more, we are executing this strategy in an environment of favourable retail sector fundamentals. As we've highlighted for some time now, population growth and increased household spending, together with limited incremental retail floor space, are collectively driving a growing shortage of quality retail gross level area per capita. This is increasing the fight for space in the best performing retail assets that are owned and managed by retail property experts, which is in turn creating greater price tension and opportunity for superior rent growth. At 3.8%, comparable MPI growth delivered by our premium asset portfolio was modestly above the portfolio average, but was disproportionately impacted by burdensome taxes and levies. On a like-for-like basis, our premium asset portfolio delivered an impressive 4.6% MPI growth. At a solid 9.7%, premium leasing spreads achieved were more than double the portfolio average. Our outlets were a standout, achieving a 14% leasing spread as retailers continue to expand their stores and increase sales productivity. The appeal of our outlet assets is reinforced by occupancy at 99.8%, where near full capacity and retailer demand is creating strong leasing tension. And perhaps of most significance, our premium assets are now generating retail sales of around $17,000 per square metre, 26% higher than the portfolio average. Once again, reinforcing our view that we can sustain positive leasing spreads and rent growth. Since embarking on this strategy in late 2022, our focus on delivering leasing outcomes that drive real income growth from a more premium higher growth asset portfolio has underpinned a $1.8 billion uplift in total value of our assets. noting the uplift incorporates our developments on a stabilised basis. And this is despite a net reduction of 12 assets and a 20 basis point expansion in capitalisation rates. And as a strategically located CBD asset with immense growth potential, the acquisition of Uptown is strongly aligned with this investment strategy. Located on Queen Street Mall in Brisbane's thriving CBD, Uptown is a landmark retail asset with a long history and deep connection with Brisbane's retail identity. Today, Uptown acts as a primary gateway to the Queen Street bus interchange. Adding to this, the asset is expected to be a major beneficiary of sizeable state-led infrastructure projects intended to enhance the connectivity of Brisbane's CBD, notably in preparation for the 2032 Olympics. What's more, Brisbane CBD sits in a large and growing total trade area but currently lacks a large-scale full-line retail offering. We are confident we have the blueprint to fill this gap. Securing full ownership enables us to mobilise and leverage our core competencies across development execution and project leasing and accelerate the rejuvenation of the asset and importantly unlock its latent value. Our vision for Uptown is to introduce a retail, dining and entertainment offer that in many aspects is akin to Emporium in Melbourne CBD. Naturally, this vision would complement the luxury offer we have curated at Queen's Plaza, also located on Queen Street Mall. Commencing in calendar year 2027, we are anticipating a total project spend of between $300 and $350 million. Funded by a mix of asset sales and debt, development returns are expected to be in line with our hurdle rates, being a stabilised yield on costs of greater than 6% and an unlevered internal rate of return of greater than 10%. Furthermore, the net impact of the acquisition of Uptown and the asset sales announced today is largely neutral to FY26 FFO. The acquisition bolsters Vicinity's already unrivalled CBD retail portfolio and allows us to deploy our proven playbook, delivering superior and sustained asset performance and an outstanding retail destination for the broader Brisbane catchment. And speaking of asset performance, on an annual basis, our assets welcome more than 384 million visitors and generated in excess of 18 billion in annual sales. After a strong second half of FY25, where portfolio sales were up 3.8%, we are pleased to observe a continuation of shopper confidence and capacity to spend in our centres, with total sales up 4.2% in the first half of FY26. Specialty and Mini Majors delivered 5.1% sales growth for the half, reflecting both solid growth in specialty sales as well as the value created by remixing strong performing specialties into larger format flagship stores notably across our premium assets. Our portfolio wide approach to ensuring the retail offer in each centre is contemporary and satisfies ever evolving shopper needs is showcased by the positive sales growth delivered by both our premium and core asset portfolios up 5.3% and 4.9% respectively, the culmination of which strengthened specialty sales productivity to over $13,400 per square metre. Every retail category and every state enjoyed positive sales growth for the half. Jewellery outperformed, growing an impressive 11% on the prior period, spanning all price points. Jewelry was closely followed by leisure at 10.3% growth, which was driven by the popular athleisure category recording growth of 10.8%, as shoppers continue to show a strong and enduring affinity for on-brand retailers in these segments. The luxury category delivered positive sales growth for four of the six months, with luxury jewelry, the standout performer, growing at 8.1%. The Black Friday sales event, which we increasingly consider as Black November, was strong, as retailer participation in a promotional event grows and shoppers increasingly take advantage of pre-Christmas discounts. As such, we are increasingly of the view that November and December trading should be assessed together. On a blended basis, November and December achieved 4.5% sales growth in the first half of FY26, which compares to 4.9% growth reported in the first half of FY25. As we look ahead, we maintain a cautiously optimistic outlook for the retail sector, premised on persistent strong employment, but somewhat tempered by the recent shift in the RBA's monetary policy settings on lifting interest rates and the ongoing prevalence of geopolitical uncertainty. Turning now to leasing, where our portfolio metrics showcase our disciplined approach to negotiating new leases where the structure, tenure and value of rent written strengthens our current and future income growth profile. We finished the half with occupancy at 99.6%, representing a 10 basis point improvement on June 2025. And at 76%, we maintain strong tenant retention, and we lengthen the average tenure on deals completed to 4.6 years, all of which reinforces the sustained demand for our quality assets in a market where retail floor space continues to tighten. We also achieved the strongest leasing spread since Vicinity's inception in 2015 at positive 4.6%, driven by exceptional performance across the premium asset portfolio. Also supporting income growth, we maintain the average annual escalators on deals completed at a healthy 4.7%. The confluence of our strategic leasing activity, maintaining occupancy and delivering positive leasing spreads amid a robust retail sales environment has enabled us to grow rent while maintaining our specialty occupancy cost ratio. At 14.1%, our OCR continues to provide sufficient headroom for further rent growth. With that, I'll hand the call to Adrian to talk through the financial results in more detail.

Thanks Peter and good morning. I'll begin on slide 11. Statutory net profit for the half was $806 million. This comprised $351 million of FFO and $455 million of statutory and other items, of which the net property valuation gain was the largest contributor. While FFO per security was up 1.3%, when adjusted for lower loss of rent from developments as well as one-off items, FFO per security was up 4.1%. Underpinning this robust result was comparable MPI growth at 3.7%. And excluding new and increased taxes and levies, comparable MPI was up 4.1%. Moving to external management fees. Due to the transition of a third party leasing mandate and the divestment of co-owned assets, management fee income was $2.5 million below the prior year. That said, our disciplined approach to cost management provided a partial offset, delivering a $1.4 million or 3.3% reduction in net corporate overheads. Our net interest expense reduced by $2.7 million. largely driven by lower debt volume arising from asset sales and proceeds from the DRP. Turning now to valuations on slide 12. The net portfolio valuation growth was $407 million or 2.6% for the six month period. This represented the fourth consecutive half year period our portfolio realised net valuation gains. Pleasingly, the net valuation gain was supported by both income growth and a meaningful compression in capitalisation rates. Income growth was again a key driver of valuation growth, particularly for Chadstone, the outlet centres and the CBD portfolio. Cap rate tightening was a main contributor to valuation growth in the core portfolio, on the back of heightened demand for higher yielding retail assets. Overall, the weighted average portfolio cap rate tightened by 11 basis points to 5.5% in the period. Looking forward, we continue to expect that with resilient income growth, Vicinity's portfolio will continue to be well positioned for future growth. Turning to capital management. Preserving our strong balance sheet and sector-leading credit ratings remains a guiding principle for vicinity when managing and deploying capital. In a period of elevated development expenditure, the combination of asset valuation growth and proceeds from the DRP have ensured gearing remained at the lower end of our 25% to 35% target range at 26.3%. When adjusted for the acquisition of the residual 75% interest in Uptown for $212 million, and the $327 million of proceeds from asset sales announced today, pro forma gearing sits at a healthy 25.8%. We maintained our investment grade credit ratings of A-stable and A-2-stable with S&P and Moody's respectively, and we continue to actively manage our funding risk. Our debt book is well diversified with a mix of debt sources and maturities. And with undrawn bank facilities of $1 billion, we have sufficient liquidity to fund all debt expires this calendar year and committed developments and acquisitions. Our debt maturities for FY27 of $300 million is relatively modest. That said, we are always monitoring debt capital markets for opportunities that support a lengthening of our weighted average maturity profile and a lowering of our weighted average cost of debt. Consistent with our disciplined capital management approach, our average hedge ratio on drawn debt is expected to be 89% for FY26 and 85% for FY27. Consequently, we are able to maintain our previous guidance of a 5% rated average cost of debt for FY26. Our balance sheet remains a source of competitive advantage and strength and is a crucial enabler of our current and potential growth agenda. Thank you. I'll now hand back to Peter.